Businesses involved in, or contemplating litigation are advised to give serious consideration to ADR from the outset of a dispute as well as during the lifecycle of a claim.

For those parties who relish their day in Court and pay lip service to alternative dispute resolution (“ADR”), the recent amendments to the Civil Procedure Rules (“CPR”) will make life harder for those parties as the Courts now have the power to order parties to engage in ADR.

The changes to the CPR came into effect on 1 October 2024 following a landmark Court of Appeal ruling in Churchill v Merthyr Tydfil County Borough Council [2023]¹, in which the Court ruled that judges have the power to stay proceedings so that parties can attempt to resolve their dispute through ADR. The Churchill ruling was a landmark development since it overturned a near 20-year prohibition on courts compelling parties to engage in ADR. That being said, the Churchill ruling does provide an important limitation on the Court’s power to compel parties to engage in ADR, as such an order must be proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost, and must not undermine the parties’ right to a judicial hearing.

So, what do these amendments mean for parties contemplating litigation, and are there specific factors that the court will take into account when compelling parties to engage in ADR?

Overview of amendments to the CPR

As a result of the Churchill ruling, the CPR Committee commissioned a consultation, inviting views and comments on its proposed amendments to the CPR. The finalised amendments largely follow the proposals in the consultation and are as follows:

• The overriding objective of enabling the Court to deal with cases justly and at proportionate cost has been expanded to now include “promoting or using alternative dispute resolution”².
• The Court’s duty of active case management powers now includes “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution”³.
• The Court’s general powers of management now include the ability to “order the parties to engage in alternative dispute resolution”⁴.
• When providing case management directions, whether in the fast/intermediate tracks and/or multitrack, Courts should consider “whether to order or encourage the parties to engage in ADR”⁵.
• When a Court is exercising its general costs discretion, its consideration of the parties’ conduct may include “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution”⁶.

Factors which the Court may take into account in exercising its new power

In line with the Churchill ruling, the recent amendments to the CPR do not provide any guidance on the particular circumstances in which the Court will exercise its new power to compel parties to participate in ADR. This is in line with the Churchill ruling, in which the Court noted various factors that may be relevant (such as the form of ADR being considered, the costs of ADR, the reasons given by a party for not wishing to mediate, whether there was a realistic prospect of resolving the claim via ADR) whilst acknowledging that there may be many others and that it would be “undesirable to provide a checklist or a score sheet for judges to operate”.

Ultimately, the factors which influence whether and when ADR will be appropriate will differ on a case-by-case basis and will differ noticeably between different types of claims.

Implications for parties contemplating litigation

Given the broad range of disputes covered by the civil justice system, a Court’s decision on whether to compel parties to engage in ADR will rest on the particular circumstances of the dispute as well as the nature of the alternative dispute resolution process contemplated.

In light of the recent amendments, parties would be well advised to give serious consideration to ADR from the outset of a dispute as well as throughout the lifecycle of the claim as proceedings progress. The new amendments provide further impetus for judges to order parties to engage in ADR and as such, we may see judges raising the question of ADR at every case management conference before allowing cases to progress to full litigation. Businesses involved in litigation will therefore need to be well-prepared to demonstrate that they have made proposals to the other side in relation to ADR.

Only time will tell how keen judges will be about actually compelling reluctant parties to engage in a particular form of ADR and there will inevitably remain a risk of a party simply going through the motions with no intent to settle, or using mediation as a fact-finding mission. It therefore remains to be seen whether the CPR will be further amended in the near future to introduce a good faith requirement on parties when engaging in ADR. Whether or not mandatory ADR will have an impact on the amount of litigation being brought is too early to tell, however parties involved in litigation would be well-advised to give particular consideration as to whether or not ADR is suitable to their case, and if not, they should be prepared to explain that position in detail to the judge at the case management conference.

For further information, please contact Hannah Field, Oliver Bartholomew or any other member of our Dispute Resolution and Litigation team.

¹ Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ. 141
² CPR 1.1(f).
³ CPR 1.4(e).
⁴ CPR 3.1(2)(o).
⁵ CPR 28.7(1)(d); CPR 28.14(1)(f); CPR 29.2(1A).
⁶ CPR 44.2(5)(e).