Scotland stands firm on the discount rate

Scotland stands firm on the discount rate's Tags

Tags related to this article

Scotland stands firm on the discount rate

Published 3 October 2019

In a move that is bound to delight pursuers and leave those - such as insurers and public bodies - footing the bill for claims that it will affect to say the least, somewhat disgruntled, the Government Actuary has announced that the discount rate in Scotland is to remain at its current level of -0.75%.

The report “The Personal Injury Discount Rate: Review and determination of the rate in Scotland by the Government Actuary”, in which the decision was announced, was published on the 27th September 2019 and it has already attracted comment.

The determination in which standard adjustments “for tax and costs of investment advice and management” and “for further margin involved in relation to the rate of return” of -0.75% and -0.50% respectively were adopted has assumed a “Gross return above RPI inflation from notional portfolio” of 0.50%.  There will be those who disagree with such a rate of return and the respective merits of the differing methodologies applied in England & Wales and Scotland will be debated, but the decision has been made and compensators in Scotland will have to face the discount rate at its current level, at least until it is next reviewed.

The disparity in discount rates that now exists between the jurisdictions north and south of the border might give rise to the risk of new behaviours such as jurisdiction shopping.  In reality there will be very few cases in which the discount rate will be relevant that could be governed by the law of damages law in either Scotland or England & Wales: the appropriate choice of law nearly always depends on the accident location.

In this context, a distinction needs to be drawn between rules governing the choice of court system (which will be decided by the complex rules surrounding jurisdiction) and the applicable law determined by EU Regulation*. Bringing a claim in the courts of England and Wales would not for example overturn the application of the EU Regulation on choice of law: so that where the accident giving rise to the claim for damages occurred in Scotland, issues of substantive law including issues of quantum will be determined under Scottish law, except for a few defined circumstances, and not the law of the forum. This will remain the position irrespective of a deal or no deal Brexit.

In any event and even in those few cases where there is an argument as to choice of law, the discount rate is only one factor that would need to be taken into account. Differing approaches to valuation of general damages or to other aspects of quantum could be just as influential.

*noting that the Rome II Regulation will be subsumed into domestic legislation post exit via “The Law Applicable to Contractual Obligations and Non-Contractual Obligations (amendment etc.) (EU Exit) Regulations 2018”

Authors

John Maillie

John Maillie

Glasgow

+44 (0)141 223 8558

Jasminka O'Hora

Jasminka O'Hora

Birmingham

+44 (0)121 698 5217

< Back to articles