England and Wales
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Parties usually negotiate to some extent at the outset of a dispute either as an alternative to, or at the same time as, litigation or arbitration. However, there are also a number of more formal types of ADR which are common-place in England and Wales across all types of commercial disputes, including mediation, adjudication, expert opinion, expert determination and early neutral evaluation.
Mediation is a voluntary, non-binding, private process in which a trained independent person helps the parties to try to reach their own negotiated settlement. This is the most common method of ADR and has a high success rate.
In adjudication, a neutral third party makes a decision that is binding, pending any subsequent court or arbitral award.
With an expert opinion, an expert will answer a series of questions which represent the areas of dispute between the parties. The non-binding process is usually persuasive in influencing the resolution of the dispute without recourse to a hearing.
Expert determination involves the appointment of an expert in the subject matter of the dispute to make a decision which the parties agree beforehand to accept as binding. It is usually adopted for specific technical issues. Although generally classified as a form of ADR, this is significantly different from the other methods, most importantly in that the outcome of the process is generally binding on the parties and non-appealable.
Early neutral evaluation is a non-binding preliminary assessment of fact, evidence or legal merits by one or more independent professionals, often retired judges. It can be private or the court can order an early neutral evaluation. It will be conducted by a judge of the same level as would be allocated to the trial. If it does not resolve the dispute, the judge conducting the early neutral evaluation will have no further involvement unless agreed.
Certain courts may also offer ADR such as Chancery Financial Dispute Resolution (CFDR) for claims within the Chancery Division. With CFDR, the court facilitates negotiations and may provide the parties with an opinion about the claim or elements of it. The process originates from the Family Division. It is without prejudice and non-binding. At present, it will not be ordered unless all parties consent.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in ADR does not itself stop time running for the purpose of limitation of actions but the parties can achieve this by agreement, such as entering into a standstill. Nor does ADR impose an automatic stay on any proceedings or arbitration already commenced, although this can simultaneously be achieved by agreement or court order. The right to litigate or arbitrate is also not directly affected by engaging in ADR. Unless the parties have agreed they will try an ADR process before issuing proceedings, litigation or arbitration can be commenced or continued whilst ADR is pursued and will be available if no settlement is secured.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
Following a Court of Appeal judgment which decided that the courts have the power to order parties to engage in mediation or another form of alternative dispute resolution (ADR), as well as having the power to stay proceedings to facilitate ADR between the parties, the Civil Procedure Rules (CPR) applicable in England and Wales were amended to reflect that decision. The CPR now expressly promotes ADR and gives express powers to the courts to order participation in ADR, stay proceedings for that purpose or take over steps to achieve settlement. This is in addition to the courts’ (longstanding) powers to penalize a party that it considers has unreasonably refused to participate in ADR, in costs after the judgment.
In addition, compulsory mediation for small claims under £10,000 (unless an exemption is granted by the court) was introduced in May 2024. This involves the parties being required to attend a free mediation appointment before the case can proceed to a hearing.
A formal ADR pledge was made by the Lord Chancellor in March 2001 which committed government departments and agencies to settling legal cases by ADR techniques. This pledge was replaced by a Dispute Resolution commitment in June 2011.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR methods to resolve any dispute that may arise and many commercial contracts will include dispute resolution clauses involving one or more of these methods. This has the advantage of putting ADR automatically “on the agenda” in the event of a dispute and providing a mechanism for reaching a quick solution.
When does ADR generally take place?
ADR can take place any time from pre-issue to appeal but the optimum timing in any dispute will depend on the particular circumstances, including whether the issues in dispute are sufficiently clear.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
Yes. ADR in England and Wales is generally confidential and will be protected by without prejudice privilege. Where the parties engage in mediation they will usually be obliged to sign a mediation agreement before the mediation commences in which they agree to keep matters discussed confidential between the parties.
Does the output from ADR create precedents?
As ADR is private, it does not create a precedent and helps avoid adverse publicity associated with a court judgment. For this reason, it is unsuitable if you need a court decision allocating blame or require an injunction. A settlement achieved through ADR is usually recorded in a written agreement which will be enforceable between the parties. It is generally not binding on third parties.
Who bears the costs of ADR?
Typically the parties share the cost of ADR, albeit it is open to the parties to agree something different as part of the settlement terms.
Is your jurisdiction subject to any specific rules for cross border ADR?
Following the UK’s departure from the European Union, there is currently no dedicated reciprocal regime for mediations arising in respect of cross-border disputes between parties in the UK and those in EU member states. However, the Cross Border Mediation (EU Directive) Regulations 2011 still apply (with modifications) to EU cross-border mediations which started before December 31, 2020.
In May 2023, the UK signed the United Nations Convention on International Settlement Agreements Resulting from Mediation 2020 (the Singapore Convention) but UK legislation will be required to bring it into force. When that happens it will make enforcement easier because, instead of first obtaining a judgment or award for breach of contract, the Singapore Convention will allow the enforcing party to go directly to a court in the country where enforcement is sought. That court will then enforce the settlement agreement, unless one of the limited grounds for refusing enforcement set out in the Singapore Convention applies. The Singapore Convention is modelled on the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards (New York Convention), and in effect will give mediation settlements the same currency and status as the New York Convention gives to arbitration awards.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
There is no obligation for mediators in England or Wales to be legally qualified.
Contacts
Tracey Spence Professional Support Lawyer
T: +44 20 7497 7096 E: traceyspence@eversheds-sutherland.com
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