Compulsory ADR – a step closer?

In July last year we reported that the Civil Justice Council (“CJC”) had concluded that there is no legal bar on making ADR (Alternative Dispute Resolution) compulsory and that ADR should no longer be viewed as an “alternative”, but rather as an integral part of the resolution of a dispute.

A year has passed since our last update, but what progress has been made on making ADR compulsory?  The current position is set out below, along with a reminder of what ADR is.

What is ADR?

ADR is essentially an umbrella term which incorporates a range of options which can be used to resolve disputes.  These options are all alternatives to court proceedings. One of the most popular forms of ADR is mediation.

What is mediation?

Mediation involves a neutral third party (a qualified mediator) being appointed by the parties to a dispute to attempt to broker a resolution of that dispute.  A mediator does not act as a judge to determine a dispute, but will help the parties to talk through the issues involved in the dispute, negotiate and, hopefully, come to a mutually agreeable resolution.

Are you obliged to mediate?

No, not under English law as it stands.  However, parties to a dispute can be contractually bound to mediate and commercial contracts often contain an ADR clause which sets out the steps which the parties must take before they can issue court proceedings to resolve a dispute.

However, there is robust judicial encouragement for parties to engage in mediation. If a judge concludes that a party has unreasonably refused to take part in mediation, cost sanctions can be imposed.

This was illustrated in the recent case of DSN v Blackpool Football Club Ltd [2020] EWHC 670 (QB) (20 March 2020) where the Defendant, believing that it had a strong defence, refused to enter into mediation with the Claimant. In this case the court confirmed “No defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution”.

The Defendant was ordered to pay costs on an indemnity basis (rather than the usual standard basis) and an important factor in that decision was the Defendant’s failure to engage in mediation.

Will mediation become compulsory in the future?

The direction of travel appears to be towards mediation becoming compulsory. In January 2022 the CJC published its report – “The Resolution of Small Claims”.  Some of the key recommendations within that report were as follows:

1. Compulsory mediation should be introduced in claims with a value of £500.00 or less (excluding road traffic accident, personal injury and housing disrepair claims) following a Defence being filed;

2. The introduction of a specific pre-action protocol for claims of less than £500.00 which would highlight the need for pre-issue ADR; and

3. Sanctions should be imposed on any party that fails to adhere to the requirements for compulsory mediation. For a Claimant that refuses to mediate, the claim should be stayed (to allow compliance) and thereafter struck out if the refusal to mediate continued. For a Defendant that refuses to mediate, cost sanctions should be imposed.

Interestingly, on 8 June 2022, Sir Geoffrey Vos, Master of the Rolls, gave a speech at the Chartered Institute of Arbitrators indicating that with the continuing development of the digital justice system, there may come a time where compulsory mediation becomes academic as the digital court process would have integrated mediated interventions built in at various stages of the court process which would be designed to focus the minds of the parties on resolution of the dispute without the court’s involvement.

Whilst this approach may do away with the formal introduction of compulsory mediation in the conventional sense it is clear that the early resolution of disputes, without the need for the courts to be involved in that process, is very much still a live issue.

Comment

Momentum is building for the introduction of compulsory mediation in all claims. We believe the starting point will initially be on lower value claims (£500 or less) with the regime then being expanded to higher value claims in the future. The continued development of the digital court process is an interesting development which may well increase the onus on ADR.

Our Disputes team have experience of resolving disputes via mediation and other forms of ADR.  If you are involved in a dispute and need guidance on the options available to try and resolve it, please get in touch.