An interesting recent development from the UK's Civil Justice Council, who have published a report on compulsory alternative dispute resolution ("ADR"). The report is intended to inform possible future reforms in this area, but no specific reforms are proposed at this time.
There were two key issues considered in the report:
- it is legal to compel parties to participate in an ADR process? Previous case law and commentary was not clear on this issue, and there were some suggestions that compulsory ADR infringes the right to a fair trial under Article 6 of the European Convention on Human Rights. The report considers that compulsory ADR would be compatible with the ECHR where the ADR is not disproportionately onerous and does not prevent effective access to court. The report also notes that English courts have compelled certain types of ADR over time, such as early neutral evaluations, and it is not clear why this principle should not be applied to other forms of ADR. The report goes on to consider the sanctions on a party for failing to participate in a compulsory ADR - this could in principle include permitting the court to discontinue proceedings, making commencement conditional on entering ADR or permitting strike out applications where ADR has been ordered and not complied with.
- in what circumstances is compelled ADR desirable? Concerns were raised around litigants being too entrenched in their positions, litigants lacking knowledge of the ADR processes and compulsory ADR undermining the legal system by removing too many disputes from judicial consideration. But these were not considered to be decisive reasons to object against compulsory ADR and compulsory ADR could be desirable and effective under certain conditions. Some of these conditions involve assessing: (i) the extent to which the ADR mechanism requires the parties to incur time or expense; (ii) whether the ADR process is judge led or not; and (iii) the level of regulation that applies to the ADR mechanism, and whether the ADR process is short and affordable.
The report notes that the questions of what types of dispute and ADR would be in scope, and how exactly to "compel" ADR are difficult and would need further consideration as part of any reform proposals. Having said that, the report was welcomed by Sir Geoffrey Vos, Master of the Rolls, who commented "ADR should no longer be viewed as “alternative” but as an integral part of the dispute resolution process; that process should focus on “resolution” rather than “dispute”. This report opens the door to a significant shift towards earlier resolution".
Technology contracts generally include a detailed mechanism for ADR which the parties expect to follow in the event that a dispute arises. Litigants tend to make use of these procedures at an appropriate point in the litigation process and it is rare for disputes to escalate directly to court without any ADR process being followed. In the rare cases where no such process is followed, the parties will be strongly encouraged to follow an ADR process by courts, who recognise that factual and legal complexities in technology contracting disputes generally require time and cost intensive processes (e.g. regarding disclosure, expert and witness evidence and the trial itself) which could be largely avoided if a successful ADR mechanism is used.
On this basis, the recommendations in the report ought not to be too concerning for those who involved in technology contracting or associated disputes. However, some points of detail may need to be considered in more detail, and potentially clarified, if there are any consultations on potential reforms in the future:
- should all ADR processes be in scope? Should it be possible for ADR to be compelled for all contractual ADR options, or only for some? Should it be possible for the court to compel the parties to use an ADR mechanism which has not been agreed in the contract?
- should there be exceptions to any compelled ADR requirement? Compelled ADR may not be entirely practical where urgent interim relief is required, e.g. in confidentiality or IP disputes.
- at what point in the litigation process should the ADR be compelled? On the one hand, compelling ADR before the parties have fully developed and exchanged their positions through correspondence may result in running an ADR process with limited prospects of a successful resolution. On the other hand, compelling ADR too late in the litigation process will reduce the potential for the parties to secure material costs savings, which will affect parties' incentives for fully committing to the ADR. There will be an optimal point for initiating ADR processes (whether the parties choose to do so or are compelled to do so) and this will likely vary from dispute to dispute. Some flexibility would probably be needed.
- what happens if new ADR mechanisms are introduced in the future? Should a court be able to compel the use of an untested ADR mechanism? This is particularly relevant for technology disputes given the relatively new SCL Adjudication rules and the Digital Dispute Resolution Rules proposed by the UK Jurisdiction Taskforce.
- are the incentives for complying with any compelled ADR/adverse consequences of failure to do so proportionate and fair? Given that some quite severe sanctions for non-compliance are proposed in the report, this is something that will require close attention as part of any consultation process.