Dispute resolution options - Characteristics of arbitration,...

Learning Outcomes

This article covers dispute resolution options in civil practice—arbitration, mediation, and litigation—addressing:

• The essential procedural, legal, and practical features of each process—confidentiality, costs, speed, enforceability, remedies, and typical advantages/limitations
• Strategic forum selection aligned with client objectives, risk profile, urgency, international dimension, and relationship considerations
• Contractual and statutory frameworks governing each method, including the Arbitration Act 1996, the CPR and Practice Directions, and international conventions (e.g., New York Convention 1958)
• Distinguishing formal adjudication from consensual ADR and situating each process on the dispute resolution continuum for clear, exam-ready comparisons
• Professional duties and ADR obligations, the duty to consider mediation, and the cost sanctions and court powers (such as stays) that follow unreasonable refusal
• Practical drafting and analysis skills for SQE2 scenarios: statements of case, dispute resolution strategy notes, settlement documentation, and coherent client recommendations
• Grounds for court involvement and routes to challenge arbitral awards (ss 67–69 AA 1996), together with domestic and international enforcement considerations
• Application to realistic fact patterns to select the appropriate forum and avoid common SQE2 selection pitfalls

SQE2 Syllabus

For SQE2, you are required to understand the mechanical and procedural distinctions between arbitration, mediation, and litigation, together with the professional obligations and strategic advice expected of a competent solicitor, with a focus on the following syllabus points:

• The procedural and practical features unique to arbitration, mediation, and litigation, including route selection and tactical implications for each.
• The circumstances in which each process is chosen, compelled, or rendered unsuitable, with reference to law, contract, and best practice.
• The enforceability and finality of outcomes produced by each process, and the grounds for court involvement or appeal.
• Costs, speed, flexibility, confidentiality, and effect on personal and commercial relationships across each process.
• The duties of solicitors including compliance with the SRA Code of Conduct, CPR requirements (e.g., pre-action protocols, costs sanctions, duty to consider ADR), and the ethical and practical implications of selecting or advising on dispute resolution.
• The impact of pre-action conduct, judicial encouragement of ADR, and statutory rules (including international enforcement conventions).
• The specific knowledge of relevant statutory and case law (e.g., Arbitration Act 1996, New York Convention 1958) and the role of precedent, particularly where issues of law and fact intersect in dispute resolution.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which one of the following processes involves appointing a third party to make a final and binding decision outside the courts?
   1. Mediation
   2. Arbitration
   3. Litigation
   4. Ombudsman review

2. List two principal advantages of mediation compared to formal court proceedings.

3. Name one situation in which arbitration is not an appropriate forum for resolving a civil dispute.

4. True or false? An arbitral award can never be appealed in the courts of England and Wales.

Introduction

Civil disputes manifest in a variety of contexts—from consumer disagreements to complex multinational commercial conflicts. The methods by which such disputes are resolved require careful selection, as each process—arbitration, mediation, and litigation—carries distinct procedural, legal, and practical ramifications. For a solicitor, distinguishing between these processes is not just a theoretical exercise: giving correct, tailored advice on forum selection and the associated legal and tactical consequences is a fundamental professional and regulatory responsibility. It is also the subject of regular judicial commentary and forms a significant part of the SQE2 assessment for dispute resolution.

Key Term: Arbitration
Arbitration is a private dispute resolution procedure where parties submit their disagreement to an impartial arbitrator for a binding decision—commonly chosen for commercial disputes, especially those involving technical issues or international parties.

Key Term: Mediation
Mediation is a non-binding, confidential process where a neutral mediator guides negotiation, with the parties themselves determining if and how a settlement is reached.

Key Term: Litigation
Litigation is the formal, state-run, public process of dispute resolution, led by judges and governed by the Civil Procedure Rules and principles of precedent.

Key Characteristics of Dispute Resolution Methods

Arbitration

Arbitration has its roots in history, renowned for offering an alternative to the delays and inflexibility of court litigation. Its operation is defined by party autonomy—the parties generally select their arbitrator(s), decide procedural matters, and may choose the law and jurisdiction governing their dispute. This flexibility is underpinned in England and Wales by the Arbitration Act 1996, which codifies the powers and duties of the tribunal, jurisdiction, stay of court proceedings, and the enforceability of arbitral awards.

The arbitral tribunal can be established ad hoc or under institutional rules (such as those of the LCIA, ICC, or CIArb), and the process can be oral or entirely documentary, at the discretion of the parties and arbitrator. The process is contractual: it arises through a prior agreement (often an arbitration clause) or a post-dispute submission agreement. Many commercial contracts contain pre-agreed arbitration clauses, which courts will usually enforce by staying litigation in favour of arbitration.

Key aspects include:

• Proceedings are confidential and allowed to take place in private, with a comparative absence of formal reporting and publicity.
• The arbitrator’s award is enforceable in the same way as a court judgment. Section 66 of the Arbitration Act 1996 permits the award to be enforced in the High Court.
• There are only limited grounds for challenging or appealing an arbitral award. Sections 67 (jurisdiction), 68 (serious irregularity causing substantial injustice), and (where not excluded by the parties) 69 (error of law) of the 1996 Act provide for exceptional challenges but not routine appeals.
• International enforcement is facilitated by the New York Convention 1958, allowing recognition of arbitral awards in more than 170 jurisdictions.

Key Term: Arbitral Award
The written, final, and binding decision of an arbitrator or tribunal, enforceable like a judgment and generally non-appealable except for narrow statutory grounds.

Advantages of Arbitration

• Privacy and Confidentiality: Hearings are not public, and most evidence or submissions remain confidential, fostering trust in sensitive commercial settings.
• Expert Decision-Makers: Parties can appoint arbitrators with technical knowledge relevant to their dispute.
• Procedural Flexibility: Parties shape proceedings, agreeing on timings, form of evidence, and place of arbitration.
• Efficiency: In complex or technical disputes, arbitration can be quicker and less costly than litigation, especially when the parties actively cooperate.
• International Recognition: Enforcement abroad is easier under the New York Convention than is the case for court judgments, an essential consideration in cross-border contracts.

Disadvantages of Arbitration

• Costs: Parties pay not only their own legal costs but also the fees and expenses of the tribunal and possibly an administering body.
• Restrictive Joinder of Third Parties: A third party cannot be joined unless all parties (including the third party) consent.
• Limited Remedies: Arbitral tribunals lack some judicial powers—in particular, they cannot usually grant injunctions or other coercive orders without assistance from a national court.
• Minimal Appeal Rights: The finality of awards can, while desirable in principle, make correction of errors difficult except in clear cases of serious irregularity or jurisdictional excess.
• Inconsistency: Absence of precedent means that similar facts can lead to different outcomes, which may raise strategic or legal uncertainty.

Mediation

Mediation sits further along the dispute resolution continuum as a consensual, facilitative, and non-binding process. Mediation can take many forms but is most often a structured negotiation guided by a mediator possessing both subject-matter knowledge and skill in promoting communication and creative solutions.

There are no predetermined outcomes, and the mediator has no authority to impose a decision. Instead, the focus is on identifying shared interests, promoting understanding, and enabling the parties to construct practical and sometimes innovative resolutions, such as apologies, changed behaviours, or future contractual arrangements.

The process is confidential (“without prejudice”), safeguarding the parties’ positions should litigation later ensue.

Mediation is actively encouraged by the courts—in some sectors (family, personal injury, professional negligence) it is routinely suggested by judges, and cost sanctions can be imposed for unreasonable refusal to mediate, even when the refusing party “wins” the substantive dispute.

Advantages of Mediation

• Speed and Low Cost: Arrangements for mediation are simple; formal procedure is minimal, and costs are correspondingly lower.
• Preservation of Relationships: Particularly suitable where ongoing relations are valued, such as business partnerships, employment, or neighbour disputes.
• Flexibility and Creativity: Outcomes are shaped by the parties’ needs, permitting creative settlements unavailable in litigation or arbitration.
• Party Autonomy: No party is forced to agree—control over both the process and its outcome is retained at every stage.
• Privacy and Confidentiality: Confidentiality is strong; the details of the dispute and settlement usually remain private regardless of the outcome.
• No Prejudice to Future Proceedings: If mediation fails, litigation or arbitration remains open as options.

Disadvantages of Mediation

• Requires Willing Participants: Mediation cannot proceed unless all parties are prepared to participate and compromise.
• Non-Binding Unless Formalized: No party can be compelled to settle, and verbal agreements alone are not usually court-enforceable.
• Limited Remedies: Parties may be unable to obtain urgent injunctions or ensure disclosure of essential documents or evidence.
• Potential for Delay: Mediation might be used tactically by a party to delay proceedings or gather information if not approached in good faith.

Litigation

Litigation is the most formal mechanism available for resolving disputes. It is governed by well-established legal rules codified in the Civil Procedure Rules (CPR) and associated Practice Directions, supported by case law and developed through the doctrines of precedent and equity. The litigation framework in England and Wales has been shaped by successive reforms, particularly the Woolf Reforms and the Jackson and Briggs Reviews, which promoted active case management, cost proportionality, and greater use of ADR.

Litigation is the only avenue through which precedent is set or clarified, third parties can be compelled to participate, and the full range of remedies (including interim and urgent relief such as injunctions and orders for specific performance) are available.

Cases proceed from pre-action protocols (encouraging settlement and disclosure), to issue and service of the claim form, defence, interim steps (including disclosure, evidence, and applications), and trial, with avenues of appeal and multiple possible enforcement mechanisms.

Key features include:

• Decisions are delivered by judges with legal knowledge and are binding, subject to routes of appeal.
• Procedural fairness is strictly regulated, with opportunities for each side to present their case, cross-examine evidence, and apply for summary judgment, interim payments, and various orders.
• Proceedings are public unless subject to specific reporting restrictions, creating a record accessible to the public and future courts.
• The losing party is typically (but not always) ordered to pay a proportion of the winner’s costs.
• Precedent is created by higher court decisions, ensuring consistency and development of English law.

Advantages of Litigation

• Enforceable Outcomes: Judgments can be enforced both domestically (with various court sanctions and enforcement steps available) and, though less efficiently, abroad.
• Binding Precedent: Court decisions in higher courts set precedents that bind lower courts, ensuring legal certainty and clarity.
• Expansion of Remedies: All legal and equitable remedies are available, including injunctions, damages, declarations, and specific performance.
• Compulsion and Joinder: The court can require parties to attend, give evidence, and allow for complex claims with multiple parties.
• Appeal Rights: Judgments are subject to appellate review—important for legal development and correction of error.

Disadvantages of Litigation

• Expense and Delay: Even with reforms, court proceedings can be lengthy and expensive, particularly for high-value or complex disputes.
• Lack of Privacy: Proceedings, evidence, judgments, and orders are usually public—an important consideration for parties concerned about confidentiality or reputational issues.
• Relationship Damage: The adversarial nature of litigation can destroy any remaining goodwill between the parties.
• Rigidity: Little opportunity exists for outcome creativity; results are generally binary (win/lose), and flexibility is limited.
• Costs Uncertainty: Liability for costs is often unpredictable, especially in scenarios involving Part 36 offers and complex tracks.

Choosing Between Arbitration, Mediation, and Litigation

Identifying the optimal dispute resolution process requires considering the nuances of the dispute, client objectives, urgency, cost, relationship considerations, confidentiality needs, enforceability, and legal or procedural requirements. Some sectors (such as family law, insolvency, criminal matters, public law/judicial review, and certain property/land issues) require litigation, as alternatives either cannot provide the necessary remedies or are not legally available.

Key Term: Alternative Dispute Resolution (ADR)
Refers to procedures other than litigation (notably mediation and arbitration), intended to resolve disputes more efficiently or flexibly and often forming a mandatory consideration before issuing proceedings under the CPR.

Core factors relevant to selection:

• Contractual clauses specifying the forum (many commercial contracts now include ‘multi-tiered’ clauses requiring negotiation and mediation or arbitration before litigation).
• The international dimension—arbitral awards may be more easily enforced internationally than court judgments.
• The risk of cost penalties for unreasonable refusal to engage in ADR, as articulated in key case law and codified in CPR 1.4, 26.4, and associated Practice Directions.
• Suitability of remedies—urgent injunctions or remedies affecting third parties are generally the preserve of litigation.

Where the needs of the client involve maintaining relationships, confidentiality, or technical knowledge, mediation or arbitration are often preferred.

Key Term: Pre-action Protocols
Protocols annexed to the CPR dictating stages prior to the issuance of proceedings, designed to encourage settlement, early disclosure, and meaningful consideration of ADR.

Legal Implications and Professional Duties

The CPR and SRA Codes of Conduct make clear that solicitors must always consider and advise on appropriate ADR options before commencing litigation. Failure to do so can lead to adverse costs consequences, as well as breach of professional duties. The Practice Direction on Pre-Action Conduct and Protocols, as well as the relevant pre-action specifics (such as those for personal injury or professional negligence), emphasise that litigation should be a ‘last resort’.

The courts are empowered to:

• Stay proceedings to compel parties to use ADR (CPR 26.4).
• Impose sanctions (often in costs) for breach of pre-action protocols or for refusing to mediate without good reason.
• Strictly manage timeframes and case schedules in the interests of efficiency and fairness (overriding objective in CPR 1.1).

Ethically, solicitors must prioritise the client’s best interests, provide information sufficient for informed decision-making, and tailor advice to client needs and objectives. This means considering the nature of the claim, funding, prospects of success, reputational context, likely enforcement issues, and the potential impact of the choice of forum.

Worked Example 1.1

Scenario:
An engineering company, based in the UK, enters into an international supply contract containing an arbitration clause. A dispute arises with a supplier based in Germany concerning delivery quality and timing. The UK client demands a rapid, expert-led, and confidential resolution enforceable in Germany.

Answer:
Arbitration is likely to be most appropriate. The parties must refer to arbitration as per the clause, appoint an arbitrator with relevant knowledge, and conduct proceedings in private. The final award will be easier to enforce in Germany due to the New York Convention.

Worked Example 1.2

Scenario:
Two construction entrepreneurs want to preserve their business relationship after a payment schedule dispute. They are open to flexible arrangements, and value expediency and confidentiality. However, urgency is not critical.

Answer:
Mediation is likely to be the best first step. It enables the parties to retain control over solutions and outcomes, preserves confidentiality, and can be scheduled quickly. If mediation fails, recourse remains open to litigation or arbitration as appropriate.

Worked Example 1.3

Scenario:
Company X faces imminent unauthorised disclosure of trade secrets by a former employee. A rapid, enforceable restraint is needed.

Answer:
Litigation is necessary here. Only the court can grant timely injunctive relief enforceable against third parties and impose sanctions for violations. ADR cannot deliver compulsory remedies or bind third parties.

Exam Warning

The court may impose significant costs sanctions—sometimes requiring the “winning” party to pay their own and their opponent’s costs—where a party refuses to attempt ADR without good reason. Always advise your client of the regulatory and financial risks before refusing ADR.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinguishing procedural and practical characteristics of arbitration, mediation, and litigation.
• The respective advantages, disadvantages, and optimal use cases for each process.
• Arbitration is founded on party agreement, leads to a binding decision (arbitral award), and offers enforceability advantages especially in international scenarios, but limited routes of appeal.
• Mediation is voluntary and non-binding unless crystallised in settlement, allowing creative, confidential, and relationship-preserving resolutions but cannot compel parties or impose remedies.
• Litigation is public, rigid, costly, and produces precedents and legally enforceable orders; it uniquely offers urgent relief, joinder of third parties, and a full suite of remedies.
• The CPR, pre-action protocols, and SRA Codes require solicitors to advise on ADR and consider cost risks of refusing mediation or other ADR.
• Selection between these forums must take into account contract, international dimensions, urgency, costs, and the client’s substantive and strategic interests.
• Judicial case management can stay cases for ADR, and courts will examine reasonableness of any refusal to mediate or arbitrate.

Key Terms and Concepts

• Arbitration
• Arbitral Award
• Mediation
• Litigation
• Alternative Dispute Resolution (ADR)
• Pre-action Protocols