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Alternative Dispute Resolution

Alternative Dispute Resolution, generally known as simply ‘ADR’, refers to established and customarily accepted routes for resolving disputes outside of court. Courts are keen to see - and often require - that a form of ADR is exhausted before a matter will be listed for trial.

This works in the best interest of the Parties, as the cost of going to court can often greatly exceed any sum of money that might be saved, or ‘won’.

The principal forms of ADR operating in respect of commercial property disputes in the UK are:

Arbitration is a strict and formal process conducted pursuant to the provisions of the Arbitration Act 1996. Whilst arbitration can involve formal ‘hearings’ at which the Parties are each represented before an Appointed Arbitrator, they are most commonly conducted on a ‘documents only’ basis. In this way, the Arbitrator is appointed (usually with provisions enabling that being provided within the contract under which the dispute arises), and the Arbitrator requires that each side presents a ‘report’ detailing the evidence which supports the opinions they are advancing, and the outcome they are seeking.

There are usually then opportunities for each side to comment on the other side’s position. The Arbitrator will ultimately make a formal ‘Award’ detailing the decision arrived at and the reasons behind that decision. This ‘Award’ is as binding as if it were a court judgement.

An Independent Expert is a common alternative to an Arbitrator, and is similarly appointed through a mechanism within the contract under which the dispute arises. The conduct of a reference to an Independent Expert is purely contractual and not subject to any particular governing statute. This form of reference is however commonly conducted as if it was an arbitration in practice, in that each side will prepare and present reports to the Independent Expert, along with Replies.

However, unlike an Arbitrator who is restricted to considering only the evidence advanced by the Parties, an Independent Expert is free to (and indeed should) make their own enquiries and apply their own experience and judgement in arriving at what is called a ‘Determination’, instead of an ‘Award’. It is similarly binding on the Parties, however is actionable under the contract, as opposed to under statute as is the case for an Arbitrator’s Award.

An Independent Expert is not obligated to provide the ‘reasons’ behind their decision, but commonly will at least provide a brief explanation.

It is worthy of note that an Arbitrator cannot be sued. Conversely, an Independent Expert does owe a ‘duty of care’ to the Parties and therefore can be pursued for negligence.

Unlike Arbitration and Independent Expert referral, mediators do not arrive at any decision, or Award. Rather, mediation should be considered to be ‘assisted negotiation’.

Mediation is a strictly confidential process, tends to take the form of a one day gathering of the Parties and their advisors with the Mediator (commonly in one of the offices of the solicitors involved), and each party will pay one half of the Mediator’s fees.

The Mediator will have been provided with a summary of each party’s position prior to the Mediation Day.

The skilled Mediator meets with the Parties (in private ‘break out’ sessions, as well as together) to assist them in objectively appreciating the strengths and weaknesses of their respective positions. The Mediator is working with the Parties to assist in finding a logical and sensible compromise in lieu of litigation. It is a fact that some 85% of mediations result in a binding negotiated settlement reached either on the day, or within a few days following.

Our senior team are regularly involved in representing parties in mediations, as well as conducting mediations in the capacity of RICS Accredited Mediators.

Early Neutral Evaluation is a relatively little known form of ADR and is best suited to situations where there is a single or several discrete issues that need to be resolved to unlock a dispute. Early Neutral Evaluation is very effective where the sticking point in a dispute is the interpretation of a term in a lease or a legal technicality.

The process involves nominating an independent and impartial expert to make a non-binding determination in relation to the issue in dispute after weighing up the strengths and weaknesses of each side's case. For example, if the issue was a point of law or the interpretation of drafting in a lease, then a specialist solicitor or barrister, ideally who also perhaps sits as a judge, would be nominated to make a determination.

The option of using Early Neutral Evaluation is now referred to in the Civil Procedure Rules and can be used on its own or in conjunction with other forms of ADR, such as mediation and arbitration. Once an evaluation has been given it is non-binding.

However, this will usually then be used to trigger or resume more informed settlement negotiations, often a much quicker and cheaper approach than going to court. To set the ground rules and parameters of the Early Neutral Evaluation, each side will need to sign an agreement on how the evaluation will be dealt with, what is expected from the evaluator, the status of the determination once reached, and any arrangement for costs.

One of the main benefits of Early Neutral Evaluation is its speed as it helps to quickly crystallise the issues in dispute. The process also highlights the difficulties that a particular side may have with their case, and in turn prompt settlement negotiations.

For these reasons, Early Neutral Evaluation can be a very cost-effective way of resolving disputes, especially if there are only one or two points in issue.

Get in touch with Raeburn Consulting, and we can talk you through the process and provide more information to see if Early Neutral Evaluation is for you.

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