How do the updated Civil Procedure Rules promote ADR?

As covered in our article on the Churchill case, ADR has enjoyed a positive shift in judicial support, and this is now reflected in updates to the Civil Procedure Rules (CPR). Back in 2004, in the Halsey case, Lord Justice Dyson said: “To oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court.”

Since then, we have seen a reluctance to fully embrace court directions that might go close to compelling the use of ADR, though various attempts were made to encourage it, especially by the Commercial Court with its ADR direction guidance. The recent Churchill case saw a step forwards, when the Court of Appeal departed from Halsey, deciding that Dyson LJ’s comments were not binding, and found that the court can make an order for the parties to engage in non-court-based dispute resolution (‘NCDR’) (including mediation); and/or a stay in proceedings to allow for NCDR to take place.

What are the updates to the CPR?

This has now been given support in updated procedure rules. The Overriding Objective will be updated at CPR 1.4(2) from; “encouraging the parties to use an alternative dispute resolution procedure” to “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution.”

Additionally, CPR 44.2(5) which details the conduct which the court can take into account when considering the order (if any) to make about costs will insert the following: “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution”.

Why use ADR?

ADR has many advantages, and comprises several forms, though the recent CPR updates are driven by the need to use mediation. The most common reasons to consider ADR are:

• its relative speed against going to court,
• many forms of ADR are cheaper than going to court, and
• it means the parties take control of how they want to resolve and move forward.

Each of these points on its own can make ADR worthwhile.

It is important to understand that this private form of dispute resolution can be better for many SMEs. Court decisions tend to be black and white, with a winner and loser. ADR, especially mediation, can let both sides find positive bespoke outcomes. Larger businesses with disputes across borders find it helpful to choose the applicable law, place and language of the dispute procedure. The parties also have the opportunity to dictate the time of resolution because they are not waiting for a court date.

Confidentiality is also easier to maintain via ADR proceedings because they are consensually private. This allows the parties to resolve without concern for reputational outcomes, or perceptions of who wins and loses. It also makes it easier to maintain confidential information and trade secrets.

There are, of course, circumstances in which court litigation is preferable to ADR, perhaps because you need to set a public precedent, or need a type of injunction that only a court can give. Yet, the main lesson from this year’s case law and the CPR changes is that parties must think about all this, and to dismiss ADR can be an error, and one that has cost consequences in court proceedings.

This is all reinforcing the focus and emphasis on ADR and the real impact it can have on costs.  You cannot afford to ignore ADR.

If you have questions or concerns about ADR, please contact James Tumbridge.