Should Parties be Compelled by Law to Attempt ADR?
- November 2, 2022
- Posted by: MK Consultus
- Category: Alternative Dispute Resolution
The rule of law is the basis of order and just conduct in our society. Its absence leads to distrust in institutions and the justice system or the free association that people form with each another. The preservation of the rule of law rests on equality of access to the law. The inability to access justice when it is beyond the reach of a common person means the rule of law suffers everywhere. Access to justice is a fundamental right and an efficient and cost-effective justice system is of vital importance to the financial, commercial and industrial life of our country.1
In England and Wales, the strength of the court system has evolved over centuries as the standard method of resolving disputes. The court system of England and Wales has always been a superior way of settling civil disputes, principally as it is independent and has rules for procedure and evidence refined over the years, providing fairness and transparency in its judicial decisions. However, access to justice is not as straightforward as it might seem. Lord Chief Justice Thomas of Cwmgiedd, Britain’s most senior judge, said: “Our justice system has become unaffordable to most,” regarding a country, whose founding document, the Magna Carta, still stands in statute in English law.2 The contrasting review of statistics of the civil and criminal courts provides a picture of issues with an overburdened English legal system. A lot of controversy surrounds reforms to legal aid, with an influx of people appearing in court without lawyers and a reduction in the Ministry of Justice budget resulting in court closures and staff cuts.
Alternative Dispute Resolution
In England and Wales, litigation has been the norm, hence all other forms of dispute resolution are called ‘alternative’. Alternative dispute resolution (ADR) has been around for centuries, whether adjudicative like arbitration or non-adjudicative as in a negotiation. ADR is described as:
“A range of procedures that serve to resolve disputes generally involving intercessions and assistance of a neutral third party, ADR mechanisms include arbitration, mediation, adjudication, expert determination, dispute boards and online dispute resolution (ODR).” 3
Will ADR Ever Stop Being the Alternative?
There is still debate on an actual definition of ADR. In the context of this article, ADR is any form of dispute resolution that does not involve the courts. ADR is not related with criminal cases which are bound to be dealt with by the criminal courts. Similarly, public law disputes are dealt with by specialist administrative tribunals, which may be distinct from the courts but remain part of the judicial system.
The disputes resolved through ADR are civil in nature; law of contract, tort, restitution, accidents, professional negligence, landlord, tenant, trust and family are some of the general categories. Construction, insurance and maritime industries are some of the key users and employers of ADR due to the specialism and complex nature of their disputes.
Strengths and Weaknesses
It is the success of ADR that persuades parties and their lawyers to use it. Research and statistics generally show good rates of success and good levels of satisfaction.4 The doubts over litigation are ever increasing and benefits of ADR, the potential for cost saving, speed of settlement, control of process, choice of forum, flexibility of process, flexibility with regards to evidence, confidentiality, risk effectiveness and expeditious way of resolving a dispute have been evidenced.
The inability to access justice when it is beyond the reach of a common person means the rule of law suffers everywhere.
Potential issues of the ADR process are well documented and are generally attributed to inappropriate mechanism and/or inappropriate time. Failed ADR causes additional expense and the dispute ends up in litigation anyway. The issues can be increased expense, additional delay, reduction in outcome compared to court judgement, lack of clear public funding, loss of potential use of strategic procedural steps, loss of potential advantages of evidential rules and confusion of process.
In intellectual property disputes, the parties often face a very specific issue – concerns that a quality result is not going to be achieved. There are certain types of cases where ADR is not appropriate. For example, in cases concerning property litigation claims (such as rectification claims or disputes concerning charges) or alleged fraud. Here, the parties may not bargain, and the give-and-take element becomes non-negotiable. Hence, there is no reason to enter into an ADR process.
Resolving Problems with Litigation Through ADR
In 1994, Lord Woolf was commissioned to review the civil justice system in England and Wales. His report pointed out that the justice system was expensive, slow, complex and becoming inaccessible. Several of his recommendations pointed out that litigation is to be avoided wherever possible, made more cooperative and less adversarial by reducing complexity and the timescales needed to be certain. The Woolf reforms encouraged active case management and the use of ADR appeared in the overriding objective of the Civil Procedure Rules (CPR).
ADR is expressly encouraged prior to litigation in the form of pre-action protocols. It requires pre-action conduct through early exchange of information that encourages the use of ADR to settle before proceedings are issued and enable proceedings to run to the court’s timetable efficiently if litigation cannot be avoided. The protocols are similar but vary in precise requirements and contain whether to make an offer to settle, including a Part 36 offer.5 ADR is expressly encouraged during litigation. It was provided that on filing the completed allocation questionnaire after issue, a party might make a written request for the proceedings to be stayed while the parties tried to settle the case by ADR, or that the parties could request it, or the court/judiciary can also stay the case if considered appropriate.
The courts have played a very important role in the implementation of ADR by establishing novel and specific authority to exercise retrospective costs control over pre-issue litigation conduct, enshrined in CPR 44, giving judges power to sanction unreasonable litigation conduct at any time during the life of a claim by penalising a winning party or by extra penalty on a losing party who litigated in an unreasonable way.6
Halsey v Milton Keynes (2004) 1 WLR 3002 remains the leading but controversial authority on ADR. It remained consistent with the position taken by successive judicial reforms in rejecting the notion of compulsory mediation, instead advocating the need for the courts to ‘encourage’ the parties to engage with mediation.7
In 2009, Lord Justice Jackson provided a significant step forward in promoting the use of ADR, with a thorough review of relevant issues in his review of civil litigation costs. The final report concluded some key recommendations. At 6.3:
“ADR (particularly mediation) has a vital role to play in reducing the costs of civil disputes, by fomenting the early settlement of cases. ADR is, however, under-used. Its potential benefits are not as widely known as they should be. I therefore recommend that:
- There should be a serious campaign to ensure that all litigation lawyers and judges are properly informed of how ADR works, and the benefits that it can bring.
- The public and small businesses… in disputes are also made aware of the benefits of ADR. An authoritative handbook for ADR should be prepared, explaining what ADR is and how it works, and listing reputable providers of ADR services.”
The review concluded that ADR should not be mandatory for all proceedings. The circumstances will vary from case to case as to where it should be used (and when it should be used) and relies on the judgment of experienced practitioners and the court. It concluded that ADR is an effective method for resolving many civil disputes at modest cost and to the satisfaction of both parties. Further proposals to encourage the use of ADR take their place in a long line of similar initiatives. The publication of The Jackson ADR Handbook (now in its second edition) has been one of the initiatives to help users and providers alike.8
Mediation information and assessment meetings (MIAM) were first introduced in the family dispute system in 2010. Since April 2014, it has been compulsory (subject to limited exceptions) for those issuing proceedings for financial relief or for a child arrangement order to attend a MIAM. The financial dispute resolution appointment (FDR) is effectively compulsory, though the court retains discretion to waive the FDR on application. This happens where the parties have already attended, without success, a private FDR or a mediation outside the court system. Its purpose, with the assistance of a judge, is to seek to identify and resolve the issues in the case quickly with less overall cost, delay and emotional strain.
In 2016, Lord Justice Briggs undertook the Civil Courts Structure Review (CCSR). One of the key findings was that there was a substantial over-supply of ADR professionals (particularly mediators) which are under-utilised and not used. Lord Briggs gave five key recommendations:
- Encouragement for the use of ADR pre-action at the online court.
- Case officers can help the parties choose appropriate forms of ADR.
- May include judicial early neutral evaluation or mediation.
- Reintroduction of the county court after-hours mediation scheme.
- As to whether any form of ADR should be compulsory he said “the civil courts have declined after consideration over many years, to make any form of ADR compulsory. This is, in many ways, both understandable and as it should be.”
The Briggs report reaffirmed that the modern emphasis is on pre-action ADR. In England and Wales all, if not most, commercial contracts, specifically construction, financial and insurance, including those involving public bodies, contain ADR contract clauses, whereby the parties contract to utilise a specified, often tiered, dispute resolution process before initiating court or arbitral proceedings.
In 2017, the latest report, ADR and Civil Justice reiterates the benefits and under-utilisation of ADR within civil justice. It reviewed various elements of the landscape of ADR provision in England and Wales; current measures for the encouragement of ADR; existing domestic systems with an insight of overseas systems; and whether ADR in England and Wales needs persuasion or compulsion. The report ended with 29 interim recommendations and a further 43 questions for consultation.
Though ADR is still a long way from reaching its true potential, in England and Wales the subject of compulsory ADR is not new. Barring arbitration – which is contractual – and adjudication – which is statutory for construction operations – most other forms of ADR are consensual and voluntary.9 For the last 20 years the express ambition of all stakeholders has been that ADR should become integral to the civil justice system in England and Wales. It has not done so, ADR has had its successes undoubtedly, but they have been extremely patchy.
ADR should become integral to the civil justice system in England and Wales. It has not done so, ADR has had its successes undoubtedly, but they have been extremely patchy. The recommendation of the interim report of the Civil Justice Council suggests that compulsion could take one of three very different forms:
- Type 1: A requirement that the parties in all cases (or in all cases of a particular type or subject matter) engage in or attempt ADR as pre-condition of access to the court, with the claimant unable to issue proceedings until evidence of the appropriate efforts is produced.
- Type 2: A requirement that the parties have in all cases (or all cases of a particular type or subject matter) engaged in or attempted ADR at some later stage such as the case management hearing.
- Type 3: A power in the court to require unwilling parties in a particular case to engage in ADR on an ad hoc basis in the course of case management.
Compulsion of ADR
The majority of the responses from institutions and practitioners to the Civil Justice Council’s consultation10 reiterated that ADR should to be made compulsory in light of the existing rules, protocols and court guidance. The examples below demonstrate:
- Action Against Medical Accidents views the ADR process to be voluntary and does not support a cost sanction being imposed for not using the process. However, reasons for not utilising ADR should be clearly set out in writing prior to proceedings being issued.
- Association of Personal Injury Lawyers (APIL) does not consider the need for compulsory ADR. Figures from the Compensation Recovery Unit suggest that the vast majority of personal injury claims are resolved before they reach court, with only 15% of claims registered with the CRU in 2015/16 being issued. Justice Briggs, in his final report on the civil court structure, set out that personal injury claims in the fast-track are dealt with in a highly efficient manner through the portal, which leads to many cases being settled without recourse to court. There are no statistics within the Civil Justice Council’s report to demonstrate the effectiveness of ADR in England and Wales for personal injury claims.
- Walker Morris considers the introduction of compulsory and prescriptive ADR to be inappropriate and counterproductive at any stage of the litigation process (including pre-action, where the issue is already dealt with adequately in the protocol).
- NHS Resolution believes that the pre-action protocol should be strengthened in terms of applicable sanctions if a party does not engage in ADR. Additionally, there should be encouragement of as many relevant groups and bodies as possible to promote ADR, including settlement negotiations. NHS views that the Type 2 recommendation of compulsion should be progressed.
- Weightmans views that whilst the court should certainly be encouraging the use of ADR at all stages, it should not be mandatory, nor should the parties face undue pressure from the court to enter into ADR where it is not deemed appropriate.
- The London Solicitor’s Litigation Association considers that the requirement of a formal ADR process as a condition to issuing proceedings would not be appropriate given the associated costs and the number of claims that are not defended. However, mandatory engagement with the principle of ADR is encouraged specifically on the claim forms and appropriate cost sanctions if the parties do not engage accordingly.
- The Law Society does not consider that ADR should be made mandatory prior to the issue of proceedings. It believes that if ADR was mandatory in all circumstances it would frustrate the principle that litigants should have unimpeded access to the
…compulsion is a toxic concept, despicable and tends to generate unduly emotional reactions – only the ADR process can support mutuality.
Is it possible that an order to use ADR that prevented access to a court would potentially breach the right to a fair trial under Article 6?11 The European Court thinks otherwise, it accepted that a party can waive Article 6 rights by agreeing to a binding adjudicative process, so long as there is no undue pressure and the right to trial is retained.12
In Halsey v Milton Keynes, the issue of compulsion was discussed in detail, though possible breach of Article 6 was not found and Dyson LJ’s comments were recorded as obiter. A party cannot be forced to enter into any form of ADR, or to agree an outcome to a non-adjudicative ADR process. It is acceptable for parties to have to consider ADR options or risk a cost penalty for unreasonable rejection. Pre-action protocols are procedural requirements and their compliance is not seen as breaching Article 6, as long as the party is not deprived of a right to trial and enforcement is not by penal sanctions (imprisonment or a fine).
It is interesting to note that the Court of Appeal has commented on whether some compulsion to use ADR should be introduced where litigants in person proceed with litigation in circumstances where this is not the best option for the case, see Wright v Michael Wright Supplies Ltd (2013) EWCA Civ 234.
From an EU perspective, several legal instruments have been adapted. In civil law, the basis of Article 81(2) Treaty on the Functioning of the European Union, the EU has already enacted several legal measures to improve access to civil justice for citizens, such as; Directive 2002/8/EC on minimum common rules relating to legal aid; Regulation No (EC) 861/2007 on the creation of the European small claims procedure; Directive 2008/52/EC on mediation in civil and commercial matters; and Directive 2013/11/EU on alternative dispute resolution for consumer disputes.
In Italy, a substantial proportion of disputes are required to be referred to compulsory mediation before formal litigation. However, the compulsory mediation system introduced in 2010 was constitutionally challenged and replaced by a modified system in 2013. The new system made pre-action mediation mandatory in a much more limited range of disputes, which include family and family business disputes, banking, investment and insurance.
Lessons from Belgium provide a different perspective that compulsory mediation in labour law was an expensive nuisance and people ‘go through the motions’. In France there is a degree of compulsion in family and labour disputes but it only extends to meeting a mediator for an information session. The German tradition is one of court-based, even court-conducted, mediation but a new provision will require those filing claims to state that they have at least attempted mediation.
Other European jurisdictions have not made mediation compulsory save in certain specific areas such as labour law. The Court of Justice of the European Union (CJEU) has concluded that national legislation imposing mandatory mediation as a pre-condition to litigation is not precluded by the EU ADR legislative framework, provided that the parties are not prevented from exercising their rights of access to the judicial system.13
Evidence from schemes in England and Wales (in particular the automatic referral to mediation pilot14 at Central London County Court) indicates that voluntary mediation is more likely to achieve higher settlement rates when compared to compulsory mediation. Mediation is by its very nature a consensual process and works best when parties come to it willingly or of their own accord. However, if court-based mediation is to rely entirely on parties requesting mediation, the demand for it is likely to remain small.
The legal system of England and Wales is built on twin pillars that are an independent, impartial and incorruptible judiciary and a strong, independent, diverse and effective legal profession. Each pillar has a long-standing history and well-earned standing for excellence in respect. This strength enables English law often to be the choice of law in commercial contracts, arbitral institutions and ADR instruments across the globe are therefore, rightly, seen as world-leading in law and justice.
To overcome the problems associated with litigation in England and Wales there needs to be equality of arms in the process which requires that the claimant has access to independent legal advice prior to deciding on mediation. By raising further awareness of ADR benefits to general users so that it is both seen to be fair – and actually is fair in practice. The last important issue is that the ADR process must be voluntary. Without parties being mutually willing to come to the table and resolve issues the ADR process risks becoming no more than another step in the litigation process.
As stated in Great Ormond Street Hospital v Yates and Gard (2017), mediation should be attempted in all cases – even if all that it does is achieve a greater understanding by the parties of each other’s positions. It can be construed as per Professor Frank EA Sander’s wise advice:
“There is a difference between coercion into mediation and coercion in mediation.”
It is indeed my conclusion, as per the Civil Mediation Council, that compulsion is a toxic concept, despicable and tends to generate unduly emotional reactions and only the ADR process can support mutuality. My vision for ADR is per Baroness Scotland, when Attorney General, who announced the government’s aspiration was making ADR the mainstream dispute resolution process, and litigation the alternative.
- Lord Justice Woolf, Access to Justice: Final Report (July 1996) http://webarchive.nationalarchives.gov.uk/20060213205513/http://www.dca.gov.uk/civil final/contents.htm
- Magna Carta, chapter 39, “We will sell to no man, we will not deny or defer to any man either Justice or Right.”
- Chartered Institute of Arbitrators, Manifesto 2015
- Solving Disputes in County courts: Creating a Simpler, quicker and MORE Proportionate System’ www.justice.gov.uk/consltations/consultation-cp6-2011.htm
- 5 The use of offers to settle was judicially encouraged in Calderbank v Calderbank (1976) Fam 93. This was formalised later as Part 36 offers, with clear potential of cost penalties
- See Dunnett v Railtrack (2002) where the courts denied cost to the defendant as they had refused to take the matter to mediation. Also see, Binns v Firstplus Financial Group LPC (2013) EWHC 2436 (QB), a claim was struck out for being unreasonable as the claimant previously gained remedy under an ADR scheme
- See Aird v Prime Meridian Ltd (2006) EWCA Civ 1866 in which the Court of Appeal held that it could only encourage the parties but not order the parties to participate in mediation
- See PGF II SA v OMFS Co 1 Ltd (2013) EWCA Civ 1288; (2014) 1 WLR 1386 where the Court of Appeal ‘firmly endorsed’ some of the advice given in that handbook
- See Swain Mason v Mills & Reeve (2012) EWCA Civ 498, where Davis LJ stated a party with a strong case may not act unreasonably in refusing ADR
- Submissions received from the, ADR & Civil Justice Consultation, available at www.judiciary.uk/related-offices-and-bodies/advisory-bodies/cjc/cjc-consultation-on-adr/
- Article 6 is the right to a fair trial “In the determination of his civil rights and obligations… everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law” European Convention on Human Rights www.echr.coe.int/Documents/Convention_ENG.pdf
- See Deweer v Belgium (1980) 2 EHRR 239
- See Menini and another v Banco Popolare Società Cooperativa (Case C-75/16) (14 June 2017) where two Italian consumers seeking to appeal a judgment objected to being forced to attempt mediation as a pre-condition to the appeal and the Italian court requested a preliminary ruling from the CJEU as to whether the relevant Italian law was incompatible with either the Consumer ADR Directive (particularly the provision specifying that mediations covered by the Directive must be voluntary) or the earlier EU Mediation Directive (2008/52/EC) cited in https://hsfnotes.com/adr/2017/07/04/cjeu-holds-that-mandatory-mediation-is-not-inherently-precluded-by-eu-law/
- As demonstrated by Professor Hazel Genn’s appraisal ‘Twisting arms: court referred and court linked mediation under judicial pressure’ available at http://bristol-mediation.org/wp-content/uploads/2011/03/Twisting-arms-mediation-report-Genn-et-al.pdf