Alternative Dispute Resolution

Whilst in the past Alternative Dispute Resolution was seen as a compelling route to pursue, after a change in the Civil Procedure Rules it is now an obligatory consideration before taking a claim to Court. Parties who have refused to consider an alternative dispute resolution service, including mediation, could suffer adverse cost consequences at trial, even if they win.

The Civil Procedure Rules practice directions give four type of Alternative Dispute Resolution as an example. They are:

• Discussion and Negotiation.

• Mediation.

• Early Neutral evaluation.

• Arbitration.

Aside from each party having to consider the possible avenues to alternative dispute resolution, the Court will usually encourage the parties to use a route that the Court deems appropriate in that case. Neither party can be forced to do so, however it is greatly encouraged and the Courts have stated that all members of the legal profession who conduct litigation cases should as a matter of course, consider whether the case is suitable for Alternative Dispute Resolution. Only in family dispute matters are the parties now required to meet with a mediator to consider mediation before taking the matter further with the Court.

When considering which Alternative Dispute Resolution to utilise, each party must think which will be cheaper, quicker and will provide an outcome that they would be happy with.

Option 1 – discussion and negotiation

Often each party’s solicitors can discuss and negotiate their respective client’s position to try and come to a form of settlement. This can be beneficial because when using Mediation and it fails to settle it can seem as if additional time and costs were wasted. However if your solicitor is simply trying to negotiate whilst the matter proceeds, no further time is wasted and costs can be kept to a minimum. Additionally it is possible to arrange an around table discussion with the parties face to face which can be guided by each parties solicitor to help come to an agreed upon settlement.

Option 2 – Mediation

Costs of Mediation can vary depending on the type used. Community mediation is usually free, although some may charge a small fee. Civil and commercial mediation, however, can be high. The average cost can be around £1,500-£3,000 per party with both sides agreeing to pay their own costs.

Small claims mediation is now provided by the Courts for free. In these cases the small claims mediator contacts each party to arrange a face to face mediation if both parties are willing.

Mediation allows for each party to tell their story and have a neutral third party facilitate them coming to a solution to the dispute. The mediator usually encourages each party to consider their commercial or other interests, rather than their legal rights. With this the aim is for each party to compromise as they see it in their long term best interests to settle the matter. Signing an agreement binds the parties to it and it can be enforced by the Courts should problems arise.

It is advisable to use a mediator who is neutral, experienced and suitable for the job. It should be someone agreed by both parties, as they need to be someone who will be trusted by both.

Prior to mediation the parties will exchange case summaries for the mediator to familiarise himself with the case. At the beginning of mediation all parties will either first meet together or separately to provide the mediator with an opening statement outlining the key issues and then there will be private meetings in confidence between the mediator and each party wherein they will try and establish what is important to each side and where there can be room for compromise.  The mediator will then go from party to party endeavouring to bring the parties positions closer together until an agreement can be reached.

It is usual for mediation to last a full day, and some may take longer.

Option 3 – Arbitration

This is where both parties agree to put forward their case to an independent 3rd party who is experienced in the area to which the issue relates and whose decision each party will agree to be bound by.

An arbitrator will usually be a member of the Chartered Institute of Arbitrators and they will make a decision based on written evidence supplied by each party. If the parties cannot agree on an arbitrator, it is possible to ask the President of the Law Society to appoint an independent arbitrator.

Most arbitration schemes charge a fee and these range from a relatively low cost of £108 to a very high cost for an experienced arbitrator relating to commercial disputes.

There can be both benefits and risks in using an Alternative Dispute Resolution. Some of these are:

Benefits of ADR    

• Mediation or negotiation can allow the parties to preserve an ongoing relationship, whereas going to Court can make a bad situation worse.

• Alternative Dispute Resolutions can provide a wider range of outcomes whereas the Court is limited to a finding on facts.

Risks

• There can be situations where there is an imbalance of power between the parties which can make face to face mediation unfair. In these situations a party may prefer to go to Court.

• The case may call for urgent immediate legal remedy and therefore there is little time to negotiate.

• Alternative Dispute Resolution processes are more informal and flexible in the way they deal with the matter. This can remove the stress that a Court hearing may bring the parties.

• Mediation or negotiation can produce an agreement which both parties are happy with rather than a simple Court imposed decision. These types of agreement are more likely to work out in practice than those which are imposed.

• Alternative Dispute Resolution can be a quicker and more affordable route than a full blown Court hearing.

• Neither party can rely on legal or human rights in an Alternative Dispute Resolution process.

• Arbitration will result in a legally binding decision which cannot be rejected, so there is no ability to take the matter to Court if you don’t like the outcome.

• Alternative Dispute Resolution providers do not have regulation or a consistent quality standard to follow. This can make it hard to the parties or their advisers to choose a good service.

It should be stressed that everything said during an Alternative Dispute Resolution process is said in confidence and without prejudice. This will mean that it cannot be used against them should the matter eventually be taken to Court. However, it does not stop a party from bearing in mind any concessions the other side are prepared to make when assessing the strength of their case.