Listening without prejudice
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27 September 2013
Jim Drake and Peter MacDonald Eggers reports on the different types of ADR and the part that the courts play.
Alternative dispute resolution (ADR) refers to all means of resolving disputes, other than by a decision of the court after a trial, with the assistance of an impartial third party. The essence of ADR is that the procedures are consensual and the parties are not bound by any decision or process unless they agree. There are a number of well-known methods of ADR, which may be tailored to suit the dispute and the parties' requirements.
The most institutionalised means of ADR, it involves an arbitrator who has specialist experience deciding the dispute in a similar way to a court, although arbitrators are granted more flexibility and all procedures may be agreed by the parties themselves. Arbitration has a significant advantage over court proceedings in that it is largely confidential and arbitrators are often experienced in the relevant industry or trade. Arbitrations are governed by the Arbitration Act 1996. Many trade and industry associations have their own arbitration procedures and maintain panels of arbitrators who are available for appointment.
Perhaps the best known and most successful of the recent innovations in ADR. It involves an impartial third party acting as a facilitator in settlement discussions between two disputants. The process is entirely "without prejudice". The mediator's task is not to express any opinion on the merits of the dispute (although will if asked), but to find an area of common ground between the parties for the purposes of settling the dispute. The mediator is more concerned with identifying the parties' priorities rather than who is right. In helping to find this common ground, the mediator may comment on the strengths of each party's case but this is confidential and not divulged to the other party. There are a number of organisations which administer mediations and a growing number of mediation panels have been established to provide mediation services to particular trades or industries.
Early neutral evaluation
Increasingly more popular, this relies on an impartial third party expressing a usually non-binding opinion on the merits of the entire case at an early stage of the dispute. Such an opinion is "without prejudice" and may either facilitate settlement or encourage the parties to improve their cases by acquiring further evidence.
This involves the parties requesting an expert in a particular area of dispute to determine which party's case is justified. The parties can agree that the expert's determination is binding or non-binding.
Often a binding procedure where the adjudicator (especially during a long-term project) decides disputes as and when they arise so that the parties' performance is not delayed.
Neutral fact finding or investigations
Similar to expert determination, but involves a third party inquiring into the facts of a case and preparing a report of the findings for use in settlement discussions or other methods of ADR.
Jim Drake and Peter MacDonald Eggers are barristers at 7 King's Bench Walk
The court and ADR
Under the new Criminal Procedure Rules (CPR), as part of the new-look 'overriding objective' of 'enabling the court to deal with cases justly', the court has an affirmative duty to manage cases. Active management includes 'encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure' and 'helping the parties to settle the whole or part of the case'.
In order to allow the parties time to pursue ADR, and as a way of effectively enforcing the court's desire for ADR in a given case), the court is empowered either of its own initiative or at the request of a party to stay the action for one month.
Hand in glove, the parties have a duty to assist the court in achieving the overriding objective of the CPR and thus have a duty to assist the court in relation to ADR. The Chancery and Commercial Courts' guides require legal representatives to consider with their clients and the other parties the possibility of resolution by ADR.
Indeed, in a case management conference, the parties are asked to indicate whether the matter is appropriate for ADR and whether ADR has been considered between the client and the legal representatives.
The regime in the Commercial Court is this: The court invites the parties to consider ADR for the entire dispute or discrete issues within it. The parties do so and, more than likely, agree to ADR. The court then makes an order. Thus, within a tight timetable during which the action is stayed, a neutral third party is appointed to conduct ADR (in whatever form the parties agree upon). The parties then report its success or failure to the court and, if the latter, the reasons why.
The glossary definition of ADR in the CPR is deliberately vague so as to encompass all manner of ADR procedures, including mediation, arbitration and a new facility offered by the Commercial Court known as early neutral evaluation (ENE).
Early Neutral Evaluation in the Commercial Court
There is now available in appropriate cases a 'facility for a without prejudice, non-binding, early neutral evaluation by a Commercial Court judge of a dispute, or of particular issues in it'. It offers an opportunity to procure from the court something akin to an advisory opinion as to the merits of a particular dispute. The judge will often take no further part in the proceedings unless the parties agree otherwise. The court intends this facility to be very flexible. Its structure is designed by the parties' advocates and the court to suit the particular case and the court will issue directions as to the conduct of the evaluation.
A typical ENE might adopt the following procedure: the court directs that a statement of facts be agreed in short order and written submissions be served. This is followed by an evaluation 'conference', at which: the judge identifies each of the issues, legal and factual; the advocates are invited to supplement their written submissions; the judge offers his view as to the likely outcome on each of the issues; and the judge gives his evaluation as to the ultimate outcome. The parties are then given a period of time to conduct settlement negotiations in light of the evaluation. If the matter does not settle, then the parties have to inform the court and explain why the negotiations have failed.
ENE was first introduced in the US in 1985 by the US District Court for the Northern District of California. The scheme there differs somewhat, notably: the evaluator is a senior trial lawyer appointed by the court; client representatives with requisite authority to settle are required to attend; at the close of the first conference, the parties may agree to use the evaluator's good offices to assist in settlement; and the evaluator may schedule limited disclosure designed to assist settlement.
ENE offers an opportunity for resolution at a very early stage of the dispute. It requires the parties (legal representatives and clients) to come to an early and realistic view of the matter. It brings the parties together and is quick and cheap. And if the matter does not settle, the work done will be utilised in any event. Its shortcomings are the same as for any non-binding ADR in so far as you only get as good as you give. The judge's evaluation will only be of assistance if the parties have narrowed the ambit sufficiently, which requires early and robust attention to the underlying factual and legal issues. For that reason it lends itself to matters that turn on questions of law rather than on complicated facts, which are difficult to ascertain early. There is little point in embarking on the process if the judge is left with an 'if this, then that' analysis. The use of a Commercial Court judge is an improvement on the US model, but it may be that other features of that model could be adopted.
Despite the recent CPR reforms, the UK still lags behind other jurisdictions on ADR, whether private or managed by the courts. For example, the US Federal Court offers a facility whereby the court can by consent or of its own initiative order the parties to participate a settlement conference before a federal magistrate (akin to a master). Such conferences take a variety of forms, including 'mini-arbitration' and ENE, though generally will be a species of mediation attended by the trial advocates and a representative of the client with requisite authority to settle.
Arbitration v mediation
Expertise of panel
Addresses underlying priorities
Often results in creative and
High rate of compliance