The majority of disputes are settled before trial, and an increasing number are settled before proceedings are issued. The Civil Procedure Rules that provide the framework for litigation in England and Wales encourage parties to consider alternative ways to resolve their differences. There are a variety of techniques that can be utilised to achieve an early and cost effective settlement. Collectively, these are known as ADR. Such are the benefits of ADR it has become an integral part of the dispute resolution process and should be considered at every stage of a dispute.
Although the courts cannot make a party enter into ADR, there may be costs sanctions for those unwilling to enter into it without good reason. The courts encourage parties to consider an appropriate form of ADR at all stages of a dispute.

There are many forms of ADR, and you should get advice at an early stage about what is most appropriate for you. Some forms of ADR involve a decision imposed upon the parties, whereas other forms, such as mediation, are consensual.

Types of ADR

Negotiation - negotiation between the parties is the most flexible and informal type of ADR. If the parties are able to discuss the dispute and reach a private resolution, this will always be preferable to initiating court proceedings and/or instructing an independent third party to make an assessment for them.

Mediation - is a voluntary and confidential process involving an independent and neutral third party - a mediator - who will attempt to facilitate negotiations between the parties with a view to the parties reaching agreement. A mediator is not entitled to offer his opinion, or impose any of his views. If settlement is achieved, the parties sign a settlement agreement, which brings an end to the litigation. However, if settlement terms cannot be agreed, either party is free to leave the mediation. A key benefit of mediation is that it allows the parties to speak to each other on a commercial basis, and allows them to agree a solution rather than have one imposed by a Court.

Expert determination - is an informal process that produces a binding decision made by an independent expert appointed by the parties. The expert is appointed to determine an issue, which is usually of a technical nature. The expert's decision is contractually binding on the parties.

Arbitration - is a private forum in which an independent arbitrator makes an award, acting in a judicial manner, to finalise the dispute. An arbitrator focuses on the issues of fact and law presented by the parties and then makes their final and binding decision. Parties are often contractually bound to enter into arbitration as many commercial contracts provide for arbitration as the form of ADR in the event a dispute arises. Although these days many are of the view that arbitration may not in fact be the best option for resolving a dispute.

Adjudication - is generally used in the construction industry. It involves an independent adjudicator who provides a decision on disputes as they arise during the course of a contract. Typically, the decision of an adjudicator has interim binding effect; that is binding pending an agreement of the parties altering its effect.

Early Neutral Evaluation (ENE) - in ENE the parties obtain a non-binding opinion from an independent person (often a recently retired judge) regarding the likely outcome of the dispute if it proceeded to trial. The parties can agree to make ENE binding. The rationale is that, once armed with the opinion, the parties will be able to negotiate an outcome with or without the assistance of a third party. Alternatively, if the parties have opted for a binding ENE, they are free to settle the dispute on the basis of the evaluation provided.

There are other types of ADR not covered in this note, such as Executive Tribunal ('mini-trial'), Conciliation, Dispute Review Board and Med-Arb. If you would like further information about these, please contact us.

What does this mean?

In the current economic climate, parties in dispute should be mindful of the costs and risks of protracted litigation, and should consider settlement at every stage. ADR provides a practical solution for parties to extricate themselves from costly proceedings, and should be embraced as the means of resolving disputes both before and during litigation.

What should you do?

• consider adopting ADR processes as a 'first step' method of dispute resolution when entering into any commercial contracts
  
• always think carefully about the appropriate form of ADR for any dispute
  
• if a dispute arises, seek early legal advice on the most suitable and cost effective form of ADR
  

 

Link to article