In English law, Alternative Dispute Resolution (ADR) serves as a vital pre-action part of legal proceedings, which should be a last resort when an amicable settlement cannot be reached. The pre-action practice direction, Paragraph 8, highlights the significant role of ADR in most disputes by confirming that ADR must be considered between the parties involved. However, under Paragraphs 8 and 11, the parties are not obliged to enter into ADR; rather, they should just consider it.
Paragraph 8:
Litigation should be a last resort. As part of a relevant pre-action protocol or this Practice Direction, the parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings.
Paragraph 11:
If proceedings are issued, the parties may be required by the court to provide evidence that ADR has been considered. A party’s silence in response to an invitation to participate or a refusal to participate in ADR might be considered unreasonable by the court and could lead to the court ordering that party to pay additional court costs.
This means the court will not order ADR to be conducted, but the involved parties should not unreasonably refuse it. The decision to engage in ADR remains voluntary, respecting the autonomy of the parties involved.
The Civil Procedure Rules 1998, R 1.4 (2)(e)
1.4—(1) The court must further the overriding objective by actively managing cases.
(2) Active case management includes —
(e)encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure.
Practice Direction 29, Paragraph 4.10(9):
(9) in such cases as the court thinks appropriate, the court may give directions requiring the parties to consider ADR.
All of the above indicates the importance that the court places on ADR. The parties involved should be aware that refusal to consider a reasonable proposal for ADR may have a significant impact on any later cost orders. Therefore, once a party refuses an ADR offer, they should file a witness statement detailing their reasons for such a decision.
Four situations where there is no point in proceeding with an ADR resolution:
- There is no dispute (e.g., a straightforward debt action).
- Where there is a need for a ruling on a point of law.
- An injunction is required.
- The other party is uncooperative or cannot be trusted to comply with the ADR outcome.
Types of Alternative Dispute Resolution (ADR)
- Mini-Trial: It is a private, voluntary event attended by representatives from each side. A third party acts as a chairperson, with senior representatives from each party having the authority to settle the dispute.
- Early Neutral Evaluation: This is a non-binding form of dispute resolution by which the parties agree to get an initial “sense-check” from an independent, neutral third party having a level of expertise in the relevant field. Such a neutral third party shall provide a preliminary view of the parties’ positions and make their recommendations.
- Final Offer Arbitration: This is a process where a third party chooses between the ‘final offers’ made by each party, encouraging realistic proposals.
- Expert Appraisal: This is a process in which an expert in the field investigates the dispute and suggests desirable but non-binding outcomes.
- Expert Determination: Where an expert, by agreement of the parties, provides a binding opinion, which is contractually binding but not enforceable as a court order.
- Judicial Appraisal: A legal expert offers a preliminary appraisal of the merits of each party’s legal position, with the option to make it binding. I.e., the parties can agree to be bound by the decision reached.
- Med-Arb: This is where parties attempt mediation and, if unsuccessful, proceed directly to arbitration. This process involves the parties agreeing to grant a mediator power to convert automatically to being an arbitrator.
- Mediation: The intervention of a third person, a mediator, into a dispute to assist the parties in negotiating a jointly acceptable resolution. The third party shall discuss the facts and evidence of the dispute with both parties and try to conclude a non-binding decision.
- Final Offer Arbitration: Where the parties agree to accept an arbitrator’s decision as final, limiting their right to seek resolution of the dispute by a court.
Advantages of ADR
- Parties would have the option to withdraw from proceedings at any time.
- Generally faster and cheaper than court proceedings, which would provide practical and economic benefits to the parties.
- Less formal and less confrontational.
- Confidential, avoiding negative publicity.
- Settlements can preserve business relationships by incorporating commercial agreements or settlements.
- Flexible, with various methods available.
Disadvantages of ADR
- Some remedies, like injunctions, are not available.
- It is not always cheaper; some disputes may take more time and end up in court anyway.
- Disputes may not be investigated as thoroughly as in court.
- Except for arbitration, most ADR decisions are hard to enforce.
Conclusion
ADR is an important part of the legal system, offering an effective alternative to direct litigation. While it has numerous advantages, it may not be suitable in all cases. Parties should carefully consider using ADR as a means to resolve their dispute, leveraging the available legal guidelines and practices.