The future of ADR – a new justice reform

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On 25th July 2023, the Ministry of Justice (MoJ) announced in a press release, that Claimants seeking to recover debts of up to £10,000 will need to attempt mediation before their cases can be heard in the small claims’ courts of England and Wales.

What is mediation?

Mediation is a form of Alternative Dispute Resolution (ADR). It is designed to be a confidential, interactive process where an impartial and independent third party seeks to neutrally assist parties in dispute to resolve areas of conflict. Mediation is not currently compulsory in the civil courts. However, under the Civil Procedure Rules, parties are encouraged to consider engaging in ADR throughout the course of their claim in order to reduce costs, minimise the risk of costs sanctions, and free up court time.

Mediation has many benefits, such as:

  • in certain cases, it can be a quick process to arrange and if successful, will save the costs and time associated with proceedings.
  • the process does not face the same legal constraints that a judge does.
  • it’s a confidential process and anything discussed is considered ‘without prejudice’ and therefore cannot be used as evidence in any subsequent trial.
  • it provides greater flexibility which gives access to a wide range of outcomes that are often not available at trial, such as costs negotiations.
  • it might be possible for the parties, via the mediator, to bring other matters outside of the central dispute itself into the mediation, to assist a commercial settlement.
  • it’s an opportunity for the parties to explore a novel avenue; and:
  • the process can assist with the preservation of existing relationships.

However, the timing of mediation can sometimes pose a dilemma. If parties mediate too soon, they may not be ready to reach a settlement nor have access to documents that might assist them. However, if left too late, it is likely that significant costs will have already been incurred in the litigation.

Why now?

The concept of compulsory ADR is historically debated and has tended to focus on high volume and lower value type claims, where the time and costs involved with litigation can quickly become disproportionate to the dispute.

The new justice reform comes after the report published in June 2021 by the Civil Justice Council (CJC), which examined the lawfulness and desirability of compulsory ADR. The report considered whether mandatory mediation is contrary to rights afforded by the European Human Rights Commission and particularly article 6, the right to a fair trial. The CJC concluded that introducing further compulsory elements of ADR, “would be both legal and potentially an extremely positive development.” This was shortly followed by a ‘Call for Evidence’ by the MoJ to inform future policy in civil disputes which included seeking views on compulsory ADR.

The CJC report considers the case of Halsey v Milton Keynes (2004) and disagrees with the finding that mandatory ADR would ‘impose an unacceptable obstruction on their right of access to court’. The report states that as long as the ADR settlement process does not lead the parties to be coerced into settlement against their will, and if they have the option to refer back to the judicial system should they reject the settlement, then it would be lawful.

The new justice reform

Parties will be referred to mediation post filing of a ‘Directions Questionnaire’ which is used by the court to collect and assess the information that is a relevant to a claim; for the purposes of setting down directions and managing the claim generally. The MoJ estimate that over 180,000 parties will be referred automatically to a free hour-long telephone session with a professional mediator provided by HM Courts and Tribunals Service before their case can progress to a hearing. For parties who fail to engage in the dispute resolution process, they risk facing cost sanctions or their claim being struck out.

The Ministry will begin with specified money claims, which make up 80% of small claims. By settling claims this way, the MoJ predicts up to 5,000 sitting days could be saved a year, providing a boost in court capacity and allowing judges to concentrate on more complex cases. The policy will eventually apply to all claims issued under the standard part 7 procedure of the Civil Procedure Rules.

The ‘one size fits all approach’ adopted by the MoJ is questionable. There will likely be certain categories of cases and litigants where mediation is not suitable.  This being due to the nature of the case itself, particularly where a ruling or precedent is desirable, which runs the risk of mandatory mediation becoming a “box ticking” exercise for the parties. There is also no guarantee that both sides will attempt to mediate in good faith, as it taints the voluntary ethos.

The new justice reform is certainly a step in the right direction for smaller claims in providing a more affordable and accessible dispute resolution system, but how this would be implemented on a larger scale for higher value claims and more complex cases, remains to be seen. As put by the Law Society, “adequate resourcing of the scheme would be vital” and whilst there are potential benefits associated with bringing mandatory mediation into the civil justice courts, the logistics of implementing the scheme in practice will be a challenge.

If your business requires guidance around ADR, please get in touch with our team of expert disputes lawyers for bespoke advice.