The Civil Procedure Rules (CPR) have been updated to allow the courts in England and Wales to order parties to engage in Alternative Dispute Resolution (ADR).
The change came into force on 1 October 2024, and marks a procedural shift in the way disputes are resolved.
Why has the change been made?
In November 2023, the Court of Appeal mandated that the parties engage in an out-of-court dispute resolution process in the case of James Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.
In light of that decision the Civil Procedure Rules Committee (CPRC) decided that a change in the rules was needed to create a clearer framework for when proceedings can be stayed in favour of ADR, and what the court can order in terms of ADR.
As a secondary consideration, it’s likely that promoting ADR will ease the burden on the courts and help to reduce the current court backlog.
What does this mean for parties in litigation?
Parties may now be ordered to participate in ADR. Up to now, parties have been encouraged to attempt mediation during the course of the dispute, and could face cost consequences if they refuse. With the new change to the CPR, parties may be compelled to try ADR, and find themselves in breach of a court order if they do not.
However, the CPRC has deliberately left the phrase “alternative dispute resolution” undefined. Parties can decide for themselves which form of ADR is most suitable for the dispute.
It’s likely that in most cases it will be mediation. But some cases of a technical nature may opt for expert determination. Other cases may seek Early Neutral Evaluation instead.
Facilitative or binding ADR?
Parties to commercial disputes typically opt for mediation as the preferred form of ADR. Mediation gives the opportunity to find a creative, commercial resolution that may not be within the court’s powers to grant. It gives the parties a chance to air their differences face to face and find a way forward that may preserve the commercial relationship.
If mediation is successful, the parties will sign a settlement agreement, which is binding upon the parties.
However, a method like Early Neutral Evaluation (ENE) is not necessarily binding on the parties. The parties can choose beforehand whether they want the decision to be binding or not. A non-binding decision in ENE leaves the door open to discard what the evaluator has said, and raises the question of how useful the exercise is in bringing the parties closer to a resolution.
Read about the key differences between commercial litigation and alternative dispute resolution in our article.
Can you refuse to engage in ADR?
The changes to the CPR make it more difficult for parties to refuse to engage in ADR during the course of their dispute. If a party unreasonably fails to engage in ADR, they expose themselves to potential cost sanctions from the court.
However, the obligation is qualified by the word “unreasonably”. It may still be reasonable to refuse ADR based on:
- The urgency of the case and whether any limitation issues are in play
- The potential costs of ADR
- Whether there is a realistic prospect of resolving the claim through ADR
- Whether there are imbalances in the parties resources, bargaining power or sophistication
These are just a few suggestions, which may or may not persuade a court. Now that the encouragement to attempt ADR is contained within the CPR, a party who refuses to try it is running a high risk of costs sanctions from the court.
Key Takeaways
ADR is now an objective of civil justice and promoting or using ADR is part of the overriding objective of the court to deal with cases justly and at proportionate cost.
That means that ADR should be factored in to the litigation strategy at the start of any dispute. The courts will want to see that parties have at least considered the options, and they may even order parties to try it.
