Arbitration and Inheritance (Provision for Family and Dependants) Act 1975 Proceedings

by Felicity Shedden *

Most practitioners would readily acknowledge the destructive impact of Inheritance Act litigation on grieving families. The benefits of mediation in offering a more constructive, efficient and civilised forum for resolving such disputes are widely accepted. However, inevitably, not every case is suited to mediation, and not every mediation is successful. Until recently, potential litigants were faced with a binary choice of mediation or court, and all too often, court seemed unavoidable.

In February 2012, a new scheme was introduced by the Institute of Family Law Arbitrators (‘IFLA’), providing a model for arbitration in these sensitive cases. Arbitration will be familiar to most commercial litigators, but for family lawyers, the step was controversial. Committed mediators questioned the move away from self-determined outcomes towards imposed decisions, while litigators queried the enforceability of arbitrated awards.

In the two years since its launch, however, the IFLA arbitration scheme has gained recognition from the judiciary and practitioners alike. Flexible, fast and cost effective, the model offers a genuine alternative to court proceedings, reducing acrimony and guaranteeing a specialist tribunal.

How does it work?

The scheme operates under the Arbitration Act 1996. IFLA have then developed a framework of rules tailoring the procedure to suit financial disputes within families. To begin the process, the parties complete a binding agreement to arbitrate by way of a Form Arb1. In that agreement, they have the opportunity to nominate their chosen arbitrator, or they can ask IFLA to appoint the arbitrator if they prefer.

The arbitrator will then arrange a first meeting, at which he or she will work with the parties to identify the issues in dispute, and to look at the procedural steps needed to allow the arbitrator to make a decision. Unlike litigation, where a rigid structure is imposed from the outset, the parties are free to design a process that is proportionate and appropriate to their own case. If, for example, the factual matrix of the case is clear, the parties can choose to dispense with oral evidence at the final hearing, or even to dispense with a final hearing altogether, and instead to ask for a decision based on written submissions. Clearly, this can lead to very significant costs savings.

The arbitrator can be creative in his or her approach to problem solving. If there is a dispute about a tax issue, for example, a joint meeting with a neutral accountant could be arranged, so as to give the parties immediate answers to their questions, at lower cost than commissioning a formal report. In other situations, a family consultant could be brought in to work with the parties on the emotional aspects of the dispute which so often underlie the legal issues, helping to move the case towards settlement.

After the first meeting, the arbitrator can continue to have a hands-on involvement with the case management, following up on deadlines to ensure compliance by the parties, and to prevent the case drifting. Where, within the court process, all too often it only becomes clear at a hearing that one or both parties have failed to meet the timetabling, in arbitration, the arbitrator is in a position to manage the case proactively, minimising delays and wasted costs.

Once all the relevant information is available, there may then be a final hearing, or written submissions. The format of the hearing can, again, be tailored to fit the issues in dispute, and of course, the timings can be managed to accommodate the parties’ existing commitments.

On a practical level, the process of attending an arbitration hearing is conducive to constructive discussions and a more positive experience for the parties. The arbitrator will usually provide separate waiting rooms, refreshments and a comfortable environment. There’s no delay in obtaining hearing dates, and you can be assured that the arbitrator will be fully prepared and focussed on the case.

Is the outcome binding?

The short answer is ‘yes’. It is clear that the arbitrated award (equivalent to a judgment) is legally binding and enforceable.

The terms of the Arbitration Act require the courts to uphold arbitrated decisions, and, in the case of S v S (Financial Remedies: Arbitral Award) [2014] EWHC 7 (Fam), [2014] 1 FLR 1257, the President of the Family Decision confirmed that the courts should enforce arbitrated awards under the IFLA scheme.

A useful benefit of arbitration in cases with an international element arises under the New York Convention, also known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The convention provides a mechanism for the enforcement of awards in contracting states. With 149 signatories by 2013, the Convention means that an arbitrated award may be directly enforceable in all but a handful of countries around the world.

It is important to remember that an arbitration cannot bind third parties, and it is a voluntary process. All the parties to the dispute would need to agree to enter into the arbitration in order for the terms of the award to be enforceable.

Is there a right of appeal?

Sections 67 to 69 of the Arbitration Act 1996 set out the circumstances in which parties can challenge or appeal an award. These are as follows:

• For lack of substantive jurisdiction (for example, if the arbitrator sought to determine issues that fell outside the terms of the original arbitration agreement)
• For serious irregularity (for example, if the arbitrator had engaged in private correspondence with one of the parties)
• On a point of law

Interestingly, the parties can also choose to exclude the right of appeal on a point of law. For some, this is an attractive option, guaranteeing the finality of the process.

Who conducts the arbitrations?

The arbitrators who have qualified under the IFLA scheme are drawn from a range of backgrounds, solicitors and barristers of differing degrees of seniority. They will all be family law specialists, with a minimum of eight years’ experience.

The application process requires references from senior professional colleagues and members of the judiciary. After attending the training course, there is an assessed paper which must be successfully completed before the arbitrator can qualify.

The parties are able to choose an arbitrator with the appropriate level of experience to suit their case. Most regions now have local arbitrators available, and for more complex matters, there is the option of appointing a retired High Court or Court of Appeal judge. Inevitably, the arbitrator’s costs will vary depending upon their seniority, but many are offering fixed fees for the process, giving the parties certainty of their costs from the outset. Although the parties will need to meet the fees for the arbitrator, in most cases the savings made through the flexibility of the process more than make up for the expenditure on the arbitrator.

Conclusion

Arbitration is a fast, flexible and responsive process, giving a binding outcome in intractable inheritance disputes. It offers the benefit of choosing your own specialist tribunal, who can manage the process to ensure a fair but cost proportionate outcome. The solution is ideal for cases where mediation has been unsuccessful, or is not appropriate. The opportunity for creative problem-solving can go a long way to limiting the toxic impact on bereaved families of these painful issues, whilst the accelerated timetabling provides a swift and efficient resolution.

Felicity Shedden is a solicitor, mediator and arbitrator, a member of the Association of Contentious Trust and Probate Specialists (ACTAPS) and of the Chartered Institute of Arbitrators. She runs specialist firm, Shedden Family Law, and is a Deputy District Judge. Her article is reproduced from the November 2014 issue of its Newsletter with the kind permission of ACTAPS.