Two forms of ADR:
- Mediation — an independent third party facilitates negotiation between the parties, who reach their own solution. No decision can be imposed.
- Arbitration — an independent expert third party hears the dispute and issues a binding decision.
ADR is conducted on a “without prejudice” basis — the court is not informed of ADR discussions until after liability and damages have been resolved.
Miko’s tip: “Without prejudice” means ADR discussions stay confidential and cannot be used against a party in subsequent proceedings — encouraging open and frank negotiation.
A solicitor must advise their client on ADR options at the outset of a dispute. ADR should be pursued unless:
- It is clearly inappropriate (e.g. an injunction is urgently required)
- The other party is unlikely to engage in good faith
- The other party cannot be trusted to comply with any agreement reached
A party who declines ADR must be prepared to justify that decision to the court. Unjustified refusal can result in costs sanctions — even against the winning party.
When completing the directions questionnaire, solicitors must confirm they have advised their client on: (1) the importance of settlement; (2) available ADR options; and (3) the risk of costs sanctions for refusing without good reason.
Miko’s tip: A court cannot compel parties to use ADR — but it can penalise those who refuse unreasonably through adverse costs orders.
Procedure: Both parties appoint an independent mediator who receives written position statements from each side. The mediator then works with the parties on a without prejudice basis to identify the core areas of disagreement and guide them toward a mutually acceptable resolution.
Enforcement: A mediated agreement operates as a contract between the parties — if one party fails to perform, the other may bring proceedings for breach of contract.
Arbitration operates as a private substitute for litigation. Once parties are bound by an arbitration agreement, they cannot resort to the ordinary courts for that dispute. It arises in two ways:
- Contractual clause — a pre-existing clause in the contract requires any dispute to go to arbitration.
- Post-dispute agreement — after a dispute arises, the parties may agree to refer it to an arbitrator of their choice.
Enforcement: The successful party may apply to the High Court under Arbitration Act 1996 to enforce the award as though it were a court judgment.
Litigation is the option of last resort. Once proceedings are issued, neither party can withdraw without bearing the other’s costs. If the parties cannot settle, the court will impose a binding and enforceable judgment.
Civil Procedure Rules (CPR 1998). To ensure proceedings advance at a reasonable pace with reduced costs, the courts exercise active control over the conduct of matters. This includes issuing appropriate directions, setting strict timetables, ensuring compliance, and imposing sanctions where necessary.
Track allocation:
- Small claims track — up to £10,000
- Fast track — £10,001–£25,000 · trial within 30 weeks; fixed trial costs
- Multi-track — over £25,000 · case management conference; detailed costs assessment
Pre-action protocols (Stage 1): Before issuing a claim, parties must identify the issues in dispute, share relevant information, and attempt resolution. The claimant sends a letter of claim setting out the basis of the claim; the defendant is expected to respond. Failure to comply with a protocol without good reason will typically result in a costs sanction. Proceedings should only be issued once these steps have been completed.
Miko’s tip: Most claims settle well before trial — the five stages are a framework for what can happen, not what always will. Negotiation runs throughout all stages.