Engaging ADR

Engaging ADR

When the Lord Wolf reforms were initiated, they had in them several salient objectives. Some of these objectives were to reduce the access to justice, wastage of valuable judicial time, and more importantly reduce the cost of litigation. Part 3- Alternative Dispute Resolution: The Courts Powers- of the new civil procedure codes is formulated along these objectives. The objective of the ADR was that, as part of the pre-action protocols, the involved parties would try and resolve their dispute on their own or through the assistance of a mediator, or through arbitration, before heading to court. In the guiding principles of the implementation of the CPR rules (the overriding objective) the court as part of its case management responsibility would encourage the involved parties to involve the ADR and only use the courts as a last resort. The parties that would adhere to this principle would be favourably considered and those that acted unreasonably in pre-action protocols penalised in awarding of costs. But questions have arisen, how far should the court go to encourage the parties to use the ADR? Can the court force parties to submit their dispute to mediation against their will? Dayson LJ in Halsey v Milton Keynes General NHS Trust and in Steel v Joy and another has provided salient answers to these questions.

Woolf’s reforms vigorously emphasised the importance ADR in the English legal system. According to Lord Woolf proper utilisation of the alternative dispute resolution mechanisms that were available in English legal system would help in bringing down the litigation cost, help more people access justice and reduce the backlog of cases in English courts . The Woolf reforms projected that if ADR were put into proper use, the English civil litigation would become quicker and cheaper. Following this understanding, the new civil procedure codes went as far as to give the court powers to encourage parties to first explore the available alternatives before heading to court . According to CPR 3.2, the court has a duty to consider, at every stage of the proceeding, whether alternative dispute resolution is the most appropriate for the case at hand. Similarly, the pre-action protocols as spelt out by the CPR require parties to explore other alternatives (conciliation, mediation and arbitration) before initiating court proceedings .

The court can exploit its powers to encourage the disputing parties to use the appropriate alternative dispute resolution mechanism, but these powers are limited to their willingness. According to Dyson LJ, the court has the powers to encourage parties to use ADR, but forcing either party to that direction against its will would amount to denying the party the right to access to court. Refusing any party the right to access the court is a serious violation of a fundamental human right . If the English legal system were to go towards this direction, it would be acting against Article 6 of the European Convention on Human Rights, of which it is party to.

In Article 6.1 of the European Convention on Human Rights, the state is obligated to ensure that every citizen is guaranteed the right to access to court as part of its commitment to a fair trial. Although the right to access to court is not absolute, any restriction that can be found to be incompatible with Article 6 of European Convention of human Right can be declared null and void to the extent of that incompatibility. In Golder v UK for example ruled that everyone has the right “to have any claim related to his civil rights and obligations brought before a court or tribunal”. With such a universal legal restriction, the English courts cannot order parties to submit their disputes to mediation against their will. Dyson LJ in Halsey v Milton Keynes General NHS Trust and Steel v Joy and another has rightly observed that the work of the court is to “encourage and not to compel(Para. 10). This background leaves the court with no other option other than to persuade parties to use ADR as an alternative to courts.

There are numbers of ways that the court can use to persuade the parties to go for ADR. These ways are entrenched in the CPR rules, the supporting practice directions and in the pre-action protocols. Through active case management, Dyson LJ notes that the court is in a position to encourage the parties to seek mediation where appropriate.

In the first place, the court may try to impress upon the parties the advantages of engaging in ADR as opposed to initiating a court proceeding. Some of these advantages include the need for the parties to continue co-existing together (especially for business) after the dispute is over. A court battle may leave the relationship between parties wounded. Other advantages are that in ADR, the parties have the control of the process, the proceedings are less formal and not stressful, the parties can reach a favourable outcome, early settlement, the parties can take control of the process and that the whole process is voluntary . It is also true that ADR can be cheaper compared to a court process.

Beside the above advantages, the CPR 44.3(4) gives the court the power to vary the normal rule of costs follow the event to factor in the conduct of the parties both in pre-litigation and during the litigation process. One of these factors that the court has considered is whether the parties tried to resolve their disputes out of court. Where any of the party is found to have behaved unreasonably in the course of resolving the dispute the court will order cost taking into consideration the extent of misconduct.

In Halsey v Milton Keynes General NHS Trust and Steel v Joy and another for instance, the court considered how far it would go to deprive the successive party costs on the ground that the party had refused to engage in an alternative dispute resolution. In the ruling, Dyson LJ considered the reasons behind the successful litigant refusal to engage in the alternative dispute resolution. Where either of the party is found to have unreasonably refused to engage in ADR, the court has the powers to impose penalties on it.

Where it was clear to either party that ADR was the best way to go, or the court had tried to impress upon the parties the need to explore alternative dispute resolution, and the successive party unreasonably refused, the court would not hesitate to impose penalties. However, Dyson LJ agreed with the Law Society that it is not in all cases that ADR will be the best way to go. Some of the cases, depending on their nature, their merits, the cost of mediation, and the implication of ADR could as well be decided by the court .

In deciding the cases of Halsey v Milton Keynes General NHS Trust and Steel v Joy and another, the court examined whether the defendants were unreasonable in refusing ADR. When such a case arises, the court has established that it is the responsibility of the unsuccessful party to prove that the successful party behaved unreasonably in refusing to agree to mediation. In Halsey v Milton Keynes General NHS Trust, Dyson LJ dismissed the appeal on the ground that the case was not suitable for ADR. Similarly, the appeal by the second defendant in Steel v Joy and another was dismissed on the ground that there was no prove that the first defendant acted unreasonably in refusing to mediate.

In the two referred cases Dyson LJ has established that the role of the court as far as alternative dispute resolution are concerned is to “encourage and not to compel” . This rule is in respect to the universally accepted legal principle that every party has the right to access to court. Thus, where either of the party refuses to engage in ADR, the court will not move in to penalise it but will consider the reason behind the party’s refusal. If the case was not suitable for ADR, the court will consider that the party had reasonable ground to object to the alternative dispute resolution.

In dismissing the appeals, the court had to evaluate the ground on which the successful party refused to engage ADR. Some of the factors that the court considered included the nature of the case, the merit of the case, the probability of the mediation to succeed, the probable cost and duration of the mediation. In Halsey v Milton Keynes General NHS Trust, the court found out that there was no probability of the mediation succeeding because Mrs Lillian Halsey had already made up her mind. Dyson LJ also established that Mrs Lillian Halsey had employed “somewhat tactical” measures to arm-twist the successive parties to mediation which was not acceptable. As Linnell notes, agreeing to enter into a mediation process has to be voluntary . In this case also, the costs of mediation were to be disproportionately higher and therefore the successive party was right to insist on a court process.

In Steel v Joy and another, the court agreed with the second defendant that matters touching on a question of law are not suitable for mediation. In such a case, the court would be the best suitable to decide the case, and therefore, the successive party was not unreasonable in refusing to engage in alternative dispute resolution.

Principles of Arbitration

In conducting arbitration and reaching a final award, an arbitrator has to be guided several key principles. The principle of impartiality is very important. An arbitrator has to ensure that the arbitration is fair to both parties. Any element of partiality will erode the confidence that the parties have bestowed on the arbitrator and affect the objectives of the whole process. The Arbitration Act 1996 requires the arbitrator to ensure that the whole process is fair, cost-effective and rapid. This principle is very important since some of the reason why people result to arbitration as opposed to a court process is to save on costs and probably arrive at a decision more rapidly . If the arbitrator was to negate this important objective, disputing parties may not find the necessity of ADR.

An arbitrator should let the parties control the process. An arbitrator is not a person who imposes his will on the parties but a person who respect their choices. Unlike in a court process where the judge exercises authoritative powers, in arbitration the arbitrator should allow the parties take control of the process so as to allow the process yield an award that is easily acceptable to all.

The other principle is that, although arbitration is an out of court settlement, the arbitrator should follow the applicable law as much as possible. Following the applicable law is very important as this would reduce the ground for challenges in court and also present arbitration as a legal abiding process . It would be very unfortunate if awards of arbitration were to be overturned by the courts.

The arbitrator should try as much as possible to be friendly to the parties. He or she should ensure that the parties understand every step of the process. It is always good to remember that the best outcome is where the awards are reached by way of consensus. On the other hand, the arbitrator should keep the supervisory powers of the court as close as possible. Section 1 of the Arbitration Act 1996 clearly enumerates this power. Although the role of the court is not to interfere with the arbitration process, it nonetheless ensures that the process is guided by the will of the parties and that it is within the confines of the law governing the arbitral process.

Challenges to Arbitration awards

Although the Arbitration Act 1996 section 1 restrains the court from interfering with the arbitration awards, the fact is that the outcome of an arbitration process is not final. It can be challenged. Arbitration Act 1996 provides three grounds on which arbitration awards can be challenged. According to s67, an arbitration award can be challenged on substantive jurisdiction, challenged for serious irregularity under s68 and an appeal on point of law under s69 .

Under s67 a party can argue that a tribunal lacked jurisdiction to arbitrate on the matter. This section states that a party can challenge “any award of the arbitral tribunal as to its substantive jurisdiction” or seek an order declaring an “award made by the tribunal on the merits to be of no effect”. In IRB Brasil v CX Re for example, the plaintiff (reinsurer) appealed a decision by the English Commercial Court to awards the defendant (reinsured) on the mechanisms of s67. The arbitrator had ruled that the reinsurer indemnify the reinsured. IRB Brasil appealed on the ground that the arbitrators made an error of law in reaching the awards since the sum paid were not recoverable.

Under s68, the Arbitration Act allows disgruntled parties to challenge the awards on the ground of serious irregularities. It is important to remember that the irregularities identified must be so serious to an extent that they require court intervention for justice to be reached. Some of the most common irregularities are where an arbitrator has serious compromised his role as an impartial arbiter or where the tribunal has overstepped its mandate probably by exercising powers that it did not have. In Kablo Imalat San Ve TIC v Intamex SA, the court ruled that it will only approach an appeal with an aim of upholding the award. In such a case, the applicant must appeal only where there are clear chances of succeeding. As it was noted in Petrochemicals industries Co (KSC) v Dow Chemical Co the court will always adopt a pro-arbitration approach. In this case, therefore, where the plaintiff had appealed on the ground that the arbitrator overlooked crucial evidence, the court dismissed the appeal. In section 69, an applicant can challenge arbitral awards on a point of law. However, the parties involved can exclude a point of law as a ground of appeal before they commence on the process. However, it is not always that an error in point of law will form a formidable ground for appeal. The error in law has to have a substantial effect on the outcome.

It is important to emphasise that although the court recognises the three ground of appeal, it has established a strong tradition of upholding arbitration awards. The guiding principle is that “as a matter of general approach the courts strive to arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting of frustrating the process of arbitration” . In this approach, the court is determined to uphold the sanctity of the arbitration award, and thus, applicants have limited chances of succeeding.