Alternative Dispute Resolution ('ADR') describes the various alternative options to resolving a dispute outside or alongside the litigation process. Read about ADR in more detail below.
Mediation is a voluntary process whereby the parties begin by agreeing to "mediate" their dispute and attempt to reach an agreement by way of compromise. A meeting will then be arranged which all parties attend, usually accompanied by their legal team, together with an independent mediator who will have been appointed with the agreement of all parties.
The mediation process will take into account the strengths and weaknesses of each party's case and ultimately it will often be the risk of losing at trial if a settlement is not reached that will act as the impetus for settlements being achieved.
A mediation will begin with all the parties attending a meeting with the Mediator in the "chair". Each party begins with an "opening statement" which will focus on the strengths of their case and why they say that their case would succeed in court if a settlement is not achieved. The parties will then usually divide off into separate meeting rooms with the mediator shuttling between the rooms communicating to each party the terms upon which the other party is willing to settle and adding his own views where relevant. This is commonly referred to as "shuttle mediation". The aim is that throughout the day the gap between the parties will narrow as the negotiations continue eventually resulting in an agreement.
Mediation is confidential, providing all parties ensure this is agreed before the mediation meeting. This is an important feature of mediation that allows the parties to concede points in negotiation that they can later choose not to concede in subsequent litigation if a settlement is not achieved.
If mediation is attempted in a dispute where proceedings have already been issued, the agreement reached will usually be recorded in a "Tomlin" order which will be filed with the court and bring an end to the proceedings. The Tomlin order is regarded as a contract between the parties and if it is not complied with, it is as enforceable as a judgment of the court.
Civil/commercial mediation costs can be reasonably high; the mediator will charge an instruction fee payable by each party of between £200 to £500 per hour and will then charge an hourly rate for the travelling to and from and attendance at the mediation. How long the dispute takes to resolve will therefore dictate the mediator's fee.
Arbitration is a form of ADR widely used for international, employment, partnership and consumer disputes.
Although arbitration is similar to litigation in that an impartial third party adjudicates upon the dispute, it is less formal and therefore intended to be quicker and cost less than litigation.
One of the benefits of arbitration, as with adjudication, is that the arbitrator is often an expert in the particular field relevant to the issues in dispute. Parties can choose a single arbitrator with relevant experience or select a panel of three or five arbitrators to prevent deadlock. The larger the panel, the more expensive the process will be. However, panels of arbitrators will generally only be used in high value commercial disputes.
Another benefit of arbitration is that the process is confidential (unlike court proceedings) and therefore the parties will not "have their dirty linen washed in public". This may be more important in certain disputes than others.
The Arbitration Process
The arbitration process is governed by the Arbitration Act 1996 which provides very limited scope for any appeal against an arbitrator's award. Usually, appeals can only be based on an allegation that the arbitrator has behaved unfairly. The Act does however allow the process to be tailored to the needs of the parties.
After considering the parties' submissions, the arbitrator issues a final and binding 'award'. Unlike litigation, the award can be based on good practice and reasonableness as well as on the law.
It may be that you have no choice whether to arbitrate a dispute as an agreement to do so may already exist within the contract to which the dispute relates. If so, the dispute must be referred to arbitration before litigation may even be considered.
Cost of Arbitration
There is a fee for most arbitration schemes. An experienced arbitrator in a commercial dispute can be very costly. However, consumer arbitration schemes run for a trade association are usually relatively low-cost. For example, most claims under the ABTA arbitration scheme for holiday disputes currently have a registration fee of £72.85.
Adjudication is the process by which an adjudicator will settle a dispute quickly on an interim basis only and until the parties commence either litigation, arbitration or reach an agreement (either by themselves or with the help of mediation).
The adjudicator's decision will usually only be based upon written submissions from each party and without a hearing. Both sides will send to the adjudicator written details of their arguments including copies of any letters, reports or other documentary evidence. The adjudicator will usually be an expert in the appropriate industry.
The aim of adjudication is to provide a swift resolution to a dispute or a number of disputes which if not resolved quickly, could lead to more costly consequences for the parties involved. An adjudicator will therefore often provide a decision on disputes as they arise during the course of a contract. This is popular within the construction industry.
Whilst an adjudicator's decision may be overturned in subsequent litigation or arbitration, this happens rarely in practice.
In an Expert Determination, an independent expert in a field appropriate to that dispute determines the dispute, often on written submissions and without a hearing. The decision will be legally binding on the parties and there is no right of appeal, thereby giving the parties finality. Expert Determination is commonly used for rent review and other valuation disputes.
Early Neutral Evaluation
Here, the parties will agree and appoint an independent party to provide a non-binding opinion which will give an indication of what the result would be if the matter was decided in court. With this in the mind, the parties are then free to either reach an agreement themselves or agree a form of ADR to resolve the dispute.
The Civil Procedure Rules which govern the practice of litigation in the UK courts make very clear that ADR should always be considered be as an alternative to litigation.An unreasonable refusal to mediate may have adverse costs consequences.