The Claims Process: Alternative Dispute Resolution
Alternative Dispute Resolution (“ADR”) is the name for a collection of different methods used to resolve disputes without the need to issue formal proceedings, or, where proceedings are ongoing, without getting to the stage where a Court or Tribunal makes a final judgment.
Resolving a dispute with ADR is generally a cheaper approach than formal litigation and can be less stressful and time consuming for the parties involved, as well as removing the risks that are associated with formal litigation.
An over-arching benefit of many types of ADR is that the details of a dispute and any resolution reached can remain confidential and out of the public domain, unlike court proceedings. Certain forms of ADR also provide the parties with the ability to reach compromises and agree to settlement terms that are not open to a Judge to make.
The overriding objective of the Civil Procedure Rules ensures the Court deals with cases justly and at a proportionate cost. This involves a requirement for the Court to actively manage cases which includes “encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure” and “helping the parties to settle the whole or part of the case.”
The Court will expect parties to have explored ADR where appropriate and in some circumstances the Court may order parties to engage in ADR. If a party refuses to consider or engage in ADR, this is likely to result in adverse costs consequences should a matter later be resolved by a Court of Tribunal. It is therefore strongly recommended that parties explore the option of ADR at the earliest opportunity and continue to keep it in mind whilst proceedings are ongoing.
There are many different forms of ADR, each with their own benefits and drawbacks. This article does not cover every form of ADR but outlines some of the key types, below.
Negotiation
This form of ADR is a non-binding route and allows parties to attempt to settle a dispute by way of agreement, without any intervention from a third party. It is common for any negotiations to proceed between parties’ solicitors on a without prejudice basis, meaning any failed attempt of negotiation will not affect court proceedings. However, it may not be suitable if there is disparity in bargaining power between the parties, or if parties are disputing complex matters or are unwilling to compromise.
If a settlement is reached by way of negotiation, this can be formalised in an appropriate agreement, which is binding on the parties.
Mediation
In mediation, a mediator, who is a neutral third party, assists with the process of attempting to settle a dispute by way of agreement. Similar to negotiation, mediation will usually take place on a without prejudice basis meaning a failed mediation will not affect court proceedings. The parties have control in the direction of the conversation and any final agreement, whilst the mediator facilitates this process. Mediation is confidential and the process can be beneficial for maintaining good working relationships between parties to a dispute. It does however require the parties to be open to the idea of compromise and as such, may not be suitable in circumstances where one or both parties have adopted a firm stance which they are unwilling to move from.
If a settlement is reached by way of mediation, this can be formalised in an appropriate agreement, which is binding on the parties.
Conciliation
Conciliation is similar to mediation with a neutral third party known as a conciliator, who assists the parties to resolve a dispute by way of agreement. However, unlike in mediation, the conciliator plays a more active role. Beyond simply facilitating negotiations, they will also provide the parties with a non-binding settlement proposal.
Early neutral evaluation (non-binding)
An independent party is appointed to give a non-binding opinion. The opinion can consider the merits of the facts, evidence and law of a particular issue or the whole case in dispute. This allows the parties to negotiate, whilst giving consideration to the opinion provided. This can be an effective route as it allows informed negotiation and may deter parties from pursuing litigation if weaknesses have been identified, but can also create unequal bargaining positions, especially if a party is unwilling to accept the opinion provided.
Expert determination
An independent expert evaluates the dispute and provides a decision which is binding upon the parties. This can be useful as it allows experts in certain fields to provide binding decisions based on assessing the technicalities of the dispute between contracting parties, which a judge may not always be familiar with. Referral to expert determination is often included in clauses within commercial contracts, where disputes relating to the contract arise.
Adjudication
In the event a dispute arises in the context of a construction contract, parties have the statutory right to refer the matter to adjudication. The decision of an adjudicator is binding on the parties until finally determined by a Court or Tribunal. The decision process is limited to a 28-day process and can therefore be an efficient and less costly form of ADR.
Given the myriad of different ADR options, each with their own benefits and drawbacks, we would strongly recommend seeking professional legal advice in order to pursue the most appropriate form of ADR at the right time.
