Mediation, Arbitration, and Alternative Dispute Resolution in England and Wales

Mediation, Arbitration, and Alternative Dispute Resolution in England and Wales

Introduction

Civil disputes do not always need to be resolved through a full court hearing. Litigation can be expensive, time-consuming and emotionally demanding, particularly where the parties have an ongoing commercial, professional, family or contractual relationship. Even when a claimant has a strong legal case, the practical costs of pursuing proceedings may outweigh the benefit of obtaining a judgment.

For these reasons, the legal system of England and Wales recognises and increasingly encourages alternative dispute resolution (ADR). ADR refers to methods of resolving disputes outside the ordinary process of a contested court trial. The principal forms include mediation, arbitration, negotiation and, in appropriate contexts, expert determination and early neutral evaluation.

These methods are not interchangeable. Mediation is generally a consensual process in which an independent third party helps the parties reach their own settlement. Arbitration is a private adjudicative process in which an arbitrator determines the dispute and makes an award that is usually binding. Negotiation allows the parties to seek agreement directly, while expert determination may entrust a specific technical or valuation question to an independent expert.

ADR is no longer treated merely as an optional supplement to civil litigation. The Civil Procedure Rules place the encouragement and facilitation of ADR within the court’s case-management responsibilities. The courts may take account of a party’s conduct in relation to ADR when deciding questions of costs, and, following the Court of Appeal’s decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, courts have a recognised power to order or require parties to engage in a non-court dispute resolution process where that is compatible with the parties’ right to a fair trial and proportionate to the circumstances.

The legal framework also changed significantly with the Arbitration Act 2025, which amended the Arbitration Act 1996. The reforms modernised important aspects of arbitration law, including the law governing arbitration agreements, arbitrators’ disclosure obligations, summary disposal of claims and the position of emergency arbitrators.

Understanding ADR is therefore essential to understanding modern civil procedure in England and Wales. It affects how disputes are approached before proceedings, how courts manage existing claims, how settlement decisions are made and how parties may obtain a final and enforceable resolution without a conventional trial.

1. The Meaning and Purpose of Alternative Dispute Resolution

Alternative dispute resolution describes a range of procedures through which parties attempt to resolve a legal disagreement without obtaining a final judgment after a contested court trial. The term is commonly abbreviated to ADR, although the courts increasingly use the expression non-court dispute resolution (NCDR) to emphasise that these processes are not necessarily secondary or inferior alternatives to litigation.

The central purpose of ADR is to provide a proportionate means of resolving disputes. A relatively straightforward disagreement over an unpaid invoice, for example, may not justify the expense of a lengthy trial. A commercial dispute involving a continuing business relationship may be better resolved through negotiation or mediation than through adversarial proceedings that permanently damage the relationship.

ADR can serve several objectives:

• reducing the financial cost of resolving disputes;
• achieving a settlement more quickly than ordinary litigation;
• preserving commercial, professional or personal relationships;
• allowing the parties to retain greater control over the outcome;
• protecting confidential business or personal information;
• narrowing the issues that remain contested before trial;
• reducing pressure on the court system.

ADR is not necessarily informal or legally insignificant. Some processes, particularly arbitration, involve detailed legal submissions, evidence, procedural hearings and a binding determination. The distinction is that the dispute is resolved through a process other than an ordinary court trial.

Nor does ADR necessarily prevent subsequent litigation. A mediation may fail, negotiations may break down, or an expert’s determination may be challenged within the limits of the relevant agreement or legal framework. Where no settlement is reached, the parties may still need to proceed to court, subject to any binding arbitration agreement or other contractual arrangement.

2. The Legal Framework: The Civil Procedure Rules and the Courts’ Duty to Encourage ADR

The principal procedural framework is found in the Civil Procedure Rules (CPR), particularly Part 1, the Practice Direction on Pre-Action Conduct and Protocols, and the provisions governing case management and costs.

The overriding objective under CPR 1.1 is to enable courts to deal with cases justly and at proportionate cost. The rule expressly includes promoting or using alternative dispute resolution among the elements of that objective.

CPR 1.4 requires the court to manage cases actively. Under CPR 1.4(2)(e), active case management includes:

ordering or encouraging the parties to use, and facilitating the use of, alternative dispute resolution.

This provision is important because it places ADR within the ordinary responsibilities of the court. A judge is not limited to waiting for the parties to propose mediation. The court may raise the possibility itself, encourage participation, direct the parties to consider appropriate processes and, where legally justified, make an order designed to facilitate ADR.

The parties also have procedural responsibilities. CPR 1.3 requires them to help the court further the overriding objective. This does not mean that every dispute must settle or that a party must abandon a legitimate legal position. It does, however, reinforce the expectation that litigation should be conducted proportionately and that reasonable opportunities for settlement should be considered.

The Practice Direction on Pre-Action Conduct and Protocols similarly expects parties to exchange sufficient information before proceedings to understand each other’s positions, consider settlement and consider an appropriate form of ADR. Litigation should generally be a last resort rather than the automatic first response to a disagreement.

The relevant official materials can be found in the Civil Procedure Rules, Part 1 – Overriding Objective and the Practice Direction on Pre-Action Conduct and Protocols.

3. Negotiation: The Simplest Form of Dispute Resolution

Negotiation is generally the most direct form of ADR. The parties communicate with one another, either personally or through their legal representatives, in an attempt to reach an agreement.

Unlike mediation, negotiation does not necessarily involve an independent third party. The parties retain complete control over the discussions and can determine which issues are negotiable, what concessions they are prepared to make and whether a settlement is acceptable.

Negotiation may take place before a formal claim is issued, during compliance with a pre-action protocol, or after proceedings have commenced. It can also occur alongside other ADR procedures.

For example, a construction company may claim that a client owes £40,000 for additional work. The client may accept that some additional work was carried out but dispute the amount charged. Rather than immediately commencing proceedings, the parties could exchange invoices, contractual documents and evidence of the work undertaken. They might eventually agree that £30,000 is payable, with payment made in instalments.

The agreement could resolve the dispute without the need for a hearing.

Negotiation is particularly useful where the parties have a relatively clear understanding of the facts and are willing to communicate constructively. It is also useful where a dispute involves several issues that can be separated and settled independently.

However, negotiation has limitations. A party may refuse to engage, withhold relevant information or adopt an unrealistic position. There is also no neutral decision-maker to assess the merits of competing arguments. Where communication has broken down, mediation may provide a more effective structure.

Negotiations are often conducted on a without prejudice basis. This principle generally protects genuine settlement communications from being used as evidence of admissions in subsequent proceedings. It encourages parties to make concessions without automatically exposing themselves to the risk that those concessions will later be presented as evidence of liability.

The protection is not unlimited. Whether a communication is genuinely without prejudice depends on its substance and context, not simply on whether it carries that label. There are also recognised exceptions, including certain disputes about whether a settlement was concluded or what its terms mean.

4. Mediation: Facilitated Settlement Through an Independent Third Party

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Mediation is one of the most widely used forms of ADR in England and Wales. It is a structured but flexible process in which an independent mediator assists the parties in attempting to resolve their dispute.

The mediator does not ordinarily decide who is legally right or impose a solution. Instead, the mediator facilitates communication, identifies the principal issues, explores the parties’ interests and helps them consider possible compromises.

Mediation is therefore fundamentally different from arbitration. An arbitrator determines a dispute; a mediator assists the parties in determining whether they can settle it themselves.

4.1 The mediator’s role

The mediator must act impartially and independently. The mediator’s role is not to represent either party, provide partisan legal advice or make a binding determination.

Depending on the circumstances, the mediator may:

• conduct a joint meeting involving all parties;
• meet each party separately in private sessions;
• identify the principal legal and factual disagreements;
• explore the parties’ commercial or practical interests;
• help evaluate possible settlement options;
• communicate proposals between the parties;
• assist in recording the terms of an agreed settlement.

Private meetings, sometimes called caucuses, are common. A party may discuss its concerns with the mediator without disclosing every detail to the opposing party. The mediator must respect the confidentiality arrangements agreed for the process and should not pass on confidential information without appropriate authority.

The mediator may challenge unrealistic expectations, identify weaknesses in a party’s position and encourage the parties to consider the risks of continuing litigation. Nevertheless, the mediator does not replace the court as the institution responsible for determining legal rights where the dispute remains unresolved.

4.2 The mediation process

Mediation can be organised in different ways, but a typical process involves several stages.

First, the parties agree to mediate, or are directed by the court to participate in an appropriate mediation process. They may select a mediator jointly, use an established mediation provider or, where applicable, participate in a court-organised scheme.

Second, the parties agree on practical arrangements, including the date, location or online format, fees, confidentiality provisions and any documents to be exchanged.

Third, each party may prepare a short position statement explaining its understanding of the dispute, the relevant facts and the outcome it seeks. Supporting documents may be provided to the mediator.

The mediation itself may begin with a joint session in which the mediator explains the procedure and each party outlines its position. The parties may then negotiate in a joint meeting or through separate private sessions.

If agreement is reached, the terms should be recorded clearly. The parties may sign a settlement agreement or another document appropriate to the nature of the dispute.

If no agreement is reached, the mediator will generally report only that the mediation has concluded without settlement, subject to the parties’ agreement and any applicable procedural requirements. The mediator does not ordinarily provide the court with a detailed account of the negotiations.

4.3 Confidentiality and without-prejudice protection

Confidentiality is one of the principal advantages of mediation. Parties may be more willing to discuss weaknesses, commercial concerns and settlement possibilities if they know that the negotiations will not ordinarily be disclosed in subsequent proceedings.

However, confidentiality and without-prejudice privilege are related but distinct concepts.

Confidentiality concerns the obligations governing the disclosure of information obtained during the mediation. These obligations may arise from the mediation agreement, the terms imposed by the mediation provider or other applicable legal principles.

Without-prejudice privilege concerns the admissibility of genuine settlement communications in subsequent litigation. It generally prevents parties from using protected negotiations as evidence of admissions or concessions made during settlement discussions.

The protection is not absolute. For example, evidence may be admissible where the issue is whether a binding settlement was concluded or where an established exception to the privilege applies. Nor should parties assume that every document supplied during mediation automatically becomes privileged. Pre-existing documents do not ordinarily acquire privilege merely because they are used in a mediation.

The Ministry of Justice provides an accessible explanation in its Guide to Civil Mediation.

4.4 The legal effect of a mediated settlement

A mediator does not ordinarily issue an enforceable judgment. The legal effect of the outcome depends on the agreement reached by the parties.

A properly concluded settlement agreement is generally a contract. It may therefore be enforceable through ordinary contractual remedies if one party fails to perform its obligations.

The settlement should identify the parties, the claims being resolved, the payment obligations, any relevant deadlines and whether the agreement is intended to settle the whole dispute or only particular issues.

Where court proceedings have already begun, the parties may also seek a court order reflecting the settlement. In appropriate cases, a settlement may be recorded in a Tomlin order, which stays the proceedings on agreed terms contained in a schedule to the order. This can provide a mechanism for enforcing the settlement through the court if a party defaults.

A settlement should not be treated as legally effective merely because the parties have reached a broad verbal understanding. Its terms should be sufficiently clear to establish what each party has agreed to do.

5. Court-Encouraged and Mandatory Mediation

The role of mediation in civil proceedings has developed considerably. Courts have long encouraged parties to consider mediation, but recent procedural developments have made participation compulsory in certain categories of claims.

5.1 The decision in Halsey v Milton Keynes General NHS Trust

In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal considered the consequences of an unreasonable refusal to participate in mediation.

The case established important guidance concerning costs. A successful party may not necessarily recover all its costs if it has unreasonably refused an appropriate invitation to mediate. The court may take that conduct into account when exercising its discretion over costs.

The decision became a leading authority on the relationship between ADR and civil litigation. However, the Court of Appeal’s discussion of whether a court could compel unwilling parties to mediate was later reconsidered.

5.2 Churchill v Merthyr Tydfil County Borough Council

The modern position was clarified in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.

The claimant brought a nuisance claim concerning Japanese knotweed that had allegedly spread from land owned by the local authority onto his property. The council argued that the claimant should first use its internal complaints procedure.

The Court of Appeal considered whether a court could stay proceedings or require parties to engage in a non-court dispute resolution process.

It held that the court does have such a power. The court may order or facilitate participation in ADR even where a party objects, provided that the order does not impair the very essence of the claimant’s right to a judicial hearing and is proportionate to the legitimate objective of resolving disputes fairly, quickly and at reasonable cost.

This was an important clarification of the earlier discussion in Halsey. The Court of Appeal explained that the relevant passages in Halsey concerning the absence of power to compel mediation were not necessary to the decision in that case and were not binding authority on the issue.

The judgment did not establish that mediation must be ordered in every case. Whether an order is appropriate depends on the circumstances, including the nature of the proposed process, its likely effectiveness, the cost, any delay, the urgency of the dispute and the parties’ respective positions.

The decision therefore establishes a balance: courts may promote meaningful ADR, but they must preserve effective access to judicial determination.

The full judgment is available in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416.

5.3 Automatic referral to mediation in certain small claims

An important practical development is the introduction of automatic referral to the HMCTS Small Claims Mediation Service for specified money claims.

From 22 May 2024, the automatic referral pilot under Practice Direction 51ZE introduced a requirement for certain money claims of £10,000 or less to attend a free mediation appointment. The scheme was subsequently extended and amended, including in relation to claims submitted through the Online Civil Money Claims service.

The current pilot is scheduled to run until 6 April 2027. Its scope is defined by the applicable practice direction and associated modifications to the Civil Procedure Rules. It does not apply indiscriminately to every small claim: the relevant eligibility conditions and exclusions must be checked. In particular, the practice direction excludes road traffic accident and personal injury claims from its scope.

The HMCTS mediation appointment is generally conducted by telephone and lasts up to one hour. The mediator speaks to the parties separately and helps them explore settlement. The service is free to the parties.

Where a settlement is reached, the proceedings may be stayed in accordance with the applicable rules, with provision for further court action if the settlement is not performed. Where no agreement is reached, the claim can proceed towards a hearing.

The rules also permit the court to consider whether a sanction is appropriate where a party fails to attend the mediation appointment. This is significant because the obligation concerns attendance and participation in the prescribed process, not an obligation to accept an offer or compromise a claim.

The scheme is explained in Practice Direction 51ZE – Small Claims Track Automatic Referral to Mediation Pilot Scheme and the government’s guidance on resolving a money claim through mediation.

6. Arbitration: Private Adjudication and Binding Awards

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Arbitration is a form of private dispute resolution in which the parties submit their dispute to one or more independent arbitrators for a binding determination.

Unlike mediation, arbitration does not depend on the parties reaching a mutually acceptable compromise. The arbitrator considers the parties’ arguments and evidence and issues an award deciding the dispute.

Arbitration is particularly common in commercial contracts, construction disputes, international trade, shipping, insurance and other areas where parties value specialist decision-makers, procedural flexibility or confidentiality.

The principal legislation governing domestic and many international arbitrations seated in England and Wales is the Arbitration Act 1996, as amended by the Arbitration Act 2025.

6.1 The arbitration agreement

Arbitration is ordinarily based on an agreement between the parties. This is commonly included as an arbitration clause in a commercial contract, although parties may also agree to arbitrate after a dispute has arisen.

An arbitration clause typically specifies that disputes arising out of or in connection with the contract will be referred to arbitration rather than determined through ordinary court proceedings.

It may also identify:

• the seat of arbitration;
• the institution or rules governing the arbitration;
• the number and appointment of arbitrators;
• the language of the proceedings;
• the applicable substantive law;
• the scope of disputes covered by the clause.

The seat of arbitration is particularly important. It identifies the legal jurisdiction whose arbitration law governs the proceedings and whose courts exercise supervisory powers over the arbitration. It is not necessarily the physical location where hearings take place.

For example, a contract between an English company and a French supplier may provide for arbitration seated in London. Hearings could take place remotely or in another country, but the legal seat remains London, making the English arbitration legislation relevant to the supervisory framework.

6.2 The Arbitration Act 1996

The Arbitration Act 1996 provides the central statutory framework for arbitration in England and Wales. It establishes the legal principles governing arbitration agreements, the powers and duties of arbitrators, court intervention, arbitral procedure, awards and enforcement.

Section 1 sets out important principles underlying the legislation:

• arbitration should obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
• the parties should be free to agree how their disputes are resolved, subject to safeguards required in the public interest;
• the court should not intervene except as provided by the Act.

These principles reflect the balance between party autonomy and judicial supervision.

6.3 The Arbitration Act 2025: Modernisation of the framework

The Arbitration Act 2025 received Royal Assent on 24 February 2025, and its substantive reforms came into force on 1 August 2025.

It does not replace the Arbitration Act 1996. Instead, it amends the existing legislation to clarify and modernise several important aspects of arbitration.

One particularly significant reform concerns the law governing an arbitration agreement. New section 6A of the 1996 Act provides that the law applicable to an arbitration agreement is the law expressly chosen by the parties for that agreement or, where no such choice is made, the law of the seat of arbitration.

Importantly, choosing a particular law to govern the main commercial contract does not, by itself, amount to an express choice of that law for the arbitration agreement. This addresses a significant source of uncertainty in international commercial disputes.

The 2025 Act also introduces or clarifies provisions concerning:

• arbitrators’ duty of disclosure in relation to circumstances that might reasonably give rise to justifiable doubts about their impartiality;
• arbitrators’ immunity in specified circumstances;
• the power of an arbitral tribunal to make summary awards where a claim or defence has no real prospect of success;
• the duties of parties and arbitrators in relation to emergency arbitration;
• the court’s powers to support arbitration and enforce certain arbitral decisions.

These changes are intended to strengthen the effectiveness and attractiveness of arbitration seated in the United Kingdom.

The legislation can be consulted through the official text of the Arbitration Act 1996 and the Arbitration Act 2025.

7. The Conduct of Arbitration Proceedings

Arbitration is more flexible than ordinary court litigation, but it is not an informal process without legal safeguards. The Arbitration Act 1996 establishes duties and powers that govern the conduct of proceedings.

7.1 The tribunal’s general duty

Section 33 of the Arbitration Act 1996 imposes a general duty on the arbitral tribunal to act fairly and impartially between the parties. The tribunal must give each party a reasonable opportunity to present its case and deal with the opposing party’s case.

It must also adopt procedures suitable for the circumstances of the particular case, avoiding unnecessary delay and expense while providing a fair means of resolving the matters in dispute.

This duty is fundamental. Although the parties may agree on procedural arrangements, their freedom to do so does not permit an arbitral tribunal to disregard basic procedural fairness.

7.2 Appointment and independence of arbitrators

The parties may agree on the number of arbitrators and the method by which they are appointed. They may select a sole arbitrator or a panel, depending on the nature and complexity of the dispute.

Where the parties have chosen institutional arbitration, the relevant institution’s rules will usually govern the appointment procedure. If they have not agreed on an effective appointment mechanism, the statutory provisions of the Arbitration Act 1996 may provide a solution.

An arbitrator must be impartial and independent in the performance of the adjudicative function. The 2025 reforms strengthened the statutory framework by expressly addressing disclosure obligations. An arbitrator must disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality, subject to the statutory provisions.

7.3 Evidence and hearings

Arbitration may involve written submissions, documentary evidence, witness statements, expert reports and oral hearings. The procedure depends on the parties’ agreement, the applicable institutional rules and the tribunal’s procedural decisions.

Some disputes are resolved predominantly through documents. Others require extensive hearings and cross-examination.

The tribunal may determine procedural and evidential matters under section 34 of the 1996 Act, subject to the parties’ agreement and the statutory framework.

This flexibility can make arbitration particularly suitable for technical or specialist disputes. For example, a construction arbitration may require detailed expert evidence concerning engineering defects, project delays and the interpretation of technical specifications.

7.4 The arbitral award

The final decision of the tribunal is called an arbitral award. It determines the issues submitted to arbitration and may include an order requiring one party to pay damages, make a payment, perform an obligation or bear specified costs.

An award is generally binding on the parties. It is not simply a recommendation or a suggested compromise.

The award must satisfy the applicable statutory and procedural requirements. Section 52 of the Arbitration Act 1996 contains requirements concerning the form and contents of an award, including the general requirement that it be in writing and signed, subject to the statutory provisions.

An arbitral award is distinct from a court judgment, but it may be enforced through the courts.

8. The Relationship Between Arbitration and the Courts

Although arbitration takes place outside the ordinary court process, the courts retain important supervisory and supportive functions.

The Arbitration Act 1996 seeks to preserve party autonomy and minimise unnecessary judicial intervention. Nevertheless, court involvement may be required to uphold arbitration agreements, support the tribunal, address serious procedural problems or enforce an award.

8.1 Staying court proceedings in favour of arbitration

Section 9 of the Arbitration Act 1996 provides a mechanism for a party to seek a stay of court proceedings where the proceedings concern a matter that is subject to an arbitration agreement.

Where the statutory requirements are satisfied, the court must generally stay the proceedings unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

This provision prevents a party from avoiding an agreed arbitration clause simply by commencing court proceedings.

For example, a supplier and purchaser may have agreed that all disputes arising from their contract will be referred to arbitration seated in London. If the purchaser subsequently brings an ordinary court claim concerning an alleged breach of that contract, the supplier may apply for a stay under section 9.

The court’s role is not ordinarily to decide the underlying commercial dispute at this stage. It is to determine whether the arbitration agreement applies and whether the statutory conditions for a stay are satisfied.

8.2 The tribunal’s jurisdiction

An arbitral tribunal must have jurisdiction over the dispute it is asked to determine. Questions may arise concerning whether an arbitration agreement exists, whether it is valid, whether it covers the particular dispute or whether the tribunal has been properly constituted.

Section 30 of the Arbitration Act 1996 recognises the tribunal’s power to rule on its own substantive jurisdiction, subject to the statutory framework. This principle is commonly known as kompetenz-kompetenz.

The tribunal may therefore consider whether it has authority to decide the dispute. However, this does not remove the supervisory role of the courts. The Act provides procedures through which jurisdictional questions may be brought before the court.

8.3 Enforcement of arbitral awards

Section 66 of the Arbitration Act 1996 provides for the enforcement of an arbitral award, with the court’s permission, in the same manner as a judgment or order of the court.

Once permission has been granted, judgment may be entered in terms of the award.

This is a crucial feature of arbitration. Although the tribunal is not itself an ordinary court, its award can obtain the practical force of a court judgment through the statutory enforcement mechanism.

The court does not ordinarily reconsider the merits of the dispute simply because a party is dissatisfied with the award. Challenges are confined to the grounds and procedures established by the Act.

8.4 Challenging an arbitral award

The Arbitration Act 1996 provides limited grounds on which an award may be challenged.

Under section 67, a party may challenge an award on the basis that the tribunal lacked substantive jurisdiction. This may involve questions concerning the existence, validity or scope of the arbitration agreement.

Section 68 allows a challenge on the ground of serious irregularity affecting the tribunal, the proceedings or the award, where the irregularity has caused or will cause substantial injustice to the applicant. The provision is intended to address serious procedural defects, not to provide a general appeal against an unfavourable decision.

Section 69 permits an appeal on a question of law arising out of an award, but only where the statutory conditions are satisfied. These include restrictions concerning the parties’ agreement, the court’s permission and the legal significance of the question.

The limited nature of these challenges is deliberate. Arbitration would lose much of its value if every award could be reconsidered by a court as though the arbitration had merely been a first-instance hearing.

9. Mediation and Arbitration Compared

Although mediation and arbitration are both forms of ADR, they differ fundamentally in their purpose, procedure and legal effect.

Feature	Mediation	Arbitration
Main purpose	To help parties reach a settlement	To obtain a binding determination
Third party	Mediator facilitates negotiations	Arbitrator decides the dispute
Control over outcome	Retained by the parties	Exercised by the tribunal
Binding result	Settlement becomes binding when validly concluded	Award is generally binding
Procedure	Flexible and usually informal	More structured and adjudicative
Evidence	Usually limited to what is useful for settlement	May involve formal documentary and oral evidence
Confidentiality	Generally confidential, subject to applicable exceptions	Often private, subject to agreement and legal requirements
Court involvement	May be encouraged or ordered in appropriate circumstances	Courts support, supervise and enforce within statutory limits

Mediation is often preferable where the parties wish to preserve a relationship or seek a practical compromise. Arbitration may be more suitable where the parties require a definitive decision, particularly in a complex commercial dispute.

Neither method is universally superior. The appropriate process depends on the nature of the dispute, the relationship between the parties, the contractual arrangements and the outcome they require.

10. Other Forms of Alternative Dispute Resolution

Mediation and arbitration are the principal methods of ADR, but they are not the only available procedures.

10.1 Early neutral evaluation

Early neutral evaluation involves an independent person, often a lawyer or specialist with relevant expertise, giving an initial assessment of the dispute.

The evaluator considers the parties’ respective positions and may express a preliminary view on the likely outcome if the dispute proceeded to trial.

The evaluation is generally not binding. Its purpose is to help the parties understand the strengths and weaknesses of their cases and make more informed decisions about settlement.

For example, in a dispute concerning the interpretation of a commercial contract, an experienced barrister might provide an early assessment of the competing legal arguments. That assessment may encourage the parties to negotiate a settlement rather than incur the costs of a full trial.

10.2 Expert determination

Expert determination involves appointing an independent expert to decide a specific technical, professional or valuation issue.

It is particularly common in disputes involving property valuation, construction, accounting, engineering, financial calculations and other specialist matters.

The parties’ agreement will usually define the expert’s authority and whether the determination is intended to be binding.

Expert determination is often narrower than arbitration. The expert may be appointed to resolve one defined issue rather than determine the entire legal dispute.

For example, a shareholders’ agreement may provide that, if the parties disagree about the value of shares on a compulsory transfer, an independent accountant will determine the valuation.

The legal effect of the expert’s decision depends heavily on the contractual terms. A court may be asked to intervene where the expert has exceeded the authority given by the agreement or failed to comply with the agreed procedure, but dissatisfaction with the valuation alone will not necessarily justify setting it aside.

10.3 Conciliation

Conciliation resembles mediation in that an independent third party assists the parties in reaching an agreement. However, the precise role of a conciliator depends on the particular scheme or institutional framework.

In some processes, a conciliator may take a more active role in proposing possible settlement terms or expressing views about the dispute.

The distinction between mediation and conciliation is not always consistent across legal systems or institutions. The governing procedure and the parties’ agreement are therefore more important than the label used.

10.4 Ombudsman and complaints procedures

Some disputes may be addressed through an ombudsman scheme or an internal complaints procedure. These processes are particularly relevant in regulated industries, public services, financial services and consumer disputes.

An ombudsman may investigate complaints and, depending on the statutory or contractual framework, recommend or impose a resolution that has legal consequences.

These procedures are not necessarily ADR in the narrow sense, but they may provide an effective alternative to ordinary litigation.

A party should check whether the relevant scheme requires a complaint to be made before court proceedings can be commenced, whether its decision is binding, and whether participation affects limitation periods or other procedural deadlines.

11. The Costs Consequences of Refusing ADR

One of the most important practical consequences of ADR in England and Wales concerns litigation costs.

Under CPR 44.2, the court has discretion when deciding whether to make a costs order and the amount of costs payable. In exercising that discretion, it may consider all the circumstances, including the parties’ conduct before and during proceedings.

An unreasonable refusal to participate in ADR may therefore have financial consequences, even where the refusing party ultimately succeeds in the litigation.

The principle is that parties should not use the court system unnecessarily where a reasonable and proportionate opportunity to settle the dispute has been available.

In Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, the Court of Appeal identified factors relevant to assessing whether a refusal to mediate was unreasonable. These included:

• the nature of the dispute;
• the merits of the parties’ positions;
• the extent to which other settlement methods had been attempted;
• whether the costs of mediation would be disproportionate;
• whether mediation would cause unreasonable delay;
• whether mediation had a reasonable prospect of success.

These factors remain useful when considering the reasonableness of a party’s conduct, although they should not be treated as a rigid checklist applicable to every case.

The later decision in Churchill reinforced the courts’ ability to facilitate ADR, but did not remove the need to consider the circumstances of each dispute.

A party is not automatically unreasonable merely because it declines mediation. There may be legitimate reasons, including urgency, a need for authoritative judicial determination, an earlier failed mediation or a process that would be unsuitable or disproportionate.

Equally, a party should not assume that success at trial guarantees full recovery of its costs. A court may consider whether the party’s conduct unnecessarily increased the expense of the proceedings.

The relevant provisions can be found in CPR Part 44 – General Rules About Costs.

12. Choosing the Appropriate ADR Method

Selecting an appropriate dispute resolution method requires consideration of both legal and practical factors. A process that works well for one dispute may be unsuitable for another.

The parties should consider the following questions.

Does the dispute require a binding decision?

If the parties want to reach a compromise, mediation may be appropriate. If they require an independent determination, arbitration or expert determination may be more suitable.

Is there an ongoing relationship to preserve?

Where the parties expect to continue working together, mediation may help preserve commercial or professional relationships. Arbitration and litigation are generally more adversarial, although they can still resolve disputes efficiently.

Does the dispute involve technical expertise?

Where the central issue concerns engineering, accounting, valuation or another specialist subject, expert determination or specialist arbitration may be appropriate.

Is confidentiality particularly important?

Mediation and arbitration may offer greater privacy than public court proceedings, although the legal rules governing confidentiality and disclosure differ.

What are the costs and likely duration?

A one-hour mediation may be proportionate for a modest financial claim. A complex arbitration involving several experts and extensive evidence may itself be expensive. The parties should compare the likely cost of the proposed process with the value and importance of the dispute.

Is there an existing contractual clause?

An arbitration agreement or contractual dispute resolution clause may significantly affect the parties’ available options. The wording should be examined carefully to determine whether it imposes mandatory procedural steps before proceedings can be commenced.

Is urgent court intervention necessary?

ADR may not be appropriate where a party needs an urgent injunction, preservation of assets or other immediate protective relief. In such circumstances, court proceedings may be necessary even if the parties later attempt to settle the underlying dispute.

The most effective approach is often a combination of methods. Parties may negotiate first, proceed to mediation if negotiations fail and use arbitration or litigation only if no settlement is possible.

13. ADR Clauses in Commercial Contracts

Businesses frequently include dispute resolution clauses in commercial contracts to establish how disagreements must be addressed. These clauses can reduce uncertainty and prevent disputes over procedure from arising after a substantive disagreement has developed.

A contractual dispute resolution clause may require the parties to follow a sequence of steps, such as:

1. Attempting to resolve the dispute through direct negotiation between designated representatives.
2. Referring the dispute to mediation if negotiation fails.
3. Referring any unresolved dispute to arbitration or, alternatively, commencing court proceedings.

Such provisions are sometimes described as multi-tier dispute resolution clauses or escalation clauses.

Their enforceability depends on their wording, certainty and the applicable legal principles. A clause that clearly identifies the steps to be followed, the time allowed for each stage and the method of appointing a mediator or arbitrator is more likely to provide an effective procedural framework.

For example, a contract might provide that a dispute must first be referred to senior management for negotiation. If it remains unresolved after 30 days, the parties must attempt mediation. If mediation does not produce a settlement within a further specified period, either party may commence arbitration under identified institutional rules.

The clause should also address the relationship between ADR and urgent legal proceedings. A requirement to negotiate or mediate should not inadvertently prevent a party from seeking urgent interim relief where assets need to be preserved or an injunction is necessary.

Parties should distinguish between a clause requiring mediation and one requiring arbitration. A mediation clause generally requires participation in a settlement process but does not give the mediator authority to impose a decision. An arbitration clause, by contrast, ordinarily creates an obligation to have covered disputes determined by an arbitral tribunal.

The distinction can be particularly important when a party attempts to commence court proceedings despite an existing arbitration agreement.

14. The Limitations and Risks of ADR

ADR offers substantial advantages, but it is not appropriate in every dispute and does not automatically produce a fair or effective outcome.

14.1 Unequal bargaining power

Mediation and negotiation depend to some extent on the parties’ ability to participate effectively. Where one party has substantially greater financial resources, commercial influence or legal knowledge, the weaker party may feel pressured to accept an unfavourable settlement.

An independent mediator can help manage the process, but cannot necessarily eliminate the underlying imbalance.

Parties should therefore consider obtaining independent legal advice before accepting a settlement, particularly where significant financial interests or complex legal rights are involved.

14.2 The absence of a binding determination in mediation

Mediation cannot guarantee that the dispute will be resolved. A party may attend, participate in discussions and still refuse to make any meaningful concession.

Where the parties cannot agree, the dispute remains unresolved and may ultimately require arbitration or litigation.

This does not necessarily mean that mediation has been wasted. It may narrow the issues, clarify the parties’ positions or create the conditions for a later settlement. Nevertheless, its effectiveness depends on the circumstances and the willingness of the parties to engage constructively.

14.3 Delay and limitation periods

An important risk arises where parties spend considerable time attempting to settle a dispute without commencing proceedings.

Mediation and negotiation do not automatically suspend statutory limitation periods. A claimant who allows the relevant limitation period to expire may lose the right to bring a claim, even if settlement discussions were ongoing.

The parties should therefore check the applicable limitation rules before beginning ADR. Where necessary, they may agree to a standstill arrangement, subject to its legal effectiveness, or commence proceedings while settlement discussions continue.

The need to protect limitation periods is particularly important in contractual, tortious and property-related disputes.

14.4 The cost of arbitration

Arbitration is not necessarily cheaper than litigation. Although it can be more efficient and flexible, the parties may have to pay arbitrators’ fees, institutional administration charges, hearing expenses and legal representation costs.

A complex arbitration can become lengthy and expensive, particularly where the parties conduct extensive disclosure, expert evidence and multiple procedural hearings.

Arbitration is therefore most valuable where its benefits, such as specialist expertise, procedural flexibility or an appropriate international enforcement framework, justify the expense.

14.5 The absence of public precedent

Court judgments contribute to the development and clarification of legal principles. Arbitration awards are generally private and do not ordinarily perform the same public precedential function.

This may be an advantage for parties wishing to keep commercial disputes confidential. However, it can be a disadvantage where the dispute raises an important legal question that would benefit from authoritative judicial clarification.

15. ADR and Access to Justice

The expansion of ADR raises an important question concerning the relationship between efficient dispute resolution and the right of access to the courts.

Article 6 of the European Convention on Human Rights protects the right to a fair hearing in the determination of civil rights and obligations. The United Kingdom’s Human Rights Act 1998 gives domestic legal effect to Convention rights, including Article 6.

ADR can support access to justice by making dispute resolution faster, less expensive and more accessible. A person who cannot realistically afford lengthy litigation may nevertheless be able to participate in a relatively inexpensive mediation.

However, ADR must not become an unreasonable obstacle to judicial determination. A party should not be prevented indefinitely from pursuing a legitimate claim because of an ineffective or excessively burdensome settlement procedure.

This balance is reflected in Churchill. The Court of Appeal recognised that requiring parties to engage in a non-court process may be lawful, but only where the requirement does not impair the essence of the right to a judicial hearing and is proportionate to the legitimate aim pursued.

The court must therefore consider the characteristics of the particular process. Relevant matters may include its cost, duration, independence, accessibility, likely effectiveness and the consequences of requiring participation.

A short, free mediation appointment for a straightforward money claim is different from an expensive, lengthy procedure that might substantially delay an urgent claim.

The objective is not to replace the courts with ADR. It is to ensure that disputes are resolved through the most appropriate and proportionate process, while preserving the right to obtain a judicial determination where necessary.

16. Practical Examples of ADR in Civil Disputes

The different methods of ADR can be understood more clearly through practical situations.

Example 1: A contractual payment dispute

A supplier claims that a business owes £18,000 for goods delivered under a commercial contract. The buyer argues that some goods were defective and that a deduction should be made.

The parties may exchange invoices, delivery records and evidence of the alleged defects. They could then negotiate directly or attend mediation. A mediator may help them agree on a reduced payment, a replacement delivery or a payment schedule.

If the dispute remains unresolved and the contract contains an applicable arbitration clause, arbitration may be required instead of ordinary court proceedings.

Example 2: A property valuation dispute

Two shareholders agree that one may purchase the other’s shares following a specified event. They disagree about the value of the shares.

Their agreement provides for valuation by an independent accountant. Expert determination may be the most suitable method because the central issue is a technical financial valuation rather than a broad dispute requiring a court to determine multiple legal questions.

Example 3: A construction dispute

A property owner claims that a contractor has failed to complete building work to the required standard. The contractor argues that the owner repeatedly changed the specifications and delayed the project.

The dispute may involve complex technical evidence, contractual interpretation and substantial financial claims. Mediation may help the parties agree on remedial work and compensation. If they require a binding determination, arbitration may be appropriate, particularly where the contract contains an arbitration clause.

Example 4: A small money claim

An individual brings a claim for £2,500 against a business for payment allegedly due under a consumer transaction. If the claim falls within the relevant HMCTS scheme, the parties will be referred to the Small Claims Mediation Service.

The mediator will help them explore settlement during the prescribed appointment. If they agree, the dispute can be resolved without a contested hearing. If they do not, the claim may proceed through the court process.

These examples demonstrate that ADR is not one uniform procedure. The appropriate method depends on the legal and practical character of the dispute.

Key Takeaways

• Alternative dispute resolution includes negotiation, mediation, arbitration, expert determination and other non-court processes.
• CPR 1.1 and CPR 1.4 recognise ADR as part of the objective of resolving civil disputes justly and at proportionate cost.
• Mediation involves an independent mediator facilitating negotiations; the mediator does not ordinarily impose a binding decision.
• A mediated settlement can become a legally binding contract when the parties conclude a sufficiently certain agreement.
• Arbitration involves a private tribunal determining the dispute and issuing a generally binding award.
• The principal arbitration legislation is the Arbitration Act 1996, as amended by the Arbitration Act 2025, whose substantive reforms came into force on 1 August 2025.
• Under Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, courts may order or facilitate participation in ADR where doing so is proportionate and does not impair the essence of the right to a judicial hearing.
• Certain money claims of £10,000 or less are subject to automatic referral to the HMCTS Small Claims Mediation Service under the applicable pilot arrangements.
• An unreasonable refusal to participate in appropriate ADR may affect the court’s decision on costs.
• ADR does not automatically suspend limitation periods or remove the need for urgent court protection.
• The choice between mediation, arbitration and litigation should reflect the nature of the dispute, the desired outcome, the parties’ contractual arrangements and the costs involved.

Frequently Asked Questions (FAQs)

1. What is alternative dispute resolution in England and Wales?

Alternative dispute resolution refers to procedures for resolving legal disputes without a conventional contested court trial. Its principal forms include negotiation, mediation, arbitration, expert determination and early neutral evaluation.

2. Is mediation legally binding in England and Wales?

The mediator’s recommendations are not ordinarily binding. However, when the parties reach a sufficiently certain and legally effective settlement agreement, that agreement is generally binding as a contract.

3. Can a court force parties to mediate?

Yes, in appropriate circumstances. In Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, the Court of Appeal confirmed that courts have power to stay proceedings or order parties to engage in a non-court dispute resolution process, provided that the requirement is proportionate and does not impair the essence of the right to a judicial hearing.

4. Must parties attend mediation in small claims cases?

Certain money claims of £10,000 or less are automatically referred to the HMCTS Small Claims Mediation Service under the applicable pilot scheme. The scheme has defined eligibility requirements and exclusions. Where it applies, parties are required to attend the prescribed mediation appointment.

5. What happens if mediation fails?

If the parties cannot reach an agreement, the dispute may proceed to a court hearing or, where an applicable arbitration agreement exists, to arbitration. The fact that mediation was unsuccessful does not ordinarily prevent a party from pursuing its legal rights.

6. Can mediation take place after court proceedings have started?

Yes. Mediation may take place before proceedings, during the pre-action stage or after a claim has been issued. The court may also stay proceedings to allow the parties to attempt settlement.

7. Is mediation confidential?

Mediation is generally conducted on a confidential basis. Genuine settlement communications will commonly benefit from without-prejudice protection. However, confidentiality and privilege are not absolute, and recognised exceptions may apply.

8. What is the difference between mediation and arbitration?

Mediation helps parties negotiate a settlement, while arbitration involves an independent arbitrator deciding the dispute. A mediator does not ordinarily impose a result; an arbitrator issues a binding award.

9. What legislation governs arbitration in England and Wales?

The principal legislation is the Arbitration Act 1996, as amended by the Arbitration Act 2025. The 2025 Act introduced significant reforms, including provisions concerning the governing law of arbitration agreements, arbitrator disclosure and summary disposal of claims and defences.

10. Can an arbitration award be enforced by a court?

Yes. Under section 66 of the Arbitration Act 1996, an arbitral award may, with the court’s permission, be enforced in the same manner as a judgment or order of the court.

11. Can an arbitration award be appealed?

There are limited statutory routes for challenging or appealing an award. Section 67 concerns substantive jurisdiction, section 68 concerns serious irregularity, and section 69 permits appeals on questions of law where the statutory conditions are met.

12. Can a party refuse an invitation to mediate?

A party may have legitimate reasons for refusing mediation, but an unreasonable refusal may have costs consequences. The court considers the circumstances, including the nature of the dispute, the suitability and cost of mediation and the prospects of settlement.

13. Does starting mediation stop the limitation period?

Not automatically. Parties should ensure that their claims remain within the applicable limitation period. Negotiation and mediation do not generally suspend statutory limitation periods simply because the parties are attempting to settle.

14. What is expert determination?

Expert determination is a procedure in which an independent specialist decides a defined technical or professional issue, such as a property valuation or financial calculation. Its legal effect depends on the parties’ agreement.

15. Is arbitration always cheaper than litigation?

No. Arbitration may save time and provide procedural flexibility, but arbitrators’ fees, institutional charges, legal representation and expert evidence can make it expensive. Its suitability depends on the circumstances of the dispute.

16. Can a contract require mediation before court proceedings?

Yes. A sufficiently clear and workable contractual dispute resolution clause may require parties to attempt mediation or another specified procedure before commencing proceedings. The enforceability and effect of such a clause depend on its wording and the applicable law.

17. Does ADR replace the civil courts?

No. ADR complements the court system. Courts retain responsibility for determining disputes where settlement is not achieved, supervising arbitration within the statutory framework, granting urgent remedies and enforcing legally binding outcomes.

Conclusion

Alternative dispute resolution has become an essential part of civil justice in England and Wales. It reflects a broader understanding that the resolution of a legal dispute should not always require a full trial, particularly where a less expensive and more efficient process can achieve a fair outcome.

Mediation allows parties to retain control over settlement, arbitration provides a binding private determination, and negotiation and expert determination offer additional ways of addressing disagreements according to their particular nature. The Civil Procedure Rules reinforce the importance of these processes by requiring courts to consider ADR as part of active case management.

The decision in Churchill v Merthyr Tydfil County Borough Council represents a significant development because it confirms that the courts may go beyond merely recommending mediation. They may require participation in an appropriate non-court process, provided that doing so remains proportionate and preserves effective access to justice. The introduction and extension of automatic mediation arrangements for certain small money claims further demonstrate the practical importance of ADR in contemporary civil procedure.

At the same time, arbitration continues to occupy a distinctive position in commercial dispute resolution. The Arbitration Act 2025 has modernised the statutory framework, strengthening the legal infrastructure for arbitration seated in England and Wales while preserving the central principles of party autonomy and limited judicial intervention.

Ultimately, ADR should not be understood as an attempt to avoid justice or diminish the authority of the courts. Its purpose is to make the resolution of disputes more accessible, proportionate and effective. A well-designed dispute resolution system recognises that different disagreements require different solutions, and that justice may sometimes be achieved through agreement rather than adjudication.