4. ADR: Adjudicative Options

Question 1

What is adjudicative ADR?

Answer 1

An independent third party reaches an impartial decision on a dispute, but with more flexibility and privacy than litigation.
Parties control process through a contractual arrangement that covers:
- The form of process to be used
- The person or body to do so
- Other details the parties may wish to add

May be subject to court oversight if process is not followed.

Question 2

What is arbitration?

Answer 2

Arbitration may be conducted by one or more arbitrators who will make a decision and make an award. Process will be agreed in advance by the parties or delegated to an arbitrator, and many arbitrators offer sample agreements and process rules.
Could be similar to a trial or made more similar.
Formally regulated by the Arbitration Act 1996

Question 3

Where is arbitration mainly used?

Answer 3

Mainly used for commercial cases, but can be appropriate in others (i.e. family). Can be used when parties want other forms of law used (i.e. Sharia).

Question 4

What are the main attractions of arbitration?

Answer 4

Attractions of adr are:
* Parties can select arbitrator
* Process is private
* Process can be tailored
* Each party selects what material is submitted
* Relatively structured, if attractive
* Can be relatively simple and cost effective (i.e. if decided on papers)

Question 5

What are the main drawbacks of arbitration?

Answer 5

The main drawbacks of arbitration are:
* Not necessarily cost saving if process is like a trial
* Parties will be bound so control over final outcome is surrendered
* Arbitration process cannot deal easily with a party who fails to cooperate, as an arbitrator will not have the wide powers of a judge in some respects (although applications to court may be made)
* Arbitrator needs to be selected with careful consideration

Question 6

If parties make an arbitration agreement in a contract, will it still be valid if the rest of the contract is not?

Answer 6

If parties make an arbitration agreement in a contract, it will likely still be valid even if the rest of the original agreement is not.

Question 7

What are the three general principles of arbitration contained in the Arbitration Act 1996?

Answer 7

S.1:
* Obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense
* Parties free to agree how their disputes are resolved, subject only to such safeguards as necessary in the public interest
* The court should not intervene except where provided by the Arbitration Act 1996.

Question 8

When the parties agree to refer their dispute to arbitration, what does this imply as regards how they want their dispute decided?

Answer 8

That they want their dispute decided:
* By a tribunal they chose
* In a neutral location with neutral arbitrators
* In privacy
* Speedily and efficiently
* With light but efficient supervision by the courts

Question 9

What are the requirements for there to be an arbitration?

Answer 9

There must:
* Be a dispute or difference;
* Which must be arbitrable (a private law dispute capable of being determined within the limits of a private contractual process);
* There must be an agreement to arbitrate
* For the AA 1996 to apply, the agreement must be in writing
* The nature of the dispute must come within the terms of the agreement
* The parties must have had legal capacity to enter into the agreement
* Any condition precedent to arbitration must be complied with
* The parties must find an arbitral tribunal willing to act and decide the dispute
* The dispute must come within the terms of the particular reference to arbitration

Question 10

What is the foundation of the arbitration for contractual disputes?

Answer 10

Almost any dispute can be referred to arbitration, though most are used for resolving disputes arising out of a contract between the parties. For disputes where there is an arbitration agreement in the original contract, there are four contracts:
* The underlying substantive contract
* The agreement to arbitrate, which is separatable from the substantive contract
* The agreement between the parties and the institution to arbitrate
* The agreement appointing the arbitrators (implied term they will act fairly and impartially).

Question 11

What is the mandate of the arbitral tribunal?

Answer 11

The jurisdiction depends on the mandate given to it by the parties. It will not have jurisdiction unless the dispute comes within its terms of reference. Limited by the terms of the agreement and the separate agreement between the tribunal and parties appointing the tribunal.

Question 12

Can a court stay legal proceedings for arbitration?

Answer 12

To prevent a party from breaching an agreement to arbitrate by bringing court proceedings, S9(1) of the AA 1996 allows the other side to apply for a stay of proceedings. It can be sought whether the legal proceedings breaching the arbitration are for a claim or counterclaim, and include unfair prejudice petitions under the companies act, as well as ordinary Part 7 claims. A stay imposes a half on the proceedings. The main question in these circumstances is whether the dispute in litigation is a matter which is arbitrable under the agreement. If it is, the court shall grant a stay, unless the agreement is null, void , inoperative, or incapable of being performed.

Question 13

How are arbitrations commenced?

Answer 13

By:
1. Sending a notice of arbitration and then appointing members (must be in writing and comply with the requirements in AA s14(3)-(5).
2. Usual procedure is each party nominates one arbitrator who together appoint a final arbitrator.
3. In absence of contrary agreement, there are default provisions for different types of arbitral tribunal.
4. Before and during appointment, each arbitrator has a duty to disclose potential conflicts of interest

Question 14

What is the procedure in arbitration?

Answer 14

Varies. If no agreement, the default provisions of the AA 1996 will apply (s4).

Generally, there is:
1. A preliminary meeting for the tribunal to discuss jurisdictional matters and make procedural directions. No set agenda. Such matters may include:
a. When and where to hold the proceedings
b. Languages to be used
c. Whether written submission will be used
d. What and when documents should be disclosed and at what stage
e. Whether to apply strict rules of evidence
f. Whether expert evidence is required, and the time, manner, and form in which such evidence should be exchanged and presented.
g. Whether the tribunal should take the initiative in ascertaining the facts/law
h. Whether and to what extent there should be oral or written evidence or submissions
i. At this stage, the tribunal may fix the time within which directions are to be complied with. Court assistance may be sought in securing the attendance of witnesses and taking the evidence of witnesses
2. Pre-trial hearing/conference
a. To review what has been done in preparation, to see if the parties will be ready, and to make directions
3. Bundles
a. Directions are usually made for the compilation of bundles for the hearing. Usually contain the reference to arbitration/documents pertaining to the appointments of arbitrators, statements of case, procedural orders, and directions. Separate bundles may be required for evidence, in which case those should be divided into contemporaneous documentation, the witness statements of the factual witnesses, and the expert evidence. Further file may contain skeles and authorities.
4. No right to an oral hearing
a. Subject to contrary agreement, the tribunal can decide whether to allow oral submissions. In deciding whether to, the tribunal must bear in mind the need to act fairly, and the need to avoid unnecessary expense and delay. While it might be unwise to proceed without a hearing in arbitration where a substantial money is at stake, arbitrators have the power to do so. A number of institutional rules reverse this position and give the parties the right to insist on an oral hearing.
5. The hearing
a. Arbitrators can choose to adopt either an adversarial or inquisitorial approach
b. The arbitrators will include a mechanism for closing the proceedings. This may be a date designated in the tribunal’s directions, or a set period after a stage in the process or after the last closing submission at the hearing. The general rule is that after closing no further evidence or submission cab be given to the tribunal (although some tribunals may give permission for this.

Question 15

What awards are available to arbitrators?

Answer 15

The four available are:
* Procedural orders, which provide procedural directions and measures designed to preserve evidence or the subject matter of the dispute while an arbitration is proceeding
* Interim (partial) awards and awards on different issues, which finally dispose of one or more of the substantive issues in the arbitration, leaving the others to be decided later.
* Final awards, finally disposing of the arbitration.
* Costs awards, which provide payment for the costs incurred.

Usually, once an award is made, it is binding. Most sets of institutional rules provide for parties making suggestions on the correction of clerical mistakes in orders and awards.

Question 16

How can arbitration awards be enforced?

Answer 16

A domestic arbitral award may be enforced either by bringing an ordinary civil claim on the award, or by using the summary procedure under s66(1) AA. This section allows the court to grant permission to enforce an award of an arbitral tribunal in the same manner as a judgment or order of the court. Permission is sought by issuing an arbitration claim form in the High Court, which is considered without notice.

Cross border enforcement can usually be achieved through the New York Convention 1958, which applies to arbitral awards made in the territory of a state other than the state where the recognition and enforcement of the award is sought. In deciding whether the convention applies, an award is treated as made at the seat of the arbitration, whether or not it was signed. a party seeking the recognition or enforcement of a new York convention award must provide the authenticated original award or a duly certified copy and the original agreement or a duly certified copy. Where permission is give, judgment may be entered in the terms of the award.

Question 17

Can an arbitration decision be appealed?

Answer 17

Only on the grounds of serious irregularity, and on a point of law (unless excluded by agreement). Also, restrictions on appeals in the cases where court applications can be made in arbitration claims.

Question 18

What is the process for claims on arbitration?

Answer 18

For claims surrounding:
* Whether there is a valid arbitration agreement
* Whether an arbitration tribunal is properly constituted; or what matters have been submitted to arbitration in accordance with the agreement
* A claim to declare that an award is not binding
* Any other application affecting arbitration proceedings or an agreement –

The below process must be followed:
* Claim issued using the form in accordance with the part 8 procedure
* An application to stay must be made by application notice to the court dealing with those proceedings
* The claim form must:
(a) include a concise statement of the remedy claims and
(b) any questions on which the claimant seeks the decision of the court
(c) details of any arbitration award challenged, identifying which parts are challenging and specifying the grounds for that
(d) show the statutory requirements have been met
(e) specity under which section the claim is madee
(f) identify who(if anyone) a costs order is sought; and
(g) specify either:
i. the persons on whom the claim is to be served, stating their role and whether theyre defendants
ii. that the claim is made without notice under s44 of the AA 1996 and the grounds relied upon
* Must be served within 1 month from date of issue

For stays:
* The application notice must be served on all parties who have given an address for service
* A copy must be served on any other party who has not given an address for service at:
(a) His last known address; or
(b) A place where it is likely to come to his attention
* Where a question arises as to whether
(a) The arbitration agreement has concluded; or
(b) The dispute falls within the terms of such an agreement
* The court may decide that question or give directions to enable it to be decided and may order the proceedings stayed pending its decision

Question 19

When may a stay be granted for arbitration proceedings?

Answer 19

Generally, only a party against whom legal proceedings are brought … in respect of the agreement in which the matter is to be referred to arbitration who may apply for a stay. A party includes any person claiming under or through a party to an agreement.

Does not apply if the parties are not the parties to the arbitration agreement, so a stay cannot be granted against a claimant who is not a party to the arbitration.

However, it is possible to impose a stay in favour of a third party on the basis of an intention to rely on a contractual defence which was subject to a term providing for the submission of disputes to arbitration.

Where the provisions in one agreement give jurisdiction to the court and in another refers disputes to arbitration, the allocation of jurisdiction is one of construction.

Equally, where a claim is stayed against one company, an action against its parent company where there was no arbitration agreement should not be stayed, regardless of the claim against its subsidiary.

Question 20

When should the application to stay in arbitration proceeding be made?

Answer 20

Before taking any step in answering the substantive claim but after acknowledging the proceedings.

Question 21

What constitutes a step to answer the substantive claim?

Answer 21

Things that may constitute a ‘step’ include:
* Applying for security for costs
* Application for disclosure
* Attending case management conference
* Application for directions
* Agreeing to or obtaining an order for directions
* After defence
* After defendant obtained time to plead and agreed short notice of trial
* Opposition to an application for final judgment
* Defendant who does not act timeously (i.e. one who resists summary judgment serving an affidavit or witness statement in opposition, but omits to issue a stay application until after the first hearing)

But no “step” is taken by:
* a party who opposes an application who does not merely mention the arbitration clause but also makes an application to stay
* not necessarily by a defendant who asks for more time for their defence statement (it depends on whether the taking of that step could constitute an election, such as where a party discusses the clause the first time they ask for more time but still asks for more time again)
* issues the application to stay but accepts courts jurisdiction conditional on the application failing

Question 22

Who is the burden on and what is it for in an application to stay?

Answer 22

The burden is on the claimant to show the dispute ought not to be referred to arbitration.

There are two jurisdictional questions:
1. whether there is a concluded arbitration agreement
2. whether the issue in the proceedings is a matter which, under an arbitration agreement, is to be decided at arbitration (includes whether it has been superseded by a later contractual agreement)

The burden is on a balance of probabilities.

Question 23

What is expert determination?

Answer 23

Expert determination is a process in which an expert (or a neutral) is appoint to make a determination on the issues referred to him by the appointing parties. It is a determinative process, most often employed in cases of a technical nature where the parties are likely to benefit from a determination by an appropriate expert. Not always the case an expert is needed however, as can be done by neutral third parties/lawyers.
Parties may bind themselves to use it in advance or select it when a dispute arises.
The precise details of the arrangement, including the obligations, relationships, and circumstances of final and binding judgment will be governed by the terms of the contract by which the expert is appointed.
Typically agree the final decision is final (unreviewable/unappealable) and binding (parties must comply). If not expressly said, the court may imply such a term. Can also agree the determination is binding for a temporary or interim period.
Not subject to supervision of a court, but courts can be involved if a dispute arises as to the jurisdiction of the expert, to challenge the determination, or if there is a need to enforce the determination if one party does not comply.
Parties may include exceptional circumstances where the determination can be challenged, and there may be other grounds for challenge.
NOT an expert witness, so cannot examine approach of expert under CPR 35/40.
No award, judgment, no right of appeal, rules of natural justice and evidence do not apply unless contract says otherwise. Expert has no immunity from suit, unless conferred in a contract, unlike a statutorily immune arbitrator. Does not act in a judicial capacity.

Question 24

What is the basis for expert determination?

Answer 24

It is on a contractual basis: may be agreed before hand or as a dispute arises. Separate contract between the parties and expert. Court can be asked to construe the contract and give effect to it (will look at all the circumstances if wording is ambiguous).
Can be narrowed to only certain types of dispute or all disputes arising under the contract. If matter decided by the expert lies outside of the scope of the contract, it will have no effect (matter of construction). If clear, court will give effect to an ‘all disputes’ agreement.
Parties should consider when drafting the contractual provisions:
* the qualifications of the expert
* the need for the person to be an expert
* the machinery for appointing the expert
* the procedure that should be followed
* the extent to which it is binding
* the extent to which there may be exceptions to the final and binding nature of the award
* whether or not reasons should be provided
* the time for payment, and whether the expert has interest power and at what rate
* the fees of the expert, and any powers for them to award costs
* whether the expert should have immunity
* time bars for challenge or for referring the matter for determination

Question 25

How should the expert be selected?

Answer 25

Parties may agree on the identity but also may enlist help of a professional body or ADR provider. In situations of deadlock, the court may be able to intervene to resolve it.

Question 26

What is the procedure for expert determination?

Answer 26

If the parties have decided on a procedure in the substantive contract or in the contract appointing the determiner, that is the procedure. Most often, the parties simply agree to refer to expert determination with the procedure decided later.

Expert will usually seek to agree any procedural directions and can be done in an informal way (i.e. in writing only).

Most usually procedure provides for each party to send to the expert:
* written submissions
* copies of all relevant documents (ideally as one bundle)
* sometimes that oral submissions may be held, with witnesses
* and that the expert may conduct their own lines of inquiry.

During this time, the parties are under an implied duty to cooperate with each other and with the expert in relation to the determination. Where the expert’s proposed terms are reasonable and consistent with the rights and obligations in the contract, the implied term of cooperation is likely to require the parties to accept the expert’s appointment on that basis. A breach by one party of that implied duty does not entitle the other party to issue proceedings.

Question 27

How confidential is expert determination?

Answer 27

The parties can agree that they provide the information to the expert on a confidential basis. If they do so, any reasons the expert gives should summarise confidential information.
To avoid suggestions of bias, it is preferable if the parties exchange any information placed before the determiner and any meetings are held in the presence of all. Unlikely to be bias where the meeting is recorded and transcribed and the other party is given the chance to respond.

Question 28

Is the decision in expert determination binding?

Answer 28

The parties will usually agree that is binding, and a court in those circumstances will uphold the decision unless there are reasons to set it aside. Decision is not like an award or order.

Question 29

Do reasons need to be given in expert determination?

Answer 29

They can agree that hose should be provided, but where not agreed the expert is not obliged to give them.
If the parties agree that reasons should be given and the expert fails to do so, the court may order reasons given under either the contract or its own inherent jurisdiction.
Any reasons should be intelligible and adequate.

Question 30

What issues can arise in expert determination?

Answer 30

• Parties can ignore expert determination provisions and commence court proceedings
• One party may dispute the jurisdiction
• One party may challenge the expert’s determination

Question 31

What happens if a party ignores the expert determination clause?

Answer 31

Such clauses may be upheld and thus ignoring it may entitle the court to give damages. The court will also not let applications for pre-action disclosure be used to frustrate, impede, or interfere with the expert determination procedure.

Court has a power to stay court proceedings issued by a party who fails to use the contractually agreed machinery. The burden will be on the party seeking to litigate the dispute to show why the claim should not be stayed. The court, in such circumstances, would consider:
* Whether the agreement creates an enforceable obligation requiring the parties to engage in expert determination, including machinery, without any further agreement
* The extent of compliance with the PAP
* Whether the dispute is suitable for determination via the contractually agreed ADR process
* The costs of the ADR process as compared to litigation
* Whether the dispute can be resolved more quickly in courts
* Whether the stay would accord with the overriding objective
* Whether an element of the claim was not subject to expert determination so that the proceedings relating to that part could not be stayed, the principle being that having parallel litigation would increase time and cost.

The court will have regard to the policy interest in upholding commercial agreements and furthering the overriding objective.

A temporary stay for a stated period does not debar a party from pursuing its claim in court. If there is a residual issue after the expert determination, then proceedings can be reactivated.

The court may also need to stay concurrent proceedings until an expert determination has taken place if it cannot reasonably resolve those proceedings until the determination has been concluded.

Question 32

What is an expert determination’s jurisdiction?

Answer 32

Some have the clause that experts can determine their own jurisdiction, however the court will be the final decision maker, even if a clause purports to confer that jurisdiction on an expert.

Court can be asked to determine the extent of an expert’s jurisdiction:
* Before the matter is referred
* During the determination but before the decision
* After the determination, where one party alleges they are not bound bc of ultra vires.

If an application is made to the court to determine the jurisdiction before the determination, the court will assess whether the dispute is real and not hypothetical and, if it is real, whether it is in the interests of justice and convenience for the court to determine the matter first, particular if it would be wasteful of time and costs if the expert determine a dispute without jurisdiction.

The court will not always determine the jurisdiction question in advance of the determination as it may be better to have a party ask this of the expert first.

Question 33

What are the grounds for challenging the decision of an expert determiner?

Answer 33

The court, in such an instance, will give primary consideration to the terms of the contract. Where the decision is final and binding, it is likely not able to be set aside.
However, contractual grounds may exist on one or more of the following grounds:
* Failing to provide reasons when required
* Manifest error
* An error of law
* Lack of procedural fairness
* Determination was not intending to be final and binding

There are other grounds of challenge as a matter of law, namely:
* Material departure from instructions
* Fraud
* Partiality

Question 34

What are the contractual grounds for challenge?

Answer 34

• No reasons for decision (need to be given if contract so provides). Decision may be challenged, but likely to just order reasons given rather than a set aside.
• Manifest error (may ONLY use this where agreed in the contract). Manifest error means ‘oversights and blunders so obvious as to admit of no difference of opinion; or ‘ an error which is obvious or easily demonstrable without extensive investigation’ or ‘an error which was so obvious as to be beyond reasonable contradiction for it to be manifest’. A manifest error does not import a condition that the error has to be manifest at the time the determination is given. If the reasoning is not apparent from the determination itself, the court can look at other material available tot eh expert to determine if a manifest error has been made and any subsequent reasons the expert may have given by way of clarification.
• An error of law. If the parties agree that the expert is the sole and final arbiter of the law, then this is not open to review by the courts that the expert’s decision was erroneous in law, unless other grounds for challenge exist. Whether an error of law invalidates the determination will depend on the construction of the contract
• Failure to act lawfully or fairly. If the procedure is set out, and the expert has not followed this, it may be possible to challenge on the basis that he did not act fairly. However, in absence of an agreement, the judgment cannot be challenged on natural justice grounds. If the procedure has broken down, the court can intervene and give its own and can order another party to follow the contractual procedure if they are failing to do so. If the procedure has not be determined, the procedure should be left to the expert without intervention from the court.
• That the question is not intended to be final on matters of construction. If an agreement confers on the expert an exclusive remit to determine a matter, then the jurisdiction of the court to intervene is excluded. However, if it can be said that the terms of the contract do not/were not intended to oust the jurisdiction of the court in matters of interpretation of the underlying contract, then the court can intervene if the expert determines based on an incorrect determination. Courts will not readily accept the parties intended an expert’s decision to be final and conclusive in respect of the contract in absence of a clear and express provision to say so, especially where the expert does not have expertise in contract construction. This is so even if the clause provides for any difference for the parties to be referred to the expert and their decision to be final and binding. Where the court retains jurisdiction, the court has a discretion whether to determine a dispute about the construction in advance of the determination but it is likely to do so only in an exceptional case for cost and time saving reasons. Where both parties have different views on the meaning of a clause and it was likely that one or the other would seek to challenge the expert’s interpretation of the meaning of the phrase, the court may find that it is in the best interests of the parties to clarify the position beforehand.

Question 35

What are the other (non-contractual) grounds that an expert’s determination can be challenged?

Answer 35

• Material departure from instructions (addressing the wrong question or not doing what they were appointed to do). Any decision on this basis is liable to be set aside. Any departure will be material except where de minimis or trivial (not necessary to show it has affected the result). In an absence of a material departure from instructions, the decision will be binding even if the expert has made a serious mistake of fact or law or professional judgment (unless there are contractual grounds)
• Fraud. (if misled or colluding with/by one side). Can be set aside.
• Collusion. Must be shown they were actually biased. Can be a contractual clause where they have to work with independence and impartiality and in that way is subject to more stringent rules on impartiality. Some things that may show collusion include telephone conversations/meetings with one party with no disclosure on that meeting to the other, even where acting as a mediator and then subsequently takes on the role of determiner.

Question 36

What is the procedure for making a challenge of an expert determination?

Answer 36

Under Part 8. Can also be issued in advance to resolve issues. Court can make, in some circumstances, the determination itself if decision is set aside, or may order a new expert instructed.

Question 37

How do you enforce an expert determination?

Answer 37

Through breach of contract proceedings, during which the court can give effect to the decision. Summary judgment likely without any challenge. Then can be enforced like a normal judgment. Winding up/bankruptcy as well.

Question 38

Can you sue the expert from an expert determination?

Answer 38

Yes, contractually/in tort for negligence. Some insert immunity clauses (which may be unenforceable under the Unfair Contract Terms Act 1977).

Question 39

What are disputes review panels?

Answer 39

A hybrid form of determination, which may or may not involve an expert. Can have different forms, but typically will allow for each party to appoint an independent party and the independent parties to then choose a chairman. Decisions made will usually be binding unless they agree to refer to arbitration. Commonly set up for construction contracts.