Making the case for ADR in the business world
In November 2023, the UK Court of Appeal found that parties to a dispute being litigated through the courts, can be ordered by the court to engage in non-court-based dispute resolution, often referred to as alternative dispute resolution (ADR). Catherine Dixon, CEO of the Chartered Institute of Arbitrators (Ciarb) looks at what ADR, including mediation, brings to the table for businesses, and their legal advisers.
What is alternative dispute resolution?
There are many different and constructive ways to resolve a dispute without going to court, even if negotiation has been tried and failed.
Referred to collectively as private or alternative dispute resolution, mediation, arbitration, adjudication, and Dispute Boards are just some examples of ADR which offer different ways of resolving disputes without having to rely on the courts. All these methods offer the parties to a dispute flexibility in determining how they want their dispute resolving. Some of these methods involve a third-party neutral determining the dispute on behalf of the parties (adjudication and arbitration), whereas mediation generally offers a facilitative process which is binding on the parties only when they agree.
If the people or companies in dispute (the parties) agree on the method, ADR processes can be organised in a timeframe agreed by them and with a third-party neutral of their choice (for example some parties might choose an expert on the matter in dispute). ADR can also offer other benefits such as confidentiality, which can be important if the dispute involves sensitive issues. To ensure certainty, many businesses include dispute resolution clauses in their contracts so that these details are agreed upfront, saving time later should a dispute arise.
After the judgment in Churchill v Merthyr Tydfil Borough Council (Churchill), changes to the Civil Procedure Rules (CPR) of England and Wales came into force on 1 October 2024. The changes embed alternative dispute resolution into the civil justice system as one of the overriding principles the court must consider.
Ciarb united with the Civil Mediation Council (CMC) and Centre for Effective Dispute Resolution (CEDR) to jointly, and successfully, intervene in Churchill. The significance of the judgment and the subsequent changes to the CPR will be felt for years to come and is likely to increase the use of ADR in England and Wales and globally.
Why is mediation attractive for businesses?
Disputes arise in all areas of business, for all kinds of organisations, and in all sectors. For most businesses it is critical that disputes are resolved quickly so as not to cause disruption or become a distraction from other important issues. Whilst the value and complexity of disputes vary, the desired outcome is, in the majority of cases, the same: a fast and cost-effective outcome that supports business continuity.
Mediation is an attractive option for businesses. Firstly, the parties can choose a mediator based on technical expertise. Mediation typically takes a few hours or days rather than months or years and can be organised at quickly. The right expertise and the speed of the process help for swifter resolution – critical for business continuity.
Additionally, mediation can be used before, during and after adjudicative processes, including court, arbitration and adjudication to save time and money, and create workable solutions to outstanding or consequential issues. Engaging in mediation does not preclude any other form of alternative dispute resolution being nor does it stop the parties going to court if that is what they wish. Even if mediation does not resolve all of the issues in the dispute, it may enable some matters to be agreed, thereby narrowing the outstanding issues still in dispute.
Settlements are reached based on the agreement by all, meaning the parties are more likely to implement the agreement because they believe it is in their interest to do so. This helps to protect, and even in some cases, strengthen, the longer-term working relationships.
Mediation is a flexible, confidential, process where a neutral mediator facilitates the parties’ search for a mutually acceptable outcome. The parties retain autonomy over how long they participate, what the terms of settlement are, and whether they settle. Once the parties reach agreement the settlement is binding. If they fail to settle, the matters discussed at the mediation are confidential and cannot be used in any court process.
A mediator will not, and cannot, force parties to accept an agreement. Mediation in the UK is ‘without prejudice’, so genuine offers of settlement made during the process cannot be used by the parties against each other after the mediation. The confidential nature of the process is key when it comes to protecting professional reputations, or any other sensitive information that businesses would prefer to be kept private.
The mediator is granted authority to mediate by the parties through a contract called a ‘Mediation Agreement’. This sets out the main terms on which the mediation will be conducted.
If a settlement is reached this can be formalised by the parties in a ‘Mediation Settlement Agreement’. If there are legal proceedings, this will usually be finalised once the Mediation Settlement Agreement is honoured by the parties.
If there is no settlement, or a partial settlement, the remaining issues may be taken forward for resolution in a further mediation, arbitration, or court process depending on what the parties have agreed.
What does the future look like for disputes?
In 2025 and beyond, businesses in England and Wales may come to rely more and more on ADR and, including, mediation.
As a global professional body, Ciarb’s membership spans diverse geographies, backgrounds and professional disciplines. All with one thing in common – a desire to advance effective dispute resolution.
To learn more about Ciarb, including the model clauses it offers and its Business Arbitration Scheme, click this link www.ciarb.org.