ADR Flashcards
Forms of ADR
- Negotiation
- Mediation
- Arbitration
- Med-arb
- Early neutral evaluation/expert appraisal/expert evaluation
- Expert determination
- Conciliation
Negotiation
Communication process between parties that is intended to reach a compromise or agreement to the satisfaction of both parties
Mediation
Confidential process intended to facilitate the resolution of disputes through the medium of an impartial third party - the mediator.
Generally each party will be present in the same location but in different rooms.
Mediator moves between the rooms delivering settlement offers and guiding each party to reflect on those offers and the alternatives to reaching an agreement.
The mediator has no authority to make any decision which is binging on the parties.
If it does not end in an agreed resolution the content will remain confidential and not be made known to the court.
Arbitration
Process by which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed will be final and binding.
By agreeing to arbitrate disputes, parties are agreeing to oust the jurisdiction of the court to hear the matter and to give the jurisdiction to a different impartial party (adjudicator) instead.
Can be a long and formal process which is governed by rules and statutes.
Advantages:
- privacy
- easier enforcement in certain jurisdictions
- ability to chose a specialist to determine the dispute
- more flexibility, can be adapted to suit the needs of the parties and the dispute.
When does question of whether to arbitrate arise?
- When negotiating a contract the parties may decide to include an arbitration clause in their agreement to cover disputes that arise in the future.
- When a dispute has arisen the parties can choose to deal with it by way of arbitration
Med-arb
Process whereby parties agree that initially they will try to resolve any dispute by mediation.
In the event that this does not result in satisfactory resolution of the matter, the matter will move on to an arbitration pursuant to which a binding decision will be made.
Early neutral evaluation (ENE)/expert appraisal/expert evaluation
Independent party is appointed by the parties. The independent party will provide a non-binding assessment of the matter(s) referred to.
Parties pay them for their time and costs.
Assessment provides an impartial opinion which might influence parties in settlement discussions.
Could be a lawyer or expert in a field.
Expert determination
Independent expert on the subject matter is appointed by the parties to determine the dispute.
Procedure is determined by the contract between the parties.
Form of ADR is particularly suitable for disputes requiring a technical knowledge but may not be suitable if the parties wish to be fully heard and there are issues of credibility.
Conciliation
Independent neutral third party helps parties resolve their dispute. Process is usually facilitative like mediation but may occasionally involve more of an evaluation.
Term has no clear meaning. Often forms part of a statutory scheme or other regulatory scheme and that scheme might provide who the conciliator should be and the process involved.
Summary of ADR types
No-third party:
- Negotiation
Third-party but not binding:
- mediation
- early neutral evaluation
- conciliation
Third-party, binding:
- expert determination
- arbitration
Why use ADR?
- Court expects it
- Less expensive
- Save time
- Privacy and confidentiality
- Parties are more involved in and in control of the process
- less disruption
- Wider range of outcomes (risk is reflected)
Court expects the parties to explore ADR
Court expects the parties to act reasonably in relation to considering and engaging in ADR and can impose sanctions if they do not.
Preserves or creates a better relationship between the parties
In many forms of ADR, factors such as business relationships, reputational issues or personal emotions can be taking to account.
Means process can assist the parties in maintaining a commercial and/or personal relationship.
Parties can explore emotional dimensions or agree a future trading relationship which court proceedings do not offer.
Less expensive
If successful some forms of ADR can lead to a resolution at less cost than litigation
Saves time
Some forms of ADR can lead to a conclusion more quickly than litigation
Greater privacy/confidentiality
Litigation involves filing documents at court which might be accessible by the public and hearings will generally be public.
All the forms of ADR already identified are essentially private and confidential
Less disruption to clients
Forms of ADR such as mediation can be much less disruptive to clients.
Might not need to search for documents, engage in as many internal meetings or attend court the way they might in the case of court proceedings.
Outcomes that reflect the risk
if a claimant is claiming £100,000 and has a 60% chance of winning - both parties might be attracted to a settlement by which the defendant pays £60,000/
Judge cannot decide the claim this way in court proceedings.
Discount the judgment sum to take into account the uncertainty that it is the right judgement.
Greater control over the process
e..g being able to chose the third party involved (arbitrator or mediator).
Parties cannot chose the judge
Greater involvement of the parties themselves
Often prefer mediation as there is a greater opportunity to get involved in the process and have their say.
Litigation can feel like an alienating and detached process for many clients.
Role of lawyers in ADR
- Ensure client is fully aware of the option for ADR
- Help their client to pursue any ADR it wishes to pursue
- Act within the authority to settle granted by the client in any settlement discussions. it is generally prudent to involve the client directly in the final approval of any settlement agreement.
ADR: earlier or later in the case?
Earlier:
- if costs is a concern, the earlier parties engage in ADR the greater the cost saving in the event of success
- Better relationships and information: even if ADR does not lead to a settlement it can improve the relationships between the parties and produce useful information - e.g. opinion of an expert might inform conduct of litigation
ADR later:
- if attempted later, the parties will better understand each other’s case. However, this should be relatively clear by the time statements of case are finalised if not earlier.
- If ADR is attempted later the parties will better understand the evidence each party has available (but not justifiable to wait until all evidence is available. Exchange of info can often be agreed in advance of an ADR procedure.
- If a party engages in ADR too early it may have incurred costs doing so when the dispute is not genuine and would not have been pursued anyway.
ADR in the CPR
- Various pre-action protocols require considering ADR
- Guidance in the costs budget requires inclusion of some elements relating to negotiations and advising on settlement
- Directions Questionnaires: require legal reps to confirm they have explained to the clients the need to try to settle, settlement options and possible costs sanctions.
Includes option to request a stay for settlement. Parties must state expressly why a settlement might not be achieved at this early stage in proceedings, if they do not require a stay.
Court has power to stay the proceedings at any stage. - As a CMC court will want to know the steps the parties have taken to explore ADR. Court can give directions that are aimed at encouraging ADR. Court is required to manage cases including by encouraging and facilitating ADR if appropriate.
How does court encourage ADR?
- Provide information about ADR
- Stay proceedings for or order the parties to engage in ADR>
- Encourage parties to engage.
ADR: costs
Court can encourage parties to engage in ADR by rewarding positive ADR behaviour and punishing poor behaviour in costs.
Will not know what happens at ADR just whether or not a party has agreed to mediate it at all.
If a party refuses - court will consider whether this is reasonable and may impose a costs penalty.
Deprive successful party of costs on the grounds of refusing to engage in ADR
Court will consider:
- Nature of the dispute - how suitable it is for ADR
- Merits of the case - refusal may be more justified if the party believes it to be very strong
- Extent to which other settlement methods have been attempted
- Where costs of ADR would be disproportionately high
- where any delay in ADR would have been prejudicial
- Whether ADR had a reasonable prospect of success
Practical advice upon receipt of an offer to engage in ADR
- Consider merits of the odder
- Respond promptly, in writing, setting out reasons for its decision and noting the principles above
- If does not wish to engage in ARD, explain circumstances in which it would agree to ADR (eg later stage)
- Make that letter with ‘open’ or without prejudice as to costs
- consider making a separate note of any reasons for refusal that it is unwilling to express to the opponent at that time, in a form which can be later shown to the court if necessary
Witness statement
Court can order a party to serve a witness statement if it refuses an opponent’s ADR proposal
