#16050 - Introduction Advantages Costs Misc - BPC Alternative Dispute Resolution

ADR/REDOC

General/introductory notes

Adjudicative vs non-adjudicative

• Adjudicative = an (independent) 3^rd party imposes the decision.

  • Adjudicative processes:

  • Arbitration

  • Litigation

  • Expert Determination (ED)

  • Adjudication (used in construction industry)

  • Ombudsman (although some don’t make decisions)

  • Competition Authority

  • [[key ones to look for in MCQ options: arbitration, litigation, ED, adjudication]].

• Non-adjudicative = parties themselves make the decision, process aimed at enabling parties to reach an agreement settlement.

  • Non-adjudicative processes:

  • Negotiation

  • Mediation (the 3^rd party does not make the decision, but facilitates the parties in seeking a settlement)

  • Expert evaluation

  • Early Neutral Evaluation

  • Conciliation (eg in employment)

Advantages of ADR processes in general

Advantages

• Costs: (for mediation/negotiation, less so for arbitration).

• Parties have Control of process:

  • Control of costs (eg can choose 1 arbitrator)

  • Control of outcome in non-adjudicative processes (negotiation/mediation)

  • In arbitration, control over who the arbitrator is.

• Less stress

• Speed/time

  • Speed of getting to point of resolution

  • Once within process, eg in negotiation can impose own timetable, in control of how long it might take. Arbitrator, parties in control of timetable.

• Confidentiality/privacy (litigation is public)

• Maintaining business relations/long-term relationships, as ADR less confrontational.

• Maintain reputation (keep the dispute private)

• Flexibility:

  • Procedural flexibility

  • Greater range of remedies,

  • Flexibility in potential outcome, not black-and-white as in court.

• Avoid litigation risk (court is all or nothing)

• Variety of claims: can make submissions on any matters, not only restricted to points of law.

• Simpler procedures and strict rules of evidence do not apply

• Can have flexible solutions which go beyond the strict parameters of the original dispute (CF in court, jurisdiction only to make orders within confines of the issues raised by the statements of case).

• Arbitration agreements are enforceable internationally, New York Convention 1958, 140+ countries

Disadvantages

• ADR procedures agreed before a dispute arose may be inappropriate for resolving the actual dispute that arises.

• Where parties agree to ADR after dispute arises, might find it difficult to agree the details of the procedure to be followed (eg identity of an arbitrator/mediator, payment of fees, rules to govern the ADR etc).

• Arbitrator fees may be more expensive than litigation.

• A party with a strong case may have to abandon their actual rights if the ADR procedure is to achieve anything.

• Can be expensive and time-wasting if one party is not genuine in their participation.

• ADR sometimes unworkable if there are multiple parties.

• Enforcement of the amount determined is easier in litigation than ADR (other than arbitration).

• Certain remedies only a court can provide.

ADR and case management, courts encouraging ADR

• Courts, emphasis on parties considering ADR:

  • Pre-Action Protocols

  • Overriding Objective (justly and at proportionate cost)

  • Courts case management powers

  • Cost implications

  • Court mediation schemes (eg small claims track, mediation service).

• Jackson Costs Review (‘Review of Civil Litigation Costs Final Report’): ADR and mediation feature significantly, role in reducing costs of civil disputes. ADR is underused. Effective costs management to encourage ADR.

• Statements made by CA judges and ‘judicial speeches’

  • ADR must become an integral part of our litigation culture.

• Case management and ADR:

  • OO = courts deal with cases justly and at proportionate cost.

  • Active case management: court must encourage of the parties to use ADR procedure ‘if the court considers that appropriate’; and to facilitate use of such procedure (r1.4(2)(e)) [one element of active case management]

  • Part of OO of proportionality post-Jackson and CPR, achieve proportionality between costs of litigation and value of what is at stake; litigation should be last resort.

  • First opportunity for court to consider ADR at allocation stage. Court will consider whether parties have complied with ADR provisions of any relevant pre-action protocol.

• Courts encourage use of ADR by:

  • (a) holding parties to pre-dispute agreements to use ADR, by granting STAYS of proceedings commenced in breach of an ADR clause;

  • (b) making orders declaring the rights of the parties under ADR clauses, or providing machinery for implementing ADR clauses

  • (c) STAYING court proceedings, typically for a month, at the case management conference stage for the purpose of using ADR

  • (d) ensuring the parties have addressed, or will address, whether ADR might be useful as a means of resolving their dispute, typically at case management conferences;

  • (e) making orders that make it plain that the court expects serious consideration to be given to use of ADR.

    • Making an ‘Ungley Order’ (requires the parties to consider whether the dispute is suitable for mediation; and if they don’t consider it suitable, to justify that conclusion by filing a statement explaining how and why they reach that conclusion.

  • (f) imposing costs sanctions on parties who act unreasonably in relation to ADR (Halsey v Milton Keynes General NHS Trust).

• Other Egs of how court can facilitate use of ADR:

  • Source of info re ADR services

  • Verbally encouraging parties to consider ADR

  • Ordering a stay of whole/part of proceedings for ADR, either on application or of own initiative.

  • Can conduct an ENE (3.1(2)(m)), with the aim of helping the parties settle their dispute.

  • Making a costs order, or advising that such an order might be made re unreasonable failure to adequately consider ADR.

  • Referring a small claim to the Small Claims Mediation Service. If the mediation service results in settlement, the proceedings will be stayed.

  • CPR 3.1(2): court’s general case management powers, can order that a party (/his legal rep) by required to attend court; such an order can be made with a view to making an ADR order or to otherwise facilitate settlement.

• Duty of parties and case management: duty of parties to help court further the OO includes encouraging & facilitating ADR as part of active case management;

  • so parties have a duty to consider seriously the possibility of ADR procedures particularly when encouraged by the court;

  • this is a continuing duty throughout the litigation.

  • Consequences of not may face costs consequences.

ADR in pre-action protocols

• PD (Pre-Action Conduct) [[there are similar provisions in other pre-action protocols]]:

  • Litigation should be a last resort;

  • Continuing duty at all times to keep possibility of settlement under review, even after proceedings have started.

  • Parties may be required to provide evidence that ADR has been considered;

  • and a refusal to participate, or a party’s silence in response to an invitation to participate, might be considered unreasonable by the court and lead to a costs order.

  • A party that has unreasonably refused to use ADR or failed to respond may be regarded as having failed to comply.

• Two main risks of non-compliance with Pre-Action Protocol, no attempts at ADR: Court may:

  • (1) stay proceedings to allow attempts at ADR

  • (2) costs order (when a decision is made).

• Court Guides & Handbooks also make reference to ADR

Compulsory ADR? Courts will encourage, but not order/compel, ADR

• Courts CANNOT compel ADR (Halsey v Milton Keynes General NHS Trust).

  • hallmark of ADR/mediation is that it is voluntary

  • may violate Art 6 ECHR to compel ADR.

Costs

Costs general principles (post-Jackson emphasis on proportionality)

• (1) costs payable by one party to another are in the discretion of the court

• (2) general rule = costs follow the event: i.e unsuccessful party pay cots of successful party. Judge must give reasons for departing from this.

• So starting point = winner should be awarded whole of his costs.

• But discretion of court, circumstances to consider include:

  • Conduct of all parties, before and during proceedings including compliance with PD (Pre-Action Conduct) or relevant pre-action protocols.

  • Any admissible offer to settle made by a party.

• note you NEVER get 100% of costs awarded by courts.

Cost sanctions (for unreasonableness re ADR)

• Court may impose cost sanctions if a party unreasonably refuses an offer to use ADR (Halsey v Milton Keynes General NHS Trust).

• Costs sanctions as part of active case management; part of judicial encouragement of ADR.

• Costs where ADR declined (when should depart from general rule that unsuccessful party pays costs?):

• Where should court impose costs sanction on a successful litigant on grounds that he refused to take part in ADR;

  • ONLY if shown that the successful party acted unreasonably in refusing to agree to ADR;

  • burden on the unsuccessful party to show this, to justify departing from general rule (Halsey).

• Court’s discretion, will consider the overall conduct of litigation.

• If a party rejects an offer of mediation or fails to give ADR adequate consideration, when following a pre-action protocol or completing the directions questionnaire it will run the risk of an adverse costs order when costs are dealt with, and the court considers the overall conduct of the litigation.

• If party acted UNREASONABLY Halsey v Milton Keynes.

• Generally, silence in the face of an invitation to participate in ADR = unreasonable, should invoke a costs sanction.

• Taking an unreasonable stance in a mediation/ADR is treated in same way as unreasonably refusing to mediate at all.

• Where a party is not silent, but gives reasons for refusing ADR at the time,...