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This article originally appeared in Insurance Day, February 2025.
Heightened litigation risk is apparent in many regions, as highlighted in our global forecast 2025 report.
In most parts of the world this is associated with existing difficulties caused by the backlog in the courts and litigation costs. Justice regimes will, therefore, need to evolve to provide new and more efficient solutions to disputes, leveraging technological advancement and reflecting evolving societal expectations.
Embedding alternative dispute resolution (ADR) into resolving disputes aims to not only alleviate court backlogs but can also create a fairer, more collaborative approach to justice outside of the traditional court route.
ADR encompasses various methods for resolving disputes without resorting to litigation, including mediation and arbitration. However, the effectiveness and adoption of ADR approaches vary significantly across jurisdictions.
For some time both the government and senior judiciary in England and Wales have expressed their support for integrating ADR processes into the civil justice system. In a pivotal judgment in the role of the courts in directing the use of ADR, on November 29, 2023 Sir Geoffrey Vos, Master of the Rolls, handed down the Court of Appeal’s judgment in Churchill v Merthyr Tydfil County Borough Council. The court held civil courts have the power to stay proceedings while a non-court settlement process is undertaken such as a complaints procedure.
Sir Geoffrey previously made clear the direction of travel regarding ADR, saying: “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.” The Court of Appeal’s decision aligned with this ethos.
Compulsory mediation
From May 22, 2024 compulsory mediation was introduced for certain small claims made on paper or through traditional online money claims worth up to £10,000 (excluding personal injury claims). According to the Ministry of Justice, this development could divert up to 20,000 cases each year from the court system, freeing up judicial resources for more complex cases. The government is also considering whether a requirement to mediate should be expanded to higher-value claims.
In April 2024 the Civil Procedure Rules (CPR) committee launched a consultation following Churchill, focused on using and promoting ADR methods. On October 1, 2024 new CPR on ADR came into effect, including an amendment to the overriding objective to make clear the court’s obligation to deal with a case justly and at proportionate cost includes “promoting or using alternative dispute resolution” (r1.1(2)(f)).
"ADR can offer significant advantages such as reduced legal costs, faster resolutions, more flexibility and, in some cases, a less adversarial process compared with traditional litigation".
The first reported High Court example of a Churchill order for court-mandated ADR is the case of DKH Retail and others v City Football Group (2024). At the pre-trial review, the claimants applied to the court seeking an order for the parties to mediate.
Although the defendant opposed the application, arguing there was not a realistic prospect of settlement by way of mediation and it was too late in the day, the judge disagreed, ordering the parties to mediate during December 2024.
In January 2025 the parties notified the court they had settled their dispute. Reflecting the court’s attitude to ADR, the judgment says: “Mediation is capable of cracking even the hardest nuts.”
ADR advantages
ADR can offer significant advantages such as reduced legal costs, faster resolutions, more flexibility and, in some cases, a less adversarial process compared to traditional litigation.
As demonstrated by recent case law and the changes in the CPR, parties should consider on a continuing basis whether there is an appropriate ADR route.
Parties will likely face increasing pressure to consider alternative ways to settle claims and may face costs consequences for failing to do so.
CPR Part 44 now says when the court exercises its discretion as to whether to make an order on costs, in considering the conduct of the parties, the court must have regard to “whether a party failed to comply with an order for [ADR] or unreasonably failed to engage in [ADR]”.
To put themselves in the best position for ADR, insurers may need to consider front-loading claims investigations. While requiring an increase in time and costs upfront, this will hopefully facilitate more accurate forecasting and reserve information.
Mandatory mediation is here to stay and the changes to date are likely only the beginning. As ADR becomes more firmly established in the legal system, England and Wales may act as an example for other jurisdictions considering alternatives to conventional litigation.
Related item: Adequate means of conflict resolution – the key to increasing court efficiency in Spain?
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