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Published On: September 29, 2020 | Blog | 0 comments

Why are we still nervous about Arbitration during Covid?

Family Law Practitioners can all agree that what has been achieved by the Courts during the pandemic has been nothing short of miraculous.  Changes that have been talked about for years happened overnight, with the introduction of virtual hearings and electronic filing and bundles.  However, ‘Rome was not built in a day’ and many hearings were inevitably adjourned to give way for priority cases, such as public law children work.  This should have heralded a coup for ADR campaigners who have long banged the drum on the merits of arbitration as a ‘one-stop shop’ alternative to the Court.  However, the top family chambers are reporting that the increase in arbitration has not been as steep as expected during the pandemic.  What has been noted is that the rise in private FDR’s has sky-rocketed.  Is this the real reason arbitration has not taken off?

Potential factors influencing clients not to arbitrate:

  • Fear of the Unknown – Solicitors do not understand the process but are well versed in FDRs so can “visualise it” and perhaps explain it more easily to clients. It is a ‘like for like’ replacement for what you would get from a Court and therefore an easier “sell” to the client.
  • Lack of Appeal Process– a vexed argument in relation to arbitration. However, it begs the question of how often cases are appealed in any event.  If the parties have faith in the chosen arbitrator, who will be very experienced, it usually is not an issue.
  • Blame for Decision of the Arbitrator – This can be avoided altogether by asking IFLA to choose an arbitrator for the parties. The reality is that solicitors regularly choose Counsel for clients and take on the risk that comes with that pairing.  It should therefore be no more risky to select an arbitrator based on their experience.
  • Only for HNW or UHNW clients – It can be difficult for solicitors to build in another layer of costs for clients who have a finite budget for their fees. However, the reality is that most chambers are offering extremely competitive rates following the pandemic as qualified Counsel wish to gain or build on their experience of arbitration (if they do not have it already).  The potential advantage of a private FDR is that a junior barrister can hear a case, which may be cheaper, but arbitrators must be qualified to arbitrate.
  • Prohibitive Costs – The appeal of arbitration is that it can be completely bespoke and procedure can be streamlined so that costs are not wasted unnecessarily on standard directions. Hearings can also be done virtually, with less time being spent on issues as it might be in Court.  There is no waiting to be heard or for the Judge to receive/read the bundle and this might save a half day/day of a Final Hearing. If the fees are split between the parties, it may cost a few thousand pounds but that can easily be spent in solicitor correspondence generated between Court hearings.  Delay always equals cost and a careful cost estimate from a solicitor will illustrate what can be saved by attending arbitration.
  • It is only for Finance Matters – Arbitration can be used for TOLATA and children matters and also to adjudicate preliminary issues. It may be that the parties disagree on a tax issue or earning capacity but agree on everything else.  In those circumstances, it is possible to obtain an “on the papers” decision which can be a very cost-effective way to crack a case.
  • No Teeth – An accepted criticism of arbitration is that it is not going to helpful if sanctions are required for non-disclosers as there is no power to commit an individual to prison. It will therefore be important to funnel the right cases to arbitration.

Arbitration is undoubtedly a neat fix for lawyers.  We know that the client will have their decision on the day and the case will be settled, subject to lodging the Order.  However, it has to be borne in mind how many cases go to Final Hearing through the Court process and the appetite clients have for that ‘day of reckoning’.  They are few and far between.  Arbitration is housed in the same stable as ADR but the reality is that it is most akin to litigation.  For the client this carries great risk, as what if the decision does not go their way?

It seems that clients wish to be part of the solution.  With an FDR, a steer is given by the Judge but the clients are not bound by it and can add their own input to the proposals being made. In this way, the parties can put their own stamp on the outcome and feel they have played a part in their own destiny.  As we know, the best outcomes are those reached by the parties when it comes to enforcement.  While arbitration represents finality, which we imagine most clients want, it may be precisely that inability to walk away that prevents people signing up to it as a means of reaching settlement.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

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