The Duty to Consider ADR

Jane Lambert

"Litigation should be a last resort" begins para 8 of Practice Direction - Pre-Action Conduct and Protocols which both sides to a dispute are required to follow. The paragraph continues:

"As part of a relevant pre-action protocol or this Practice Direction, the parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings."

The obligation to consider ways of settling a dispute is not a once-and-for-all step but continues even after a claim form has been issued.

What Paragraph 8 means in Practice

When I read that paragraph to clients they often have three questions:

1. What is meant by "ADR"?
2. How do I get some of this ADR? and
3. What happens if I don't consider ADR?

What is meant by ADR?

"ADR" stands for "alternative dispute resolution" which is defined in the Glossary to the Civil Procedure Rules as

"Collective description of methods of resolving disputes otherwise than through the normal trial process."

Para. 10 of the Practice Direction suggests 4 types of ADR, namely:

"(a) mediation, a third party facilitating a resolution;
(b) arbitration, a third party deciding the dispute;
(c) early neutral evaluation, a third party giving an informed opinion on the dispute; and
(d) Ombudsmen schemes."

The last of these is not really relevant to most intellectual property ("IP") or TMT ("technology, media and telecommunications") disputes so I will concentrate on the first three. I have experience of all three kinds of alternative dispute resolution both as an advocate and legal advisor and as a dispute resolution service provider as I sit on the WIPO (the UN Agency for Intellectual Property) panel of neutrals and I am listed on the Intellectual Property Office's Mediation Providers.

How do I get some of this ADR?

I discussed some of the types of ADR that are available for the resolution of IP disputes in Intellectual Property Dispute Resolution in the UK 30 Jan 2017.  In that article I mentioned two ADR services that are tailor made for IP and TMT disputes, namely patent examiners' opinions from the Intellectual Property Office on patent issues and the Uniform Domain Name Dispute Resolution Policy for generic top level domain name disputes (ie ".com", ".net" and ",org" disputes) and similar schemes for ".uk" and ".eu" domain name disputes, In IP Mediation 22 May 2015 I considered the mediation services that are specifically designed for IP disputes and in IP Arbitration 3 Dec 2015 I wrote about the specialist arbitration services.

What happens if I don't consider ADR?

The short answer is that you could waste a lot of time and lose a lot of money.  The Ministry of Justice website lists a number of standard case management directions which are routinely given in the multitrack. The second of those directions provides:

"At all stages the parties must consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation); any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise."

These directions are proceeded by a general warning in bold type at the top of the order:

"Warning: you must comply with the terms imposed upon you by this order otherwise your case is liable to be struck out or some other sanction imposed. If you cannot comply you are expected to make formal application to the court before any deadline imposed upon you expires."

So the courts are serious. That warning is reinforced in terms by para 14 (c) of the Practice Direction:

"14. The court may decide that there has been a failure of compliance when a party has—
........................................
(c) unreasonably refused to use a form of ADR, or failed to respond at all to an invitation to do so."

Para 15 sets out some of the things that the court can do such as remove any restraints that may have been imposed on your opponent, delay your action indefinitely or penalize you with sanctions. Those sanctions can include making you pay extra costs or interest if you lose the action or disallowing some or all of your costs or making you pay the other side's even if you win.

But the main disincentive for not considering ADR is that the dispute could continue a lot longer and cost a lot more money than it might have done, Queen Mary College's report on Pre-empting and Resolving Technology, Media and Telecoms Disputes, International Dispute Resolution Survey, which can be downloaded from the WIPO's website, highlights the advantages of arbitration and mediation as perceived by some of the world's biggest companies.  Those companies forecast that more disputes will be referred to ADR and fewer will be resolved by the courts over the next few years.

How can I help you?

When I have explained all this to a client whether he or she is a potential claimant or someone who has been threatened with a letter before claim I am usually asked what can be done about it. The answer will depend on the circumstances.

Some cases are better suited to one form of ADR and others to another. Negotiation may be the best plan in some cases or it may be that there is an arbitration or other dispute resolution agreement between the parties. Whatever the situation, I can advise on the next step.

It may be appropriate to suggest a form of ADR in a letter before claim or response which I am often instructed to draft. I can represent a client in party-to-party negotiations or mediation. If there is an agreement I can draft or help draft the terms of settlement.  If no agreement is reached I can advise on the next step.

If the parties agree to arbitrate, I can draft an arbitration agreement or notice under an existing agreement, statements of case, skeleton arguments and other documents. If there is an oral hearing I can appear for you before the arbitrator. If you win I can advise you on, and assist you with, enforcement. If you lose, I can advise you on whether, and if so how, you can challenge the arbitrator's award.

Further Information

Should you wish to discuss this article or if you have an IP or TMT dispute upon which you need advice, call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.