Alternative dispute resolution (or “ADR”) has long played an important role in dispute resolution. A recent report by the Civil Justice Council (the “Report”), commissioned to consider the legality and desirability of making ADR compulsory, could see ADR playing an even more prominent role in future.

The Report

The Report uses ADR to refer to any dispute resolution technique in which the parties are assisted in exploring a settlement by a third party (for example, a mediator or judge in a non-adjudicative role), while retaining the ability to decline to settle and return to the judicial process. This includes mediation and early neutral evaluation, amongst other mechanisms.

 

  1. The legality question – is it lawful to compel a party to participate in ADR?
  • In Halsey v Milton Keynes General NHS Trust [2004] 1 WLR 3002 the Court of Appeal thought that requiring parties to mediate would be an unacceptable obstruction on their rights of access to the courts under Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“ECHR”) (the right to a fair trial).
  • Those comments have been subject to criticism. There has also been the subsequent finding in Lomax v Lomax [2019] 1 WLR 6527 that the Court did have the power under the Civil Procedure Rules to order parties to attend an early neutral evaluation.
  • The courts can already pressure parties to engage in ADR in various circumstances. For example, in civil disputes a court can order a stay for ADR to take place, impose costs sanctions for failure to participate in an ADR process, and can direct participation in early neutral evaluation. In the employment and family context, the court’s power to require ADR are more wide ranging.
  • Against this backdrop, the Report concludes that compulsory ADR will not necessarily violate article 6 ECHR. The authors suggest that “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”.
  • Applying that conclusion, the Report considers that it would breach article 6 to require participation in ADR that is disproportionately costly, slow, or otherwise burdensome.
  • On this basis, the Report suggests that compulsory ADR orders should be subject to sanction, which could be significant, for example strike out of the claim or defence.
  • Critically, any compulsory ADR must allow the parties to return to court for a judicial decision.

 

  1. The desirability question – when should a requirement be imposed?
  • The Court in Halsey concluded that compelling parties to participate would achieve nothing except increase costs, delay the resolution of the dispute, and damage the perceived effectiveness of ADR.
  • In contrast, the Report concludes that there are conditions in which compelling parties to engage in ADR could be both desirable and effective. The following factors need to be considered:
    • The cost and time burden on the parties;
    • Whether the process is suitable in certain specific areas;
    • The need for confidence in the ADR provider (and the role of regulation to assist this);
    • Access to legal advice;
    • The stage(s) of proceedings where ADR may be required; and
    • Whether the terms of the obligation are sufficiently clear to encourage compliance and permit enforcement.
  • The Report does not conclude how the dispute resolution process should incorporate compulsory ADR. However, it provides three relevant observations:
    • Compulsory ADR will not usually be controversial where it costs no time or money for the parties.
    • Greater use of judge-led ADR will be acceptable, as this has already been implemented in a way which is free and appears effective.
    • Compulsory mediation may be considered where sufficiently regulated; and made available, where appropriate, in short, affordable formats.

 

Implications of making ADR compulsory in more cases

There is merit in obliging litigants to participate in some form of ADR before they reach trial. It could save the resources of both the court and the parties. Even where ADR does not result in immediate settlement, it is often a useful nudge for parties to take a realistic view of the case. It can often lead to settlement soon after ADR as a result.

The challenge is creating a framework for the right form of ADR to be used in the right cases at the right time.

For example, in some cases a mediation at the pre-action stage may be effective to resolve the dispute early. In other cases, compromise is simply not possible before the parties have set out their case fully in their pleadings. In a number of mediations we have experienced, the turning point for a mediation was undertaking the case and costs management exercise (when all parties see how long a dispute will take and how much it will cost). Other disputes might need the exchange of evidence (particularly expert evidence on matters such as quantum) to get the best out of the process.

There is a clear risk that by forcing ADR too early, not only does the dispute not settle, but parties are deterred from undertaking further ADR later on, when it might be a better time to achieve a resolution.

A key issue with any compulsory ADR scheme would be how to deal with someone who just goes through the motions with no genuine intention to settle. The Report acknowledges that this is a real risk, but there are difficulties with setting a level of participation, as discussions would be subject to without prejudice privilege.

The Report received a positive response from the Master of the Rolls, Sir Geoffrey Vos, and this is unlikely to be the last we hear on compulsory ADR. The Report identifies that its role was not to set out the detail of how compulsory ADR might be achieved. That is still to come, and is inevitably complex. To that end, a Call for Evidence by the Ministry of Justice opened last week seeking views on “alternative” dispute resolution processes.

With the Financial Ombudsman Service as a well-established dispute resolution mechanism, the financial services sector is ahead of the game with compulsory ADR (at least, compulsory for one party). Indeed, the FOS scheme goes far beyond compulsory ADR, with regulated businesses frequently bound by FOS decisions they do not accept. More generally, while we may not yet have compulsory ADR, the benefits of voluntary ADR remain and should be considered in all but the most exceptional of disputes.