EM Law | Commercial Lawyers in Central London
Alternative Dispute Resolution solicitors
Alternative Dispute Resolution (ADR) refers to ways of resolving disputes between parties without going to court. There are a number of ADR mechanisms available to parties to a dispute. These include negotiation, mediation, expert determination, early neutral evaluation and conciliation. The CPR requires parties to give consideration to ADR throughout a case.
Negotiation is a communication process between parties that is intended to reach a compromise or agreement to the satisfaction of both parties. Negotiation is usually the starting point when trying to resolve a dispute. Negotiation does not involve a third party and discussions usually proceed on a without prejudice basis.
Expert determination is an informal alternative dispute resolution process that produces a binding decision. It involves appointing an independent expert on the subject matter and is often provided for in commercial agreements. The expert will either be agreed on by the parties or will be appointed by their nominee. The powers of the expert are usually set out in a separate ‘terms of reference’. The parties will have to pay the expert for his time and costs. The expert has no authority to make an order as to costs following the determination unless the parties grant him such authority in the contract. Expert determination is the most suitable form of alternative dispute resolution for disputes requiring technical knowledge but may not be suitable if the parties wish to be fully heard and there are issues of credibility.
Early neutral evaluation
Early neutral evaluation (ENE) is where an independent and neutral evaluator, often a QC or a retired judge, meets with parties early on to give a non-binding and confidential assessment of the dispute. ENE is usually most effective if attempted during the early stages of a case and before significant costs have been incurred. The rationale is that, once armed with the opinion, parties will be able to negotiate an outcome, with or without the assistance of a third party. There are no procedural requirements for ENE beyond those agreed between the parties. The Commercial Court specifically encourages parties to consider ENE.
Conciliation is similar to mediation except that, usually, the third party will actively assist the parties to settle the dispute. The term is widely used to describe the facilitated settlement discussions that occur in the employment arena. The advantages and disadvantages of conciliation are similar to those for mediation. In addition, parties may welcome the more pro-active approach of the third party in steering the parties towards achieving a settlement.
Advantages of Alternative Dispute Resolution
• Saving time: Going through a court process can take months or even years. ADR can usually be arranged and undertaken on much shorter timescales, even a matter of days in some cases.
• Saving costs: Resolving a dispute through ADR is likely to be cheaper than doing so through the courts, partly because of the shorter timescales involved. Undertaking ADR at any early stage can also reduce the prospect of case management sanctions being imposed down the line.
• Flexibility, choice and control: A major advantage of ADR is that it can result in a more flexible, imaginative and practical solution than a trial. Parties are free to tailor the process to suit their needs and to reach a settlement based on their commercial interests. With some forms of ADR parties also have greater choice and control over who conducts the process.
• Confidentiality: ADR procedures can be confidential in nature, which can give parties freedom to air sensitive commercial issues and enable full and frank negotiations. In most cases, the court procedure is public.
• Other advantages: Even if the ADR process does not result in a settlement, it might produce other advantages for the parties. For example, it might narrow the issues in dispute, test the strength and weaknesses of each party’s case and allow parties to air their different perspectives. ADR commonly increases the prospect of settlement being reached before trial.
Disadvantages of Alternative Dispute Resolution
• Delay and increased costs: Where settlement is not reached and a court process is ultimately pursued, undertaking ADR can result in wasted time and costs for the parties.
• Revealing too much information: Some clients fear that ADR runs the risk of exposing their cards or strategy that they will use in court if the case does not settle. For many forms of ADR however, anything said will be subject to privilege in any future proceedings.
• Non-binding results: Settlement terms agreed through a non-binding ADR process are not enforceable. However, it is always open to the parties to formalise any agreement reached in a written and signed contract. Additionally some forms of ADR produce binding outcomes, providing greater certainty for the parties to a dispute.
• Limitation issues: Unlike in legal proceedings, most forms of ADR do not stop the clock for limitation purposes. Parties will therefore need to keep an eye on the limitation period and consider the possibility of having to issue protective legal proceedings whilst undertaking ADR.
• Risk of delay to trial: In cases where the possibility of undertaking ADR is raised at an advanced stage of litigation, there may be a risk that diverting the parties’ attention to ADR will get in the way of the court process, and could even delay the trial. Courts may be reluctant to suggest ADR where such a risk could arise, although it may be possible to conduct both processes at the same time.
Who pays the costs of Alternative Dispute Resolution?
At the end of a court case, the unsuccessful party is usually ordered to pay the successful party’s costs. Costs are, however, always at the discretion of the court. When it comes to assessing costs, the court will consider whether a party acted reasonably in refusing to agree to ADR. When deciding whether or not parties have acted unreasonably the court should bear in mind the advantages of ADR over the court process and have regard to all the circumstances of the particular case.
If the case settles with ADR, who should bear the costs is usually a matter for agreement between the parties. One common approach is that the parties agree to share the fees, expenses and other costs of the ADR process.
For any questions you may have, our Alternative Dispute Resolution solicitor Joanna McKenzie can help.