Where the parties to a conflict reach an impasse, one party may, through his solicitor or by himself, apply to the court to force a conclusion to the conflict. This is called issuing proceedings. These proceedings are then served on the other party so that he is aware of being taken to court in order for a judge to decide the outcome of the conflict.
But have the parties really tried to settle the matter before deciding to use court time and resources? And why is it so important that they do so?
This note focusses on providing a brief overview of the ADR mechanisms themselves that exist and explains the reasons behind the need to attempt a settlement.
Court is a last resort
While it may be tempting to rush to issue proceedings against the other side in the dispute, parties should be aware that the Civil Procedure Rules state going to court is really a “last resort”.
Instead, parties are urged, under the Civil Procedure Rules Practice Directions for Pre-Action Conduct and Protocols, to consider settlement and Alternative Dispute Resolution (ADR). Particularly, the Practice Direction states that “…parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings…”. What is important in this paragraph are the words “without commencing proceedings”. Let’s see why.
Apart from the obvious saving of court resources and the expense to the parties of commencing proceedings, why are settlement and ADR so important?
The Civil Procedure Rules state that if proceedings are issued, the court may require evidence from the parties that ADR has been considered, and if this evidence is not provided due to, for example, one party refusing to mediate, the court may order the refusing party to pay additional costs in the case on the grounds that its refusal is considered unreasonable behaviour. These additional costs orders may be severe.
There is a large body of case law surrounding whether or not one party’s refusal to enter into ADR is considered unreasonable. This will be looked at in a subsequent article. For now, we will concentrate on what ADR methods are available to parties in a dispute.
ADR
What are the ADR options referred to? Let’s have a look at them briefly, one by one:
- Negotiation
This involves the parties trying to resolve the matter without the help of a third party. The outcome of negotiations is non-binding, meaning that it cannot be enforced in court at a later date, and the parties can proceed to litigation if the outcome is not successful.
- Mediation
This is a process of dispute resolution with the assistance of a neutral, third party. Again, it is non-binding. The advantages of mediation are that the parties retain control over the settlement options, this being more flexible and creative than what may be imposed in court, any settlement is obviously consensual therefore business relations remain intact, mediation is generally less expensive than other forms of ADR and even if a settlement is not reached prior to litigation the prior attempt at mediation can set the scene for the possibility of a settlement at a later date.
- Med-arb and arb-med
This is the use of mediation combined with arbitration, to resolve the dispute. Where mediation fails, the parties can agree that the mediator becomes the arbitrator and issue a final and binding award on the matter. The reverse, arb-med, is where the parties go through arbitration followed by a session of mediation where the arbitrator attempts to resolve the dispute. If a settlement is not reached within a specified timeframe then an arbitration award is issued. Arb-med or med-arb would be more costly than just mediation alone, as arbitration is being paid for also. For this reason, these methods would be reserved for straightforward disputes.
Med-arb or arb-med have the advantage of a binding outcome at the end of the process.
- Mini trial
This is the process whereby each party makes a formal representation of his best case before a panel of the parties’ senior executives and an independent chairperson, acting as mediator. The parties may request that the chairperson make a binding decision.
While this will be a private process, without prejudice, it is likely to be time-consuming and costly.
- Conciliation
This is similar to mediation with the only difference being that the third party actively assists the parties to settle the dispute, by, for example, suggesting options for settlement.
- Early neutral evaluation (ENE)
An independent third party is appointed by the parties to give a non-binding opinion on the merits of the dispute which is then used by the parties to negotiate an outcome with or without a third party helping them, or it can be used as the basis of a settlement, in which case the evaluation becomes binding.
As ENE evaluates the evidence, facts and law at issue, the procedure helps the parties involved to refresh their memories as to the main disputed issues in the case. It is relatively inexpensive and quick and even though it may not result in a settlement, it reminds the parties of the more important aspects of the case.
- Expert determination
This is a contractually binding decision made by an expert, in an informal setting. It is considered faster and cheaper than arbitration and litigation since it can do away with the need for parties to instruct their own independent expert witness. Questions of law or fact cannot be decided on by the expert since his remit is entirely governed by the contractual conditions of his appointment. In addition, any decision of an expert may only be enforced after recourse to court or using arbitration.
- Adjudication
An adjudicator provides a decision on disputes as they arise during a contract. Its decision is temporarily binding on the parties until the dispute is determined by court proceedings or until the parties agree to settle. The procedure takes 28 days therefore it is fast in comparison to other ADR methods. It is private unless the decision is later referred to in court for enforcement proceedings, and a party can choose freely who adjudicates.
- Dispute Board Review (DRB)
Usually used in large-scale construction projects, DRB consists of a panel of three neutral parties is appointed by the parties at the start of a project, who visits the site of the project three or four times a year and deals with disputes as they arise, similarly to the adjudicator operates. The decision of the panel is temporarily binding and can be challenged in arbitration or litigation. The project contract would set out how the DRB is formed and how it is to operate. Examples of projects using the help of a DRB are the construction of a third runway at Sydney airport or the Olympic Stadium in London.
- Arbitration
Arbitration in England is governed by the Arbitration Act 1996. The procedure has the condition that all parties must agree that the dispute is submitted to arbitration. It is private and the outcome, or, award, is final and binding on the parties. The arbitrator cannot meet with either party privately.
This is just a brief overview of the ADR methods available to parties in a dispute. Not all of them may be applicable to every type of dispute due to time restrictions, cost restrictions or the nature of the dispute itself. The most important point to remember is that parties must have considered ADR prior to issuing proceedings and it is a solicitor’s duty to advise his clients about ADR. Not offering ADR or refusing to accept it, maybe a costly move.
The next article in this series of articles on ADR will look at the importance of ADR and the principles established in the case of Halsey v Milton Keynes General NHS Trust [2004] EWCA (Civ) 576. Following this, we will look at each ADR method in turn, including the advantages and disadvantages of using the particular method, its cost-effectiveness and timeframe; and a summary “how to”.
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