Embedding ADR in the Civil Justice System

Embedding ADR in the Civil Justice System

Limited court resources and the high cost of litigation have promoted a policy whereby early settlements have incrementally become a crucial aim of the civil justice system.¹ This aim is intertwined with the traditional adversarial model of adjudication where the parties, and not the court, are in control of the process.² While common law judges have increasingly gained managerial powers, civil litigation has retained a preference for settlement, which is now expressly encouraged by the courts.³ In England, the Civil Procedure Rules 1998 (CPR) seek to encourage settlement even before the claim is issued, and all the way to the trial stage, either via alternative dispute resolution (ADR) or via direct negotiation between the parties.⁴ This paper examines how mediation, and more broadly ADR, is being used in England to settle civil disputes, and it first argues that for most cases ADR, unlike negotiated settlements, mainly takes place when parties are referred to it. It further notes that increasingly several proceedings in England are embedding ADR into their processes, requiring parties to explore a settlement in advance of court adjudication at various stages of the dispute life cycle. This emerging trend is being intensified as a result of the digitalisation program roll out, which seeks to increase the use of ADR by, inter alia, making participation in ADR mandatory and subject to sanctions for small claims.⁵ This change represents a paradigm shift for civil claims that is further eroding the ‘alternative’ component of ADR.

English courts encourage settlements, on one hand, by requiring parties to exchange their arguments and supporting evidence, and on the other hand, by having a ‘pay as you go’ system for court fees – which need to be paid by the claimant at various stages of the procedure, such as on the submission of the claim, the track allocation and the trial⁶ – and for legal fees, which are typically paid periodically to counsel on an hourly-basis rate. When cases proceed to trial, most costs are recoverable from the losing party, save for two main exceptions. The first exception occurs when one party has rejected an adequate offer to settle which financial settlement was not improved in a subsequent judgment.⁷ The rationale behind this penalty is based on the understanding that the refusing party should have accepted a suitable settlement instead of letting the claim progress through the costly court process. The other main exception is when a party has behaved unreasonably by declining to follow a court order or, as is discussed below, by refusing an invitation to participate in mediation or an ADR process.⁸

The academic literature has argued that the single most important factor that encourages participation in ADR is the threat of costs penalties,⁹ which seeks to make civil litigation more cost-efficient for those cases that can be settled without an expensive trial. Indeed, disproportionate legal costs for low- and medium-value claims are not unusual; that is why there are ongoing reforms, including notably the consultation on mandatory ADR for small claims,¹⁰ the expansion of the fixed fees regime¹¹ and the launch of the Online Civil Money Claims (OCMC) service, which integrates online negotiation and telephone mediation as part of its procedure.¹²