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Alternative Dispute Resolution: Can it be Compulsory?

Alternative Dispute Resolution has become a prominent feature of the civil justice system in England and Wales in recent years.

The issue of whether ADR should be made compulsory, however, is a vexed one. The Civil Justice Council (the “CVC”) recently considered this subject in its appropriately titled report “Compulsory ADR” (the “Report”)[1].

The CVC’s conclusion was that it would be both lawful and, in certain circumstances, desirable to compel parties to participate in ADR. This has left the door wide open for a change of approach in the English courts. 

ADR and the English Courts

For those unfamiliar, ADR can be simply defined as the process by which parties to a dispute seek to settle that dispute outside of the courtroom. For the purposes of the Report, the CVC defined ADR as “any dispute resolution technique in which the parties are assisted in exploring settlement by a third party”. It is widely accepted that ADR offers numerous benefits to determination of a case by a judge (including confidentiality, cost, speed, and flexibility).

The seminal authority in England regarding the importance of ADR is the 2004 case of Halsey -v- Milton Keynes [2]. In Halsey, the Court of Appeal found that a party can be punished in costs if it unreasonably refuses to engage in ADR. This principle applies even if the party refusing to engage was ultimately successful in the case. However, whilst Halsey revealed the court’s strong preference that parties partake in ADR, it did not go as far as to make it compulsory.

Whilst several cases have since discussed compulsory ADR, Halsey remains the chief authority on the topic.

The Report’s Findings

The Report addressed two key questions:

  1. Is compulsory ADR legal? (the “Legality Question”); and
  1. If the answer to the Legality Question is “yes”, then how, when and in what kind of cases should compulsory ADR be imposed? (the “Desirability Question”)

The Legality Question

In answering the Legality Question the CVC found that, subject to certain conditions, compulsory ADR would be legal. Strikingly, the CVC went as far as endorsing a regime whereby the penalty for not taking part in ADR could be a party’s claim or defence being struck out.

This is contrary to Halsey, in which it was held that compulsory ADR would “be to impose an unacceptable obstruction on [a party’s] right of access to the court…and, therefore, a violation of article 6 [of the European Convention on Human Rights]”.  

In reaching this conclusion the CVC considered several cases since Halsey and various senior judges’ comments. The CVC was also persuaded by the fact that in certain scenarios compulsory ADR already exists in the English courts. Examples include Financial Dispute Resolution appointments in family cases and ACAS Early Conciliation in employment disputes. Finally, the CVC referred to other jurisdictions which have successfully adopted forms of compulsory ADR.

Whilst making this finding the CVC was careful to stress that compulsory ADR would only be legal providing that it was not “disproportionately onerous and does not foreclose the parties’ effective access to the court”. Further, the CVC made it clear that there had to be “no obligation on the parties to settle” and that they must remain free to continue litigation.

The Desirability Question

Having answered “yes” to the Legality Question, the CVC went on to consider the Desirability Question.

The Report again noted the judiciary’s historic view that it was not desirable for compulsory ADR to exist. It explained that the main concerns perceived with compulsory ADR are: (i) there is a risk that ADR might not work, and (ii) that its introduction would undermine the role of the court.

The CVC did not agree. First, it said that the view that compulsory ADR is not effective was not supported by the available data. Second, the CVC did not consider that compulsory ADR would undermine the “primary purpose of the courts in dispensing justice”. Instead, it found that in certain cases and subject to appropriate rules it would complement the justice system.

In making these findings the CVC reiterated that compulsory ADR is already successful in various parts of the English system and highlighted how compulsory ADR enjoys success in online marketplaces such as eBay[3].

In determining the Desirability Question, the CVC opted not to detail a list of rigid factors or requirements. Instead, it noted that several critical issues will need to be addressed, as follows:

  1. Whether ADR would be a “disproportionate burden” on a party’s time or resources. If it would be then it should not be compulsory.
  1. Whether certain types of case were better suited to compulsory ADR. The Report suggested that boundary and neighbour disputes were examples of more suitable cases.
  1. There has to be confidence in the neutral provider of the ADR process.
  1. Whether the parties have access to legal advice (and the concern that without it, ADR may be less effective).
  1. The stage in a case at which ADR should take place.
  1. How to deal with parties who take part in ADR, but do not fully engage with the process.

Subject to these concerns being confronted the CVC concluded that “introducing further compulsory elements of ADR will be both legal and potentially an extremely positive development”.

The Future

Compulsory ADR will never be without its critics. Indeed, the Report has been greeted with observations from legal professionals that several types of cases will not benefit from it and that parties should not be forced to attempt settlement. Nevertheless, the Report’s findings strongly suggest that further moves towards compulsory ADR are not far away.

What remains to be seen is how any reforms would be put into place. The Report does not prescribe this, and it is unclear whether any changes will be introduced via legislation or a shift in attitude of the courts. Parties to disputes will have to watch this space carefully.

[1] The Report can be accessed here.

[2] Halsey -v- Milton Keynes General NHS Trust [2004] EWCA Civ 576

[3] eBay operates a ‘Resolution Centre’ to facilitate the settlement of disputes between sellers and buyers.

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