Modern housing developments and in particular the management of or ownership within, blocks of flats often have arbitration agreements. One such was the background in the most recent Scottish court decision on arbitration: Arbitration Application Number 1 of 2026 [2026] CSOH 46.

The reason for arbitration in flatted developments is to allow the owners to obtain a quick and final decision rather than having to become embroiled in potentially very long, costly and stressful court proceedings. As Number 1 of 2026 shows, however, “quick and final” means just that: once the decision is made it’s over. An appeal is exceptionally difficult.

Tenement dispute

The arbitration concerned the ownership of “volume located in a residential building”. Volume of what? one might ask. While it’s not absolutely clear from the court’s decision it seems to have been the airspace of a commonly used passage (stair?) which passed adjacent to a flat owned by one party and a higher flat owned by the other party.

The parties, P and R, agreed on 3 questions for the arbitrator, namely:

(1) is P the sole owner of second floor part of the volume?

(2) is P the co-owner of that part? And if so with whom?

(3) if the answer to (1) or (2) is “yes”, has R encroached on the volume?

The arbitrator examined the parties’ title deeds and title sheet and interpreted them. In his award he answered question (1) “No”, question (2) “No”, and question (3) “No”.

P sought leave (permission) to make a legal error appeal, claiming that the arbitrator had erred on a point of Scots law. P argued:

(a) the decisions to questions (1) and (3) were contradictory

(b) the arbitrator had not given reasons as to why he rejected the caselaw that P had supplied

(c) he erred by not interpreting the title material with regard to circumstances occurring after the title had been acquired

(d) he found that section 3 of the Tenements (Scotland) Act did not allow a flat-owner to own parts of a tenement if those parts were not expressly included in the title to the flat.

Legal error appeal

P’s appeal was presented as a “legal error” rather than a “serious irregularity” appeal.

In the language of the Arbitration (Scotland) Act “legal error” involves an assertion that the arbitrator has misunderstood or misapplied the substantive law only. “Legal error” appeals are not concerned with the unfairness or otherwise of the decision-making procedure. And “legal error” appeals are available in very limited circumstances: the tribunal’s decision on the point must have been “obviously wrong” or, if the point was of general importance (beyond the dispute in question), “open to serious doubt”.

Basically, there is significant room for the arbitrator to get the law wrong. But that’s the price paid for the advantages of speed and finality that arbitration brings.

Procedure, not substantive law

The court was clear on arguments (a) and (b). The arbitrator’s decision on question (3) was unnecessary. As such it was beyond the scope of the questions actually submitted and could not invalidate the decision on question (1). Any complaint about lack of clarity of reasons on question (1) related to a breach of legal procedure. No “legal error” was even raised.

No error let alone an “obvious” one

Turning to argument (c) the arbitrator’s application of the substantive law of interpreting legal documents in his exclusion of post-wording circumstances was not erroneous, let alone obviously erroneous. Argument (c) was rejected.

Unfortunately, without seeing the award, the court’s reasoning on argument (d) is unclear. It does not seem to meet the argument – at least as set out in the court’s judgment. However the court did find that the arbitrator applied substantive property law correctly in disregarding a prior sasine title when deciding whether the space was included expressly in the current land-registered title: again there was no obvious error.  Leave (permission) to appeal was refused.

Observations:

Firstly the case reminds us that in Scottish arbitration-speak, “legal error” covers less errors than “error of law” in the sense used generally by lawyers. “Error of law” takes in a court getting the law wrong in whatever respect, whether it is (a) the law of procedure or evidence or (b) substantive law such as the law of contract, property, delict or unjustified enrichment. But in Scottish arbitrations “legal error” relates only to type (b) substantive law errors.

As observed in Arbitration Application No.1 of 2013, an arbitrator’s error cannot be both a “legal error” and a (type (a)) “serious (procedural) irregularity”. A disappointed party might be advised to look through rule 68 on serious irregularity to see if the error is listed there before seeking to appeal it as a “legal error”.

Secondly, as noted in Dundas and Bartos on the Arbitration (Scotland) Act 2010 (2^nd edn), the “obviously wrong” test sets a high bar, which will seldom be reached.

Finally, with regard to arbitration practice, it was unfortunate that the arbitrator decided to answer question (3) when, given his answers to questions (1) and (2), it did not arise. Not only was that a procedural irregularity under rule 68(2)(b) (though unlikely to be “serious”), but it created a risk of muddying the waters of his reasoning for questions (1) and (2) and so casting doubt on the correctness of those decisions.