Arbitration and the court process: scope for mutual support?

Introduction

When the IFLA arbitration scheme commenced in February 2012 it was initially confined to dealing only with the main species of financial provision on family breakdown. In July 2016, the scheme was substantially expanded to accommodate certain disputes about child arrangements. The territory was further enlarged in April 2020 by the inclusion of applications for the temporary and permanent removal of children to certain specified foreign jurisdictions. However, it is perhaps only in the current climate, where there is an unprecedented level of pressure on the court system, that the arbitration route is seen as a fully “mainstream” option. There is a risk, however, that the “court option” and the “arbitration option” are still seen as mutually exclusive. In fact, there is plenty of scope for each field to complement and support the other to their mutual advantage.

The need for effective dispute resolution  

The unique set of circumstances unfolding in the form of the Covid-19 pandemic has created huge challenges across the whole of society. In the family justice system, heroic efforts have been made by ‘front-line’ judges and their valiant HMCTS support staff (already struggling with underfunded technology, pared down budgets and all too heavy case-loads) to “keep the show on the road”. But there is little doubt that with the temporary closure of courts and suspension of in-person hearings, a significant backlog of cases has arisen as numerous cases have been adjourned, delayed or rendered ineffective. That ‘bulge’ in the pipeline of work has the potential, when it hits, to further stretch an already over-stretched judicial system.

At the same time, many families will have been wrestling with the serious economic, logistical and emotional pressures created by ‘lockdown’, the closure of schools, the loss of employment or, indeed, the loss of loved ones. For many families that level of pressure will prove to be too great to bear and relationships will buckle under the strain. This too is likely to create even further demands on the resources of the family court.

Arbitration in support of (and not ‘instead of’) the court process

Fundamental to the terms of the Arbitration Act 1996 and the IFLA scheme is the principle that you don’t face ‘double jeopardy’: you cannot litigate an issue in court whilst simultaneously seeking to arbitrate it under the Arbitration Act 1996. Hence both the Forms ARB1 FS and ARB1 CS provide for the parties to record their agreement that:

“Once the arbitration has started, we will not commence court proceedings or continue existing court proceedings in relation to the same subject matter (and will apply for or consent to a stay of any existing court proceedings, as necessary), unless it is appropriate to make an application to the court arising out of or in connection with the arbitration, or some relief is required that would not be available in the arbitration;

That does not preclude, however, the arbitral process being used as an adjunct to, and in support of, a court-based process. Indeed, CM v CM [2019] EWFC 16 is a powerful example of how arbitration can be used in support of court-based litigation.  In that case, Moor J had conducted a First Appointment in financial remedies proceedings, including the determination of  the terms of reference of an expert account’s report. Following the hearing (and despite the judge’s order being fairly prescriptive), when the parties came to draft the joint letter of instruction there was significant ‘mission creep’ and an inevitable dispute about whether the competing draft letters of instruction faithfully adhered to, or strayed from, the terms of the original directions order. When the matter was referred back to Moor, J for further determination, he expressed some characteristically trenchant views about how the matter ought to have been disposed of:

10. High Court Judges are exceptionally busy.  They do not have time to draft letters of instruction or even to determine disputes as to the wording of such letters…  If, however, in a future case, there is a genuine issue as to drafting, I consider it would be exactly the sort of matter that should be referred to an arbitrator who is accredited by the Institute of Family Law Arbitrators. 

This powerful and emphatic backing for arbitration from one of our leading judges perhaps signposts a way in which the arbitral scheme can be used to alleviate pressure on judicial lists whilst also streamlining general case management.

Interim issues

Often where formal proceedings are already on foot within the court arena, interim disputes can crop up that have not been accommodated within one of the ‘standard’ hearings but nevertheless need dealing with promptly. Classic examples would be maintenance pending suit, applications for legal services orders or interim child arrangements. If these are not tackled as part of one of the scheduled case-management hearings, the parties then face the unenviable choice between leaving the issue unresolved (infrequently festering away, causing resentment, frustration and a head of steam that finds expression in evidence at final hearing), or seeking an additional court hearing specifically to deal with the issue (which may be so delayed that any it renders the interim relief sought utterly pointless).

Here, arbitration can and should be deployed as the speedy, streamlined and focussed mechanism for determining the dispute fairly but efficiently. The case as a whole will remain in the court arena, but the discrete interim dispute can be hived off for an early arbitral determination. The court list is not weighed down by interim disputes, freeing up judicial time for substantive hearings.

Case-management issues

Using arbitration to iron out case-management issues also mutually benefits both the court and the litigants. With interim case-management disputes, a swift determination is critical unless the overall timetable is to be put in jeopardy. Placing an application into the court system in the hope of receiving a quick judicial decision as part of ‘boxwork’ is an ambitious approach at the best of times and may, in the current climate, be something of a fool’s errand. Here, appointing an arbitrator to decide the point (more likely than not, “on the papers”) is an obvious course of action. Whatever the narrow scope of the dispute (Which expert should we appoint? Do I really have to give this disclosure?) can be comprehensively defined in the arbitral reference in Form ARB1 CS and ARB1 FS and that will limit, precisely, the scope of the arbitrator’s remit.

In the financial world, this scheme does not of course have to be confined to discrete case-management disputes. The parties could agree, for example, to empower the arbitrator to decide all case-management issues on a financial remedies case up to the FDR. First appointments could be provided even in complex cases within a week or two of appointment, rather than the sixteen week plus wait for the Judge.  Arbitrators could be appointed in a way that would give them significantly longer time on the papers than the poor Judge shouldering an overstuffed court list.

Instinctively, one could only see this as positive.  Certainly, the parties could expect a significantly faster and lower-cost process to the judicial assistance they need through the following steps:

1. Issue application and sign ARB1FS, limited to the arbitrator providing assistance to the procedural steps prior to FDR;
2. Progress to exchange Forms E;
3. Where Forms E are delayed, the arbitrator convenes a ‘directions’ meeting (by video call) and lays down timetabling;
4. Further steps laid out as required but throughout a rigorous adoption of FPR protocols to ensure proper interface with the court process;
5. The case is then managed to dovetail with the timetabling of the first hearing at court which can then advance as FDR (FPR 2010, r.9.15(7)(b))).
6. To address concerns that the court hearing is “bumped” then the terms of reference for the arbitrator might prospectively include giving directions for the conduct of a private FDR, to include identifying the tribunal and laying down any final arrangements to give agreement the highest chance of success.

By essentially delegating the ‘routine’ case-management spadework to the arbitrator, the parties are able to secure FDR input and guidance from a judge at the earliest (indeed, first) time the case is formally heard by the court. In compliance with the overriding objective, the parties are taken through the process more quickly and at lower cost; and simultaneously the burdens on the court are reduced. It is ‘win:win’ for the litigants and for the court.

Of course, not every case will amenable to this template. For example, the arbitrator does not have recourse to FPR 2010, r. 9.26B and cannot join third parties against their will. Some litigants will (as always) want to play a tactical hand and will want to delay the progress of the case for strategic reasons. Equally, whether judges fully embrace and support this level of activity from arbitrators remains to be seen. One can imagine some judges jealously protecting their own case-management ‘turf’. However, in the light of all judicial pronouncements on arbitration in the reported case-law, it should be fairly safe to assume a positive judicial reaction.

Judicial support for arbitration

Even the most over-burdened, under-resourced judge will not have the power to reduce their lists by compelling litigants into arbitration (or any other form of non-court dispute resolution). Part 3 of the FPR 2010 imposes an express duty on the court to consider “at every stage in proceedings” whether non-court dispute resolution is appropriate. But the court cannot force the issue. There is power (FPR 2010, r. 3.4(1)) to adjourn proceedings:

• (a) to enable the parties to obtain information and advice about, and consider using non-court dispute resolution; and
• (b) where the parties agree, to enable non-court dispute resolution to take place (emphasis added).

Whilst the court cannot actively compel participation in non-court dispute resolution, the judge nevertheless has some “teeth” to bare in the form of the ‘Ungley’ order. Helpful guidance was provided by Mostyn J in the case of Mann v Mann [2014] EWHC 537:

25. ADR has its own berth in Part 3 of the FPR 2010. There is no counterpart in the CPR. Rule 3.2 provides that “the court must consider, at every stage in proceedings, whether alternative dispute resolution is appropriate.” This applies across the full range of family proceedings, whether the subject matter is money or children. Rule 3.3 [now 3.4, see above] provides that:

(1) If the court considers that alternative dispute resolution is appropriate, the court may direct that the proceedings, or a hearing in the proceedings, be adjourned for such specified period as it considers appropriate –

• (a) to enable the parties to obtain information and advice about alternative dispute resolution; and
• (b) where the parties agree, to enable alternative dispute resolution to take place.

26. It can be seen that this rule differs slightly from CPR rule 26.4(2A). That latter rule talks of staying a case while FPR rule 3.3 talks of adjourning it. That is a distinction without a difference. More importantly, the power under FPR rule 3.3(1)(b), while capable of being exercised on the court’s own initiative,  can only be exercised if the parties agree. In contrast, under the CPR counterpart the court can impose a stay in favour of ADR whether the parties agree or not.

27. If the parties have made an agreement to engage in ADR then I am of the view that the court can exercise its powers under FPR rule 3.3(1)(b), even if one party is trying to back out of that agreement. However, if there has never been an agreement to engage in ADR I cannot see that the rule can be invoked. And if the rule cannot be invoked then it is hard to see how a separate power could exist to order the parties to engage in ADR in those proceedings not governed by Part 9, and thus subject to the FDR process.

28. In my respectful opinion, the Rules Committee should give consideration to deleting the words “if the parties agree” from rule 3.3(1)(b) so that it is put on the same footing as its CPR. counterpart.

29. As I have stated, if there is a written agreement to engage in ADR before going ahead with a Part 8 or an enforcement application then I consider that the rule may be invoked to adjourn the application for a specified period to enable ADR to take place, even if one party is trying to back out of the ADR agreement. Such an adjournment may be coupled with an Ungley Order to make clear that an unreasonable refusal to participate in the ADR may well attract a costs sanction. But an indefinite adjournment could not properly be ordered. Not only would this amount to a denial of the right of access to justice but it would be giving effect to the ADR agreement in a way that falls foul of the terms of s34(1)(a) Matrimonial Causes Act 1973 (which renders void any agreement which purports to restrict the right to apply to the court for an order containing financial arrangements).

36. I cannot compel the parties to engage in the mediation. But I can robustly encourage them by means of an Ungley Order. I shall therefore make a further order in the following terms:-

• i) If either party considers that the case is unsuitable for resolution by ADR, that party shall be prepared to justify that decision at the conclusion of the enforcement proceedings, should the judge consider that such means of the resolution were appropriate when he is considering the appropriate costs order to make.
• ii) The party considering the case unsuitable for ADR shall, not less than 7 days before the commencement of the adjourned enforcement hearing, file with the court a witness statement without prejudice save as to costs, giving reasons upon which they rely for saying that the case was unsuitable.

So here the litigant might offer to embark on arbitration … they might indicate that they have the offer of a fixed fee for this stage of the case and they indicate that a refusal to adopt arbitration will ultimately be raised as an argument on costs. An Ungley order will provide a potent backdrop to any such costs application.

Rolling forward from March 2014, when Mann was heard to mid-2020, we have new costs rules which may make such robust approaches more likely:

• 4.4  In considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case. This may be of particular significance in applications for variation orders and interim variation orders or other cases where there is a risk of the costs becoming disproportionate to the amounts in dispute. The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs. This includes in a ‘needs’ case where the applicant litigates unreasonably resulting in the costs incurred by each party becoming disproportionate to the award made by the court. Where an order for costs is made at an interim stage the court will not usually allow any resulting liability to be reckoned as a debt in the computation of the assets.  [emphasis added]

Conclusion

The arbitral and court spheres are not mutually exclusive and there is plainly scope for each sphere to support the other. Even where the parties wish to remain substantively within the court process, we suggest that there will be opportunities where arbitration can be used to ensure the court process is effective and proportionate, and that our judiciary is likely to welcome arbitrators seeking to relieve their courts of the burden of the preparation and interim stages of cases. Equally, by prudent deployment of the powers under FPR 2010, r. 3.4 and the Ungley order, the court has significant tools to bring the benefits of arbitration into sharp focus for the parties. Whether acting as lawyers, arbitrators or as judges, we should all be looking to exploit the opportunities for efficiency wherever they can be found.

Written by James Pirrie and Tom Carter.