ADR Explored

In our recent article, we looked at the growing importance of Alternative Dispute Resolution (“ADR”), and the measures the Court will take to ensure parties properly engage in the process.

In this article, we explore some of the most prevalent methods of ADR, as well as their advantages and disadvantages.

What constitutes ADR?

ADR is defined in the Civil Procedure Rules (“CPR”) glossary as a “collective description of methods of resolving disputes other than through the normal trial process”.  

ADR takes many forms, and whilst the CPR contain a specific obligation on the Court when actively managing cases to order, or encourage, the parties to use, and facilitate the use of, ADR (CPR 1.4(2)(e)), it does not stipulate which form of ADR the Court or the parties should or must utilise. Every dispute is different and hence one dispute might lend itself more keenly to a specific type of ADR than another.

Methods of ADR

1. Without prejudice negotiations

Without prejudice negotiations are informal negotiations conducted on a “without prejudice” basis, meaning statements made cannot be used in later proceedings (save for enforcing a concluded settlement). Their purpose is to encourage candid dialogue. 

Without prejudice negotiations are flexible and can take place with or without legal representatives present, with or without the parties present (i.e. solicitor to solicitor), in writing or orally, in person or over the phone. For these reasons, without prejudice negotiations remain the simplest and often most commercially pragmatic form of dispute resolution.

2. Mediation

Mediation is a voluntary and confidential process in which two or more parties in a dispute attempt to reach a mutually acceptable resolution with the assistance of a neutral third party, known as the mediator. The mediator facilitates discussions between the parties, helping them to better understand their positions and explore options for settlement. Unlike litigation, mediation is informal and flexible, allowing parties to adapt the process to suit their specific needs. The mediator does not impose a decision but instead helps the parties to devise their own solution, which can address a broader range of issues than those typically resolved in court proceedings.

Mediation is cost-effective and efficient, as it is generally quicker and less expensive than litigation. Mediation also allows for creative and flexible solutions that may not be possible in court, such as apologies, explanations, or agreements to continue business relationships on new terms. Additionally, mediation is confidential, with discussions protected by the ‘without prejudice’ rule, ensuring that information disclosed during the process cannot be used in subsequent legal proceedings. This confidentiality can be particularly beneficial in cases involving sensitive information or where parties wish to avoid public scrutiny. Mediation also promotes party autonomy, as the parties retain control over the process and the outcome. It can also help preserve relationships and prevent future disputes, making it especially suitable for cases where ongoing collaboration is important.

Mediation can also help to narrow the issues in dispute between the parties. However, the success of mediation depends on the willingness of the parties to engage in the process and their ability to negotiate effectively, so mediation may not be suitable for all disputes. Mediation is also not legally binding unless the parties agree to make the settlement enforceable, such as through a settlement agreement or consent order. 

4. Arbitration

Arbitration is also a commonly used method of ADR, particularly favoured for commercial disputes. It involves parties agreeing to submit their dispute to one or more impartial arbitrators, whose decision, known as an award, is binding and enforceable by law. 

The process is private, and the parties can select arbitrators with specific expertise relevant to their dispute. 

Arbitration is governed primarily by the Arbitration Act 1996, which provides a comprehensive legal framework and allows considerable flexibility for parties to shape the procedure according to their needs.

One of the key advantages of arbitration is its confidentiality, which is especially valued in sensitive commercial matters. 

The process is generally less formal than court litigation, and it can be quicker and occasionally more cost-effective. Awards are enforceable both domestically and internationally under the New York Convention. However, arbitration can sometimes mirror the complexity and expense of litigation, especially in high-value or multi-party disputes, and there are limited grounds for appeal, which means the parties must accept the arbitrator’s decision except in cases of serious procedural irregularity or lack of jurisdiction.

5. Expert Determination

Expert determination is a non-judicial process where an independent expert is appointed to decide a technical or specialist matter in dispute. 

This method is particularly suited to disputes involving complex factual or valuation issues such as those concerning construction, property, or financial matters, where the parties prefer to rely on the expertise of a professional rather than a judge or arbitrator. The parties typically agree in advance to be bound by the expert’s decision, and the process is usually governed by the terms set out in their contract.

The main benefit of expert determination lies in its speed, cost-effectiveness, and the ability to appoint an expert with precise knowledge relevant to the dispute. 

The process is private and informal, with minimal procedural requirements, making it less adversarial than arbitration or litigation. 

However, the expert’s decision is generally final and difficult to challenge, except in cases of manifest error or breach of natural justice. 

As such, it is crucial for parties to clearly define the expert’s remit and the procedure to be followed from the outset.

6. Early Neutral Evaluation (“ENE”)

ENE is a process in which the parties present their arguments and evidence to a neutral evaluator, often a retired judge or a senior lawyer, who provides a non-binding assessment of the likely outcome of the dispute if it was to proceed to trial. 

ENE is usually conducted at an early stage in the dispute, with the aim of helping the parties to understand the strengths and weaknesses of their respective cases, thereby encouraging negotiation or settlement.

The main advantage of ENE is that it provides the parties with an informed, objective view of their position without the time and expense of full litigation. It can facilitate settlement by breaking deadlocks and clarifying key issues, and it is often used in complex commercial or technical disputes. 

Although the evaluator’s opinion is not binding, it carries significant persuasive weight, and the process is flexible and confidential. However, its success depends on the willingness of both parties to engage constructively and to consider the evaluator’s assessment seriously.

7. Hybrid and Other Commercial ADR Options

Hybrid ADR methods combine elements of different dispute resolution processes to suit the specific needs of the parties and the nature of the dispute. Common hybrid options in England and Wales include Med-Arb (mediation followed by arbitration) and Arb-Med (arbitration followed by mediation). 

In Med-Arb for example, the parties first attempt to resolve their dispute through mediation; if this fails, the matter proceeds to arbitration, where the arbitrator may be the same individual who acted as mediator, provided the parties agree.

These hybrid approaches aim to harness the benefits of both mediation and arbitration, namely the flexibility and consensual nature of mediation, and the finality and enforceability of arbitration. 

Hybrid ADR processes can save time and costs by avoiding duplication, and they offer the opportunity for creative, interest-based solutions while retaining a binding mechanism if settlement cannot be reached. 

Care must be taken, however, to manage potential conflicts of interest, particularly if the same individual acts as both mediator and arbitrator, and parties should set out clear procedural rules at the outset to ensure fairness and transparency.

Conclusion

The flexibility of ADR allows parties to tailor processes to industry norms, the nature of the dispute and commercial priorities. 

In our upcoming webinar, Resolving disputes differently: the future of ADR in England and Wales, Katherine East, a Senior Associate and specialist in ADR, Joanna Gosling, Senior Associate and accredited mediator and Thomas Barnard, a Partner and expert in arbitration, will explore ADR and its future in more detail. To register for the event, please follow the link above.