Alternative Dispute Resolution: No longer voluntary under new Civil Procedure Rules

Article author: Associate Arani Arunan

Alternative Dispute Resolution (ADR) is a general term that refers to various methods used by parties including meditation, executive tribunal and early neutral evaluation to resolve disputes outside of court proceedings and arbitration. This article discusses the new powers given to the courts from October 2024 to order or encourage parties to engage in method(s) of ADR.

Changes to Civil Procedure Rules (CPR)

With the introduction of free mediation sessions for disputing parties from 22 May 2024, ADR became a required step in the small claims process for resolving money claims under £10,000. This change formed part of the government's wider initiative to increase the use of dispute resolution in courts and tribunals.

Whilst the CPR flags the need for parties to consider ADR in its framework for pre-action conduct of claims, the courts had generally avoided compelling ADR. However, recent amendments to the CPR in October 2024 gave effect to the landmark decision in Churchill v Merthyr Tydfil Borough Council [2023] EWCA Civ 1416 and provided the courts with the power to order parties to engage in ADR.

The recent amendments to the CPR involving ADR have been summarised below:

• CPR 1.3- The overriding objective of the courts is to deal with claims justly and at a proportionate cost. This objective now includes "promoting or using alternative dispute resolution";
• CPR 1.4(2)- The court's duty to actively manage cases now involves "ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution";
• CPR 3.1(2) - The courts have the general power to "order the parties to engage in alternative dispute resolution";
• CPR 28.7(1)(d); CPR 28.14(1)(f); CPR 29.2(1A)- the court should consider "whether to order or encourage the parties to engage in [ADR]” when giving directions to claims allocated in the fast, intermediate or multi track; and
• CPR 44.2 (5)- the court will have regard to “whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution” when making an order as to costs.

Impact of the amendments 

The CPR do not provide specific guidance on when or how courts can exercise its new powers. This approach resembles the Court of Appeal's stance in Churchill to refrain from providing a checklist of factors that courts should consider when ordering parties to engage in ADR. This perhaps reflects the court’s awareness of the differences in the applicability and usefulness of ADR in a wide variety of disputes. However, it is likely that the courts will be guided by Churchill and order a stay of proceedings and/or order parties to engage in ADR if the order(s):

• Do not undermine the parties’ right to a fair trial;
• is made in pursuit of a legitimate aim; and
• is proportionate to achieving that aim.

Whilst it is too early to comment on how the courts have generally implemented their new powers, recent case law confirms that unwilling parties can be ordered to mediate just before a trial is due to take place (DKH Retail Ltd and other companies v City Football Group Ltd [2024])and parties can be ordered to engage in ADR even after doing so at the pre-action stage (Francis v Pearson [2024] EWHC 605 (KB)).

For charities, ADR remains a significant tool in its arsenal due to its potential to bring a cheaper and quicker resolution to disputes and reduce the risk to a charity’s reputation. Recent amendments to the CPR solidify the significance of ADR in the litigation process and provide charities with the assurance that opposing parties are likely to seriously consider the implications of refusing or failing to adequately engage in ADR. However, these amendments will also require charities to continually revisit ADR and its various methods throughout all of stages of litigation and may lead to an increase in costs. Therefore, the timing and methods of ADR utilised by charities should be carefully strategised throughout the litigation process with particular thought given to the pre-litigation stage.