New English court rules will encourage settlement of litigation

The Civil Procedure Rules (CPR), which govern civil litigation in the English courts, have been updated to give greater effect to a landmark Court of Appeal ruling last year, Churchill v Merthyr Tydfil. In that case, the court found that judges have the power to ‘stay’ – or pause - court proceedings so that the parties can attempt to resolve their disputes through mediation or another form of alternative dispute resolution (ADR). The court can even positively require parties to engage in ADR.

The updates are part of a wider drive in the English courts to encourage parties to resolve their disputes at an early stage, avoiding the need for costly protracted litigation.

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What are the changes?

With effect from today, the “overriding objective” of the CPR has been updated to add express reference to "promoting or using alternative dispute resolution". The overriding objective, which guides judicial decision-making about procedural matters, is to enable the court to deal with cases justly and at proportionate cost. The rules give examples of what this includes, such as saving expense, dealing with cases in a way which is proportionate to their value, complexity and importance and the financial position of the parties, and allotting to a case a fair share of the courts’ resources. Promoting or using ADR has now been added to this list. 

The changes also see the court's list of case management powers expanded to add a power to order that parties engage in ADR. The court’s duty of active case management already included “encouraging the parties to use an alternative dispute resolution procedure…and facilitating the use of such procedure”, and its case management powers included powers to take steps to further this objective. However, the rules have been strengthened with the addition of a clear express power to order ADR. The rules also, generally, now expressly require courts, when giving directions for the progress of a matter, to consider whether to order or encourage the parties to engage in ADR.

The CPR require the court, when considering what, if any, order to make about costs, to consider the conduct of the parties. The relevant conduct was already broadly framed but now makes express reference to “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution”.

ADR can take a number of forms. Mediation - a confidential process in which a neutral third-party mediator facilitates the parties in trying to reach a negotiated solution to their dispute – is one of the most popular, often taking the form of a day of plenary and private meetings. Other forms of ADR include early neutral evaluation, where an independent third party such as a KC or former judge gives the parties a non-binding view on certain issues in the case; arbitration, a confidential alternative to litigation in which a third-party arbitrator makes a binding decision on the matter; and simple negotiation between the parties. 'Hybrid' forms of ADR, combining more than one form of ADR, are also increasingly popular. For example, 'Med-Arb' involves the parties trying to resolve their dispute through mediation, with any remaining issues then being determined by a binding arbitration.

What will the changes mean?

The updates to the CPR are really points of emphasis rather than introducing fundamental change. The courts already have powers to do what the updates envisage as part of their existing discretion. For example, it is fairly common for courts to order a pause for the parties to consider mediation, with an obligation to report back to the court at the end of that period. Even where the court does not order such a stay, it will often factor in the need for parties to have time to engage in ADR processes, at the most appropriate moment, when setting the procedural timetable for the case.

However, the new rules provide yet further impetus for judges to encourage or order parties to engage in ADR, and a clear ‘hook’ on which to hang decisions to do so. 

As a result, we may see it become a matter of course for judges to raise the question of ADR at every case management conference (CMC) – generally the first procedural hearing in a matter, at which the judge gives directions for the future conduct of the case.  Businesses involved in litigation will need to be ready to deal with this question and make proposals in relation to ADR.

In practice, most commercial parties already engage in some form of ADR at some point in a dispute. In particular, businesses often recognise the value of mediation as a means of resolving a dispute without the risk, costs and publicity of going to trial. This is unsurprising given mediation organisation The Centre for Effective Dispute Resolution last year reported that mediations have a 92% success rate, in terms of settling on the day of the mediation or shortly afterwards. Even where matters do not settle as a result of mediation, the process can give an early insight into the opposing party's arguments and motivations. Businesses value the flexibility which mediation offers; for example, the opportunity to shape the timetable for the day, and to choose a mediator with particular knowledge of the subject matter or a particular approach.

However, ADR is not “one-size-fits-all” and mediation is not always the most suitable approach. Preparing for and attending mediation can be expensive and involve considerable time commitment. For these reasons, and sometimes because of the particular dynamics between the parties, other forms of ADR may sometimes be more appropriate, including simple negotiation between lawyers or parties. Timing is also key to the effectiveness of mediation.  In some cases, the factual disclosure, witness evidence or expert evidence can be so pivotal to the dispute that a mediation before one of those stages is unlikely to lead to settlement. 

If a party takes the view that a particular form of ADR is not suitable, or is not suitable yet, it will need to be ready to explain that position in detail to the judge at the CMC. The party should also prepare to make proposals as to alternative forms of ADR and as to the right timing for any formal ADR process to take place. Parties will need to do this thinking well before the CMC and ideally to engage in dialogue with each other about it.

This may drive increased interest in different and hybrid forms of ADR, and in using mediation more flexibly, creatively and cost-effectively.

It remains to be seen how enthusiastic judges will be about actually compelling reluctant parties to engage in a particular form of ADR. Generally, the greater the degree of willing buy-in from the parties to an ADR process, the greater its chances of success. There will remain an inherent risk of a party “going through the motions” or using mediation as a fact-finding mission rather than attending with real intent to settle. However, encouraging parties to focus more closely on choosing the right type of ADR for the dispute, to best suit the circumstances, and when it would be most effective to engage in the identified process, would be a positive cultural shift which may in turn lead to more matters successfully being resolved through ADR.