The new rules regarding Alternative Dispute Resolution
In civil litigation, the courts have always encouraged parties to engage in alternative dispute resolution (ADR) prior to commencing action. This adheres to the pre-action protocols contained in the Civil Procedure Rules and generally prevents unnecessary time and costs being incurred. The consequences of not doing do so, mean that parties can be penalised at various stages during the litigation process, for example when costs are being awarded. This has historically had a deterrent effect and incentivised parties to engage in ADR from the outset of a dispute.
Over the past year, the courts have placed even more emphasis on the role of alternative dispute resolution, through the introduction of various amendments to the Civil Procedure Rules. These amendments mean that the courts are now able to compel parties to engage in ADR as part of their case management powers.
The amendments were introduced on 1 October 2024 and the most significant additions are summarised below:
- The overriding objective regarding dealing with a case justly and at proportionate cost now includes “promoting or using alternative dispute resolution” – CPR 1.1(2)(f);
- The court’s active duties regarding case management, now includes “ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution” – CPR 1.4(2)(e) ;
- The court’s general powers of management now mean that the court may “order the parties to engage in alternative dispute resolution” – CPR 3.1(2)(o);
- Provisions relating to the court’s discretion as to costs now mean the court will consider “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution” – CPR 44.2(5)(e).
These changes are a result of the decision in the landmark case Churchill v Merthyr Tydfil County Borough Council [2023] where the Court of Appeal had to re-consider the long-standing precedent determined in Halsey v Milton Keynes General NHS Trust [2004], where it was decided that the courts should not have the power to order parties to engage in ADR, as this could be too obstructive.
In Churchill it was held that:
“The court can lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process provided that the order made does not impair the very essence of the claimant's right to proceed to a judicial hearing, and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost”.
The Court of Appeal’s judgement echoes the guidance contained in the ‘overriding objective’ and implies that any such order for ADR made by the courts will be just and proportionate. It is likely that the new provisions will act as a stronger incentive for parties to voluntarily engage in ADR from the outset, as they know there is a possibility that it could be ordered by the courts. This increase in the court’s discretionary powers, indicate a shift towards a more proactive approach to dispute resolution and the hope that this will lead to quicker solutions between parties, fewer lengthy court proceedings and less wasted costs.
If you are involved in a dispute and would like to consider alternative dispute resolution, or require advice from one of our solicitors, please contact our commercial litigation team or call 020 7632 4300.