Alternative Dispute Resolution (ADR) up for discussion

In recent years, the courts in England and Wales have placed a greater emphasis on encouraging parties to explore Alternative Dispute Resolution (ADR) to assist in reducing the congestion of cases going before the Courts and to encourage litigants to focus on resolving their disputes. This emphasis on ADR has been heightened by the introduction of the Jackson Cost Reforms which came into force on 1 April 2013, which the courts intend to enforce robustly. The effect of incentivising parties to keep costs down, requiring parties to file detailed costs budgets and to consider all alternative options prior to going to court appears set to result in a boom in the use of ADR.

Recent case law has also helped encourage those who do not want their disputes aired in a public forum into ADR. The recent authority of Global Torch Limited v Apex Global Management Ltd & Others [2013] EWHC 223 (Ch) reconfirmed that, with limited exceptions, potential damage to reputation will not stop cases being held in public and an order to hold hearings in private will be extremely difficult to attain. The use of without prejudice discussions can also drive parties into making concessions behind closed doors, and anything raised in negotiations during the course of ADR can and should be made without prejudice so that it will not impact on the parties’ formal positions. This gives the parties’ added flexibility to negotiate the resolution of a dispute.

ADR is an extremely flexible and varied forum for resolving disputes. When ADR is used successfully, huge savings can be made in time, money and stress levels. Parties can also utilise forms of ADR for anything from boundary disputes to large scale fraud cases. Indeed the HMRC has recently held a pilot study to look into the possibility of using ADR in large and complex tax cases.

Broadly, ADR can be broken down into 3 areas:

Non-Binding ADR Processes without Third-Party Intervention

• Negotiation: Where the two parties come together to discuss the issue without any third party involvement. This may be the best option if both parties understand the other sides’ position but consider that the dispute can be resolved between them, as the process is flexible and non-binding. However, negotiation can prove difficult if either party adopts an entrenched position.

​Non-Binding ADR Processes with Third-Party Intervention

• Mediation: Mediation is similar to negotiation but is facilitated by an independent third party chairing the discussion. Involving a skilled and experienced non-partisan intermediary can significantly assist the parties to put personal issues aside and focus on the key disputes. The parties still have control over the mediation as it involves the parties reaching a voluntary agreement to resolve their disputes.
• Conciliation: Similar to mediation but where the third party attempts to facilitate an end to the dispute by suggesting resolutions and concessions to the dispute.
• Early neutral evaluation: This is where an independent third party evaluates the conflicting parties’ positions and gives a considered opinion of the outcome, including the strengths and weaknesses of the respective cases, should the matter go through to a hearing. It is a non-binding process but is often a helpful tool in enabling the parties to evaluate the risks of going forward to trial on their dispute.

​Binding ADR Process

• Arbitration: Arbitration is similar to a court hearing but can be held in private when the two parties contract to abide by the decision of an independent third party arbitrator. The parties are then given the opportunity to put forward their case in written statements of case and the arbitrator then makes an award either based on the paper submissions of the parties or following an oral hearing. Arbitration can often be a more cost effective and faster way to resolve the disputes, and is a particularly useful tool where the dispute involves international parties.  The decision of an arbitrator is final and binding and can be enforced in the Courts.
• Adjudication: Adjudication is normally used in the construction industry in contractual disputes to provide an interim decision until the two conflicted parties come to a mutually agreeable position. This has the benefit of providing a faster and more cost-effective solution allowing contracts to be fulfilled whilst points remain in dispute.

​The variety of ADR options available provides those in dispute with a range of options for a cheaper and faster conclusion. With the courts encouraging and in fact actively requiring the parties to consider ADR options, there is a real incentive to litigating parties and the lawyers advising them to explore ADR. If the dispute can be resolved then this may result in a significant saving in time and costs, and conversely if the other party refuses to participate in ADR then this will be a factor the court will take into account in assessing the issues of costs at the end of the court process.  It can also be a useful tool in assessing the strength and weaknesses of your case at a relatively early stage. ADR is on the increase, it is being pushed more than ever and is here to stay.

Co-written by Angus Wakeman and Iain Hartnup.