Negotiation & Alternative Dispute Resolution

Negotiation is the most informal and flexible ADR process. It involves parties attempting to reach agreement on matters in dispute without the assistance of a third-party. Whilst they typically do, negotiations need not necessarily involve lawyers. Negotiation is a typical form of ADR used by private individuals involved in a legal dispute.

Mediation is the process whereby parties, with the assistance of a neutral third-party appointed by the parties, identify the issues in dispute and attempt to reach an agreed resolution. It is invariably faster and cheaper than litigating a dispute through the courts.

The outcome of a mediation is not binding until the parties sign an agreement, setting out the terms agreed. If one party refuses to abide by the agreement, the other party can sue in the courts to enforce it. If the parties do not sign an agreement, the matters discussed at the mediation cannot be referred to in any court proceedings.

Mediation is also a typical form of ADR used by individuals involved in a legal dispute.

Arbitration is the process whereby the parties agree to submit a dispute to be determined by an independent third-party arbitrator who, acting in a judicial fashion, makes an award, determining the dispute, which is binding on the parties. The parties cannot then refer the matter to the court appealing against the Arbitrator’s decision unless he has reached that decision having made a manifest error of fact or law.

Adjudication is the process whereby a dispute arising under a contract (typically certain construction contracts) is, according to the terms of the contract, referred to a third-party adjudicator for determination.

ADR has a number of advantages, including the following:

• Where appropriate and possible, ADR can be arranged and undertaken in a substantially shorter time-scale than in typically takes for a dispute to be resolved through litigation, meaning that disputes can be resolved more quickly, if ADR is successful, which may be particularly important if you are a private individual;
• If it is successful, resolving a dispute through ADR is likely to be cheaper than resolving the dispute through litigation, which may be particularly important if you are a private individual;
• Litigation is adversarial in nature. It is principally concerned with producing a ‘winner’ and a ‘loser’. Also, the remedies that the courts can impose when determining a dispute are generic and limited. ADR typically focuses on achieving a practical solution for all of the parties concerned based on their actual needs, rather than having solutions, which may not be entirely adequate, imposed on them;
• With most ADR processes, the parties can choose who conducts the process;
• ADR can be confidential, which can give the parties the freedom to safely air sensitive personal issues, which may be particularly important to an individual; and
• ADR can enable the parties to a dispute to reach settlement by consent, increasing the likelihood of a positive future relationship.

If ADR does not result in settlement, undertaking an ADR process can result in wasted time and costs for the parties. However, even if ADR does not result in settlement, it should test the merits of each party’s case and narrow the issues in dispute between the parties. In any event, ADR should allow the parties the opportunity to fully and frankly air their different perspectives.

Even if ADR does not result in settlement itself, it is common for ADR to increase the chances of settlement being reached at a later stage before trial.

Parties should also bear in mind the potential adverse costs consequences of unreasonably refusing to undertake ADR, which may be particularly damaging to a private individual.

A party may be contractually obliged to use an ADR process. However, even if they are not, the court rules robustly encourage it.

Unless the particular circumstances of a dispute make it inappropriate to do so, before starting proceedings the court rules require parties to take appropriate steps to resolve their dispute and, in particular, to consider the use of an appropriate form of ADR in order to do so. The Court will expect the parties to have complied with the court rules.

The Court has a broad discretion as to whether the costs of one party should be paid by another, the amount of those costs and when they are to be paid. When the court decides to make a costs order, generally the unsuccessful party will be ordered to pay the successful party’s costs. However, in deciding what order to make about costs, the court must have regard to the conduct of the parties, both before and during the litigation, which includes the extent to which they have complied with the court rules. Accordingly, where a party refuses to use ADR or fails to consider the use of ADR, that can be a relevant factor for the court to consider when deciding what orders to make as to costs. Undertaking ADR at an early stage can reduce the prospect of an adverse costs order being imposed by the court at a later stage, which may be particularly important for a private individual.

Refusing to use ADR because you do not believe it will be successful and proceeding with litigation should be very carefully considered, especially if you are a private individual where the adverse consequences of litigation might be more damaging. There is a risk that the court will find that proceeding with litigation on the basis that ADR has no reasonable prospect of success is not a good enough reason to refuse to engage in ADR and the party making that decision may be subject to an adverse costs order.

A dispute may be wholly unsuited to ADR in limited but important circumstances; for example, where a party requires urgent injunctive relief.