What is Alternative Dispute Resolution in costs?

Alternative Dispute Resolution (ADR) is the process of dealing with disputes without the need for going to Court. 

There are many different types of ADR, for example, mediation, arbitration, and negotiation are a few. The process of ADR is highly supported by the Courts, as stated in the Civil Justice Council’s recent report.

What happens during the Costs ADR process?

The ADR procedure is dependent on the route that is taken, the following (not exhaustive) list of ADR methods are typically used:

·        Mediation,

·        Arbitration, or

·        Negotiation.

Costs ADR: Mediation

Mediation is the use of an impartial third party to help the sides to reach an agreement, the mediator takes both of the parties arguments into account but cannot make a decision for them. The mediator is a trained body from a mediation service to promote a mutually acceptable agreement between the parties.

The use of mediation as a form of costs ADR is known to be quicker, cheaper and result in less costs being incurred for the parties when costs are in dispute.

The only shortfall for using mediation is that once an agreement is made it is not normally legal binding, so parties can proceed to Court if needed.

Costs ADR: Arbitration

Arbitration is a formal process of using an independent arbitrator to make a legally binding decision about the dispute. The costs arbitration process is normally one of sending your Bill of Costs to the arbitrator, along with Points of Dispute and Points of Reply. The process is similar to that of a Detailed Assessment Hearing in which the Bill will be reviewed and provide a decision based on the Points (Dispute and Reply), in which, the decision will be legally binding.

The process of retrieving an arbitration decision is known to be significantly shortly than that of going to Court for a Detailed Assessment Hearing. Normally, the time frame tends to be around 45 days. Whilst the process for going to Court is needing of a Notice of Commencement, serving the Points of Dispute and Reply, in which each have time limits of 21 days to file, and potentially waiting several months to proceed to Court for the Assessment Hearing.

The route of arbitration is therefore, more attractive to reduce increasing cost fees as the process for arbitration is much shorter.

Costs ADR: Negotiation

Negotiation is the most informal route to take for costs ADR in which the sides agree to attempt to reach a resolution without the need to approach a third party, this type of ADR method is used to prevent costs escalating needlessly.

Can a party in the dispute refuse ADR?

ADR is known to be a more cost effective, faster, and flexible form of dispute resolution. There is no general rule in law that states that ADR must be used in dispute resolution; but, the Court does heavily advise that types of ADR should be encouraged and may not look favourably on any party refusing to engage in mediation or other types of ADR .

The Civil Justice Council’s report on ADR in July 2021 stated that ADR should be encouraged, and will ‘benefit all concerned.’ The Master of the Rolls stated that ADR should not be viewed as an alternative but as an ‘integral part of the resolution process.’

The case of Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 highlighted the importance of promoting ADR in dispute resolution, and the Court of Appeal stated that parties should consider the merits of ADR at an early stage.

From this encouragement by the Courts, if a party in the dispute gives an unreasonable refusal to go to ADR then this could lead to costs sanctions for the refusing party.

The recent case of DSN v Blackpool Football Club Limited [2020] EWHC 670 (QB) allowed the courts to highlight the cost sanctions given to an unreasonable refusal to mediate.

The claimant, in this case, was awarded the costs of the dispute from the refusing party on an indemnity basis. The refusing party had claimed that the reason for failing to engage in ADR and by wanting to proceed to Court was because of a ‘confidence in the strength of its defence’, the Court stated that this behaviour from the refusing party was ‘out of the norm’ which was ‘outside the reasonable conduct of proceedings.’

As it turned out from the Court’s further inspection, the refusing party’s defence was not strong. The court stated that no defence, however strong, justifies a refusal to engage in any kind of alternative dispute resolution.