Author:
Deloitte Legal– Mathew Irvine and Fergus Nolan
As a result of the Court of Appeal’s judgment in Churchill v Merthyr Tydfil County Borough Council[1] at the end of 2023, alternative dispute resolution, or ‘ADR’ as it is better known, has been the subject of a large amount of commentary among legal practitioners, trade bodies and regulators.
While finding a route to settlement outside of the court has long been encouraged where possible, the Court of Appeal’s decision is seen by many as a landmark as it overrules a previous longstanding judgment. Back in 2004, in Halsey v Milton Keynes General NHS Trust,[2] the Court of Appeal felt that to compel unwilling parties to engage in ADR may go so far as to obstruct their right to a fair trial under Article 6.[3] This in turn has resulted in instances where courts have been hesitant to stay proceedings and encourage ADR, even when it might have seemed in the parties’ best interests.
In Churchill, the Court of Appeal decided that the concerns around the right to fair trial that an application to stay proceedings to engage in ADR may lead to were not part of the “essential reasoning” in Halsey, and so did not bind judges to it. On the question of whether proceedings can be stayed for such purposes, the Court in Churchill referred to the Civil Justice Council’s 2021 Report on Compulsory ADR which states that: “any form of ADR which is not disproportionately onerous and does not foreclose the parties’ effective access to the court will be compatible with the parties’ Article 6 rights”.[4] The Court of Appeal held that courts can lawfully stay existing proceedings to (i) enable parties to, or (ii) order parties to, engage in ADR. However, the Court of Appeal did clarify that any such order by the courts must not “impair the very essence of the claimant’s right to proceed to a judicial hearing”.
In this blog, we consider ADR more generally and its most popular forms, together with what the Court of Appeal’s judgment means for the ADR landscape.
Resolving disputes out of court
Before thinking about the impact of the ruling, it’s helpful to first remind ourselves what we mean by ADR. ADR is a broad term and typically refers to any form of dispute settlement process which does not involve the courts. In addition to negotiation, the most common forms of ADR include mediation, arbitration, and expert determination.
One of the most popular forms of ADR, and which was the focus of the Court of Appeal’s decision in Churchill, is mediation. It is a confidential (and often cost-effective) process whereby parties engage with a neutral third party as a means of narrowing issues, understanding the strengths and weaknesses of a case, and identifying opportunities for settlement. The mediator themselves does not make any binding decision (unlike the decisions made by a court or an arbitrator), so any eventual settlement must be agreed between the parties.
A recent study by the non-profit organisation Centre for Effective Dispute Resolution found that the overall success rate of mediation is high, at 92%.[5] Furthermore, the UK Government recently reiterated the value in parties engaging in this form of dispute resolution, with plans to make mediation compulsory for civil claims where their value is below £10,000.[6] Elsewhere, earlier this year, the Ministry of Justice’s announcement of its intention to sign the Singapore Convention placed mediation again in the spotlight.
Arbitration, whereby a neutral third arbitrator (or arbitrators) make a binding decision on the merits of a case, has also been in the news recently. Following a consultation led by the Law Commission, changes to domestic arbitration legislation, the Arbitration Act 1996, have been proposed and introduced to parliament at the end of 2023 in the form of the Arbitration Bill. What does this mean for the ADR landscape?
Is the Court of Appeal judgment likely to have a significant impact on the ADR landscape? Yes and no. The judgment removes one of the historic barriers to judges ordering parties to explore ADR. As a result, where a judge feels that a set of circumstances or particular parties would clearly benefit from ADR, they will feel less restrained by precedent to avoid staying proceedings. However, even before the judgment, the judiciary have been vocal as to the value seen in the settling of disputes outside of court.
The Court of Appeal’s ruling does not change the fact that ADR remains a highly encouraged, and often effective, avenue for resolving disputes. Notwithstanding this, where a specific dispute requires it, a binding resolution within the courts may be the most appropriate forum for the parties. It is important to remember that the circumstances of one matter may make it the perfect candidate for negotiation, another a matter for expert determination, or another perhaps for mediation.
In its response to the ruling, the Law Society reiterated the value the judgment provides, as it makes clear the “parameters governing when parties can be required to enter into a non-court-based dispute resolution process before proceeding with a civil claim”.[10] Rather than setting out a hard and fast rule for when legal proceedings should be stayed and ADR ordered, the Court of Appeal has instead actively chosen not to provide any “fixed principles” in this regard. This is most likely because the Court had in mind the earlier judgment of Dyson LJ in Halsey, where he noted that:
“If the court were to compel parties to enter into a mediation to which they objected, that would achieve nothing except to add to the costs to be borne by the parties, possibly postpone the time when the court determines the dispute and damage the perceived effectiveness of the ADR process”.[11]
For parties to an existing dispute, or those that are anticipating one, understanding whether a specific set of circumstances would benefit from ADR (and what form) can be crucial. Not only can the right ADR at the right moment potentially unlock a knotty issue that had led to an impasse, so too can its deployment at the wrong time risk being counterproductive.
