The significance of Alternative Dispute Resolution (ADR) cannot be understated within the litigation context. The Civil Procedure Rules (CPR) Pre-Action Conduct explicitly state that Litigation should be the last resort in dispute resolution, and that parties should consider ADR before commencing proceedings. Additionally, the requirement for parties to consider and engage with ADR extends beyond pre-action and continues throughout the whole litigation process, making this an area of ongoing importance for all parties.
A parties’ failure to demonstrate and evidence to the court that they have taken appropriate steps to engage in and consider ADR, if considered unreasonable, can result in court ordered cost penalties.
The courts can also issue a stay in proceedings in the case that both parties are seeking to engage in ADR.
Our dispute resolution team can advise on the best strategy for you. Call Lewis Nedas on 020 4572 1313 or complete our online enquiry form today.
ASSESSING UNREASONABLENESS IN REFUSING ADR
In order to assess whether a party has acted unreasonably in refusing to engage in ADR, several factors are considered, known as ‘The Halsey Principles’. These include:
- The suitableness/appropriateness of ADR for the specific dispute;
- The comparative cost of mediation to the claim
- Any delays caused by ADR to trial
- The validity and strength of the claim
- The prospects of success for mediation
WHAT TYPES OF ADR ARE AVAILABLE?
There are several forms of ADR available to enable parties to settle a dispute, some of which are binding and require third-party intervention, whilst others do not.
Some forms of ADR include:
- Negotiation;
- Mediation;
- Arbitration
STRENGTHS AND WEAKNESSES OF ADR VERSUS LITIGATION
Negotiation is a non-binding process that does not require the intervention of a third party; this simply involves the parties seeking to reach an agreement on a dispute. This is the least formal and most flexible of the ADR processes, and can be extremely time and cost-effective. Additionally, all negotiations occur without prejudice save as to Costs, meaning that should the negotiations be unsuccessful the parties rights will not be affected. As there are no third-parties involved, should negotiations stall, there are no mechanisms to break through the impasse, which is a potential weakness of this type of ADR compared to litigation.
Mediation is a non-binding process that does require the intervention of a third party known as a mediator, who’s role is to seek to achieve a mutually agreed settlement between the parties. This process can be conducted in a relatively quick and cheap time frame compared to litigation; however, as the parties retain control over whether they accept the mediator’s proposals, there is no guarantee of a settlement.
Arbitration is a binding form of ADR involving an independent third party, the arbitrator. Typically, parties agree contractually to arbitrate before selecting an arbitrator or tribunal. The arbitrator reviews the factual and legal issues and issues a binding award after a hearing where both parties present their cases. Arbitration awards are enforceable through legal procedures if necessary. These proceedings are confidential, generally more cost-effective than litigation, and can be conducted swiftly by experts in a convenient setting.
A COMMERCIAL VIEW
There will be many instances where individuals either engaged in litigation or looking to engage will have to measure up whether they will get any positive value through litigation compared to ADR options to reach a settlement. In this situation, factors such as the merits of the case, the sums being claimed, and the likelihood of success must be considered as it will often be commercially unviable to go through the expensive litigation process. For larger claims, ADR can be utilised to preserve costs and save on expensive court fees.
When in litigation, parties utilising strategic and reasonable Part 36 offers can set a benchmark for what figure they would be willing to settle at. They are treated ‘without prejudice save as to costs’ meaning that they cannot be put in front of the court as evidence of an admission. These offers often focus the dispute towards settlement as the other side is put under pressure related to costs. Should a claimant not accept a Part 36 offer and fail to secure a larger judgment than the offer, they will be liable to pay the defendant’s costs from the expiry/rejection of the offer. This makes them a formidable and pointed tool that can be used to draw a close and save costs in an expensive litigation process.
At Lewis Nedas Law, we help clients choose the right path – whether ADR or litigation – to achieve an effective, commercial, and cost-sensitive outcome.
Contact our expert Dispute Resolution Lawyers
If you would like advice on whether ADR or litigation is the right strategy for your dispute, we can assist. Please contact Sebastian Roberts of our Litigation team on 020 7387 2032. Alternatively, you can make an enquiry via our online contact form.
Disclaimer:
This article is for general information purposes only and does not constitute legal advice. For tailored advice based on your circumstances, please contact our team directly.