Alternative Dispute Resolution during the Coronavirus Crisis
Alternative dispute resolution (ADR) is increasingly significant for firms due to the circumstances of COVID-19. In this article, Alessandro Rossi discusses how the legal industry has used ADR to respond to the challenges posed by COVID-19 to business, and how these innovations will continue.
For some, dispute resolution may still conjure up images of barristers agreeing to last-gasp settlements on the steps of the court. The modern reality is that alternative dispute resolution ('ADR') has become a common industry practice, and failure to engage in such efforts may well be held against a party. The COVID-19 pandemic has presented businesses with unique challenges, which not only affect their commercial environment but also the physical conditions in which legal proceedings must occur. Alternative dispute resolution offers a cost-effective means of settlement and, crucially, is quickly innovating to accommodate the social distancing requirements of our current predicament.
COVID-19’s rapid spread in the Spring of 2020 precipitated an unprecedented disruption of international supply chains, necessitated a shift towards remote working, and shattered economic confidence. The inevitable product of this nexus has been a marked rise in the frustration of contracts, and the citation of force majeure in the face of such conditions.1 Occurring parallel to the economic and social crisis is a judicial backlog, with the courts struggling to process existing actions.2
Owing to this disruption, a pronounced decrease in litigation actions was observed in the spring, with a contemporaneous Linklaters LLP publication stating that ‘new claims filed in the commercial courts fell by 50 per cent in the run-up to Easter compared with the same period last year’.3 However, this appears to have been a temporary trend, with May’s commercial and Chancery court filings representing a higher rate of activity than at the previous time last year.4
Commenting on this uptick, Damian Honey, a dispute resolution partner with HFW LLP suggested that the frustration of contracts and the use of litigation funders are likely responsible.5 However, traditional litigation is an increasingly unattractive and expensive option in the context of the present conditions. The high risk and costs of such action, coupled with the typically longer timeframe, means that ADR has emerged as a competitive alternative, endorsed by government guidance.6 A final but valuable consideration is that ADR offers parties the chance to preserve both their market reputations and commercial relationships, somethings which is now more essential than ever.7
In this article, I will set out how the legal industry has responded through ADR to the challenges posed by COVID-19 to business, and how this innovation will continue.
ADR and its Significance Today
Alternative dispute resolution is comprised of four options:
1. Negotiation - A process of discursive engagement between conflicting parties which seeks to resolve the dispute at hand.8
2. Mediation - A voluntary settlement process where neutral third-party mediators seek to resolve the dispute. This is a non-binding process with conflicting parties retaining control over the terms of the settlement.9
3. Early Neutral Evaluation - A neutral party, likely to be a retired judge, will consider each party’s submissions and then will offer an analysis of the likely outcome at trial. This is a non-binding option and is merely informative.10
Litigation remains a frequent terminus for commercial contractual disputes. However, in the past two decades, successive governments and the law’s professional bodies have sought to promote ADR as a viable alternative. In 2001, the ‘ADR Pledge’ was introduced by the then Lord Chancellor, Lord Irvine, committing public bodies to the use of ADR in the course of disputes.13 This represented a consolidation of previous efforts in this regard, first seen in ADR’s role being formally recognised by the Civil Procedure Rules of England and Wales (CPR) in 1998.14 Most recently, the ADR Pledge has been replaced by the Dispute Resolution Commitment, which was announced in 2011 by Justice Minister Johnathan Djanogly.15
The significance now attached to ADR is plainly detailed in the 10th Edition of the Commercial Court Guide. The use of ADR is explicitly encouraged for disputing parties, and the guide sets out specific advantages offered by the process.16 If a dispute reaches the Case Management Conference and no attempt has yet been made to engage in ADR, the judge may invite the parties to do so, adjourning the case to facilitate this under an ADR Order.17 The Guide also makes provision for such an order to be issued after judgment if an application is made to appeal. The opportunity to appeal will be restored if these efforts fail to reach a settlement.18
Judicial support for ADR is now well established, with a number of precedent cases forming the basis of a consistent framework guiding how a court’s remedies are informed by a party’s use or failure to engage in ADR. In Dunnet v. Railtrack  EWCA Civ 302, the court declined to award costs to the successful party on the basis of its failure to engage with the other party through ADR. Barrister Julius Nkafu, reflecting on the Court of Appeal’s ruling in Halsey v. Milton Keynes General NHS Trust  EWCA Civ 576, concluded that the ‘position of the Court of Appeal has been that the parties are required to consider ADR, but with the courts stopping short of ordering them to do so.’19 In Halsey, the court held that to require parties to seek alternative means of resolving disputes would breach Article 6 of the European Convention on Human Rights, so the use of ADR remains only an encouraged practice, and a factor when considering costs.20
ADR and Advisory Developments during COVID-19
In May, the government issued official guidance on contractual behaviour via the Cabinet Office. This guidance began with a plea for parties to ‘consider their behaviour as part of the national response to the public health emergency we are currently facing’, and to show ‘[r]esponsible and fair behaviour in contracts’.21 Section 17 makes specific reference to the alternative means of resolution under the aegis of ADR, and implores parties involved in disputes to engage constructively through resolution services offered by professional associations. Whilst this guidance remains non-statutory, failure to abide could potentially be held against a party during costs considerations.22
Several days before England and Wales entered a full lockdown, the Lord Chief Justice issued a statement to judges in the civil and family courts. Along with outlining arrangements for remote working and the prioritisation of certain cases, he stated that ‘I would urge all before agreeing to adjourn any hearing to use available time to explore with the parties the possibility for compromise.’23 With the backlog in cases likely to take some time to ease, ADR will emerge as an attractive and necessary means to settle contractual disputes in a timely and satisfactory manner.
ADR and Legal Services during COVID-19
Whilst the courts have struggled to process the mounting caseload, ADR has emerged as a forward-looking, flexible tool which can offer quicker timeframes and has adapted well to virtual platforms. As a party-led process, ADR offers an alternative to the backlog in the courts and enables parties to skip steps of the usual judicial process, such as the Case Management Conference.24
ADR has been well placed to meet the demand for remote access dispute resolution, as technology such as video conferencing was often already on offer, or in use prior to the pandemic. Other developing solutions include real-time transcription services, rotating cameras under the control of an arbitration panel, and cloud-based storage enabling the sharing of files.25
It has not only been the technological solutions associated with ADR which have been directed towards the present challenge. The Chartered Institute of Arbitrators and the Centre for Effective Dispute Resolution launched the Pandemic Business Dispute Resolution Service, which seeks to specifically resolve contractual conflicts arising as a result of COVID-19. Similarly, the London Chamber of Commerce and Industry launched the London Chamber of Arbitration and Mediation. Both of these services are offered for a fixed-fee, and the latter utilises blockchain technology to ensure streamlined and secure proceedings.26 Similarly, within the legal sector itself, Norton Rose Fulbright has launched NRF Covid Resolve, which it describes as ‘a new online legal framework and process for expedited dispute resolution.’27 This service aims to deliver a settlement within four to six weeks and is also offered at a fixed-fee rate.28
The current necessity of remote engagement between firms and their clients has encouraged the use of client extranets, where files can be shared and managed more effectively.29 This technology essentially extends the concept of an intranet, enabling external parties, most commonly taking the form of clients, to access areas of the firm’s virtual network.30 Client extranets offer clear advantages for firms responding to complex disputes though the medium of ADR, with products such as Thomson Reuters’s HighQ extranet enabling firms to maximise productivity through document automation.31 Consequently, when working on a dispute with a great deal of documentation, oversight of administrative tasks can be minimised, leaving lawyers free to engage with clients and more pressing tasks.
With the digitisation of dispute resolution comes the attendant cyber-security risk; a threat of acute concern considering the highly confidential nature of many disputes. The increased availability of online dispute resolution platforms (ODRs) such as NRF Covid Resolve has required the application of sophisticated security features such as multi-factor authentication and encryption, as well as robust responses to suspected intrusions.32 These platforms are governed by professional regulations, however, certain areas of ODR services such as case management and virtual hearings remain inadequately addressed.33 With the threat of virtual intrusion ever-present, the risk of ADR proceedings being compromised must be actively mitigated, as otherwise, the whole process risks reputational damage.34
Prior to COVID-19, ADR was already emerging as an increasingly favoured option in disputes, owing to judicial support and its nature as an attractive alternative to litigation. The current crisis will only serve to underscore its flexibility and bespoke nature which stands in contrast to the judicial route. This greater compatibility with business needs, coupled with its capacity for innovation will ensure that ADR cements its role in the post-COVID legal landscape.
In practice, this will mean a greater focus by firms on services such as ODRs, and a growing trade for ADR-focused institutions such as the London Chamber of Arbitration and Mediation.
Whilst face-to-face meetings will almost certainly resume for the most essential stages of an ADR process, it is likely that the use of remote video conferencing will be retained for less significant or procedural interactions. As international trade continues to integrate further, complex international disputes will inevitably occur. ADR offers a credible alternative to traditional litigation and is well placed to manage the diverse locations of disputing parties through its established, remotely delivered services.
Written by Alessandro Rossi.
1 Tracey Dovaston and Fiona Huntriss, ‘Post-pandemic litigation to expect in England and Wales’ (LexisNexis, 17th June 2020) https://www.lexisnexis.co.uk/blog/covid-19/post-pandemic-litigation-to- expect-in-england-and-wales
2 NewLawJournal, ‘Pressure On As Backlog Reaches Court’ (NewLawJournal, 10th June 2020) https://www.newlawjournal.co.uk/content/pressure-on-as-backlog-reaches-court
3 Susana Cao Miranda, Jane Larner, ‘Covid-19 – alternative methods of dispute resolution’ (Linklaters, 5th May 2020) https://www.linklaters.com/en/insights/publications/2020/april/covid-19-inspiring-use-of- alternative-methods-of-dispute-resolution
4 Ben Edwards, ‘London High Court claims bounce back in May after Covid-19 slump’ (The Global Legal Post, 11th June 2020) https://www.globallegalpost.com/big-stories/london-high-court-claims-bounce-back-in-may-after-covid-19-slump-5601949/
6 Cabinet Office, ‘Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency’ (7th May 2020) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/883737/_Covid19_and_Responsible_Contractual_Behaviour web_final 7_May_.pdf
7 HM Courts & Tribunals Service, ‘The Commercial Court Guide’ (Tenth Edition, 2017) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672422/The_Commercial_Court_Guide_new_10th_Edition_07.09.17.pdf (p.62)
8 Trischa Mann "negotiation." In Australian Law Dictionary, edited by Blunden, Audrey. : Oxford University Press, 2010. https://www.oxfordreference.com/view/10.1093/acref/9780195557558.001.0001/
12 N.B. Whilst arbitration is frequently grouped with these other processes under the heading of ADR, it is a significant process in its own right. When ADR is cited, either by official guidance, legal publications or by practitioners themselves, it is therefore likely that the first three processes are what is primarily in mind.
13 Julius Nkafu, ‘UK Government calls on parties in contractual disputes arising from COVID-19 to use ADR methods for dispute resolution’ (CIArb Features, 30th June 2020) https://www.ciarb.org/resources/ features/uk-government-calls-on-parties-in-contractual-disputes-arising-from-covid-19-to-use-adr-methods- for-dispute-resolution/
16 HM Courts & Tribunals Service, ‘The Commercial Court Guide’ (Tenth Edition, 2017) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672422/The_Commercial_Court_Guide_new_10th_Edition_07.09.17.pdf (p.62)
17 Ibid, p. 62, 63
18 Ibid, p. 63
19 Julius Nkafu, ‘UK Government calls on parties in contractual disputes arising from COVID-19 to use ADR methods for dispute resolution’ (CIArb Features, 30th June 2020) https://www.ciarb.org/resources/ features/uk-government-calls-on-parties-in-contractual-disputes-arising-from-covid-19-to-use-adr-methods- for-dispute-resolution/
21 Cabinet Office, ‘Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency’ (7th May 2020) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/883737/_Covid19_and_Responsible_Contractual_Behaviour web_final 7_May_.pdf (p.1)
22 Marie Smale, ‘Contractual disputes in the time of COVID-19’ (Morrisons Solicitors Insights, 31st July 2020) https://www.morrlaw.com/dispute-resolution-business/contractual-disputes-in-the-time-of-covid-19/
23 Courts and Tribunals Judiciary, ‘Coronavirus (COVID-19): Message from the Lord Chief Justice to judges in the Civil and Family Courts’ (judiciary.uk, 19th March 2020) https://www.judiciary.uk/announcements/ coronavirus-covid-19-message-from-the-lord-chief-justice-to-judges-in-the-civil-and-family-courts/
24 Mark Davison, ‘Dispute resolution in a post coronavirus and Brexit world – should you be considering arbitration?’(28th April 2020) https://www.mills-reeve.com/insights/publications/dispute-resolution-in-post- coronavirus-and-brexit
25 David Rivkin, Tony Dymond, Catherine Amirfar, Lord Goldsmith QC, ‘Conducting International Arbitrations During the COVID-19 Pandemic’ (Debevoise & Plimpton, 21st April 2020) https://www.debevoise.com/insights/publications/2020/04/conducting-international-arbitrations-during-covid
26 London Chamber of Commerce and Industry, ‘London Chamber of Arbitration and Mediation launches’ (London Chamber of Commerce and Industry, 26th May 2020) https://www.londonchamber.co.uk/ news/press-releases/london-chamber-of-arbitration-and-mediation-(lcam)/
27 Norton Rose Fulbright, ‘NRF Covid Resolve helps clients with fast-track COVID-19 dispute resolution’ (Norton Rose Fulbright, June 2020) https://www.nortonrosefulbright.com/en-gb/news/5f9e6fde/ nrf-covid-resolve-helps-clients-with-fast-track-covid-19-dispute-resolution
29 Pinsent Masons, ‘European courts turn to technology for pandemic response’ (Pinsent Masons Out Law Guide, 8th September 2020) https://www.pinsentmasons.com/out-law/guides/european-courts-technology- pandemic-response
31 Thomson Reuters Legal, ‘3 ways law firms are using HighQ to respond to COVID-19’ (Thomson Reuters Legal Blog, 19th May 2020) https://legal.thomsonreuters.com/blog/3-ways-law-firms-are-using-highq-to- respond-to-covid-19/
32 Wendy Gonzales Lozano, Naimeh Masumy, ‘Online Dispute Resolution Platforms: Cybersecurity Champions in the COVID-19 Era? Time for Arbitral Institutions to Embrace ODRs’ (Kluwer Arbitration Blog, 25th September 2020) http://arbitrationblog.kluwerarbitration.com/2020/09/25/online-dispute- resolution-platforms-cybersecurity-champions-in-the-covid-19-era-time-for-arbitral-institutions-to-embrace- odrs/