Friday, February 24, 2012

Debating Family Law Arbitration


I mentioned the launching of the new family law arbitration scheme by the Institute of Family Law Arbitrators ('IFLA') in this post on Wednesday. Family Law Week now reports that the launch has provoked a debate about the enforceability of arbitration awards.

In particular, Carl Gardner of the Head of Legal blog has written a piece in The Guardian in which he asks What's legal about family arbitration? Commenting on that piece, Gillian Douglas, Professor of Law at Cardiff Law School, takes the view that arbitration awards cannot be binding, and that they "will have to be incorporated into consent orders, in line both with the Supreme Court's approach in Radmacher and the terms of s 34 of the Matrimonial Causes Act 1973".

What does the IFLA say? Well, at the time that I'm writing this the FAQS page on their website doesn't seem to be working properly, but looking at the source code for that page one can see the answers to the stated questions, which include: Is an award final and binding?, to which the answer is:
"Yes, it is agreed to be binding between the parties. Currently family law does not permit parties to make their own arrangements for financial and/or property issues on divorce or separation simply by agreement, without the possibility of court review. The Rules in relation to awards acknowledge this: if the subject matter of the award makes it necessary, the parties are bound to apply to the court for an order in the same or similar terms as the award (see paragraph 6.5 of ARB1). This will usually be necessary.
Following recent rulings by the courts on pre- and post-nuptial agreements, it is expected that the Courts will generally uphold awards made under the Scheme. An award will be the outcome of an impartial adjudication following a recognised process – supported by the Arbitration Act – whose object is to achieve a fair result. It is expected that Courts will enforce awards made under the Scheme."
"If the subject matter of the award makes it necessary" (see also Article 13 of the Scheme's Rules): The Family Law Week article quotes Grant Howell, one of the first group of family lawyers to qualify as an arbitrator, in which he gives two examples of when a court order would be required, i.e. when future claims are to be dismissed (which is likely to be in most cases) and to share a pension (which is likely to be very common). This suggests that he believes that orders will not be required for most other matters (which actually might be quite few in number), but I'm not so sure.

For what it's worth, I'm with Gillian Douglas. I think an arbitration award will not be binding until it is incorporated into a consent order, as with an agreement. This means, of course, that the award must meet with the approval of the court, and that no order will be made (making the award unenforceable) if it does not. Having said that, I agree that the courts are likely to uphold awards.

Moving on, when I first heard about family arbitration I wondered about the cost - in particular, whether it will just be something for the better-off (with the likely abolition of legal aid, it would be very timely if it were available for all). The IFLA FAQ has this to say on the subject of the arbitrator's fees and expenses:
"The arbitrator and the parties will set the level of the arbitrator’s fees (usually on an hourly or daily basis) by agreement at the outset of the arbitration.
The usual arrangement will be for the parties to bear the arbitrator’s fees and expenses (as well as IFLA’s fees and expenses) in equal shares. However, the arbitrator has a discretion under the Rules to order a party to pay more than an equal share (even up to the full amount) if that is appropriate because of the conduct of that party in relation to the arbitration."
All very well, but how much are the arbitrator's fees? Well, the only indication that I've found was in this article in The Telegraph yesterday, which suggests that they may be up to £5,000 a day. There is no indication of the source of this figure, but if it is any where near typical then it is very disappointing, although not surprising, given the calibre of the first crop of arbitrators. It may not be much for the well-off, but I doubt whether many couples of moderate means would be prepared to agree to such a sum, even if a contested financial dispute application might cost considerably more. Perhaps when substantially more than the present 35 arbitrators are trained, including people from the less exalted echelons of the profession, we may see fees dropping to more affordable sums.

6 comments:

  1.  John;-
     A comment left on the Guardian website by Nicola was also posted by her on my website too. She commented in terms 'Arbitration sounds like delivering what it says on the tin, as opposed to other forms of dispute resolution.'
     I responded to her in relation to the original post and her comment as follows:- 
    Thank you. I note you left a similar comment on the Guardian post by Carl Gardner. 
    I'm sorry he was writing so negatively about this scheme which I think has the potential for making a real difference to the system. 
    I intend as part of an award to draft up a court order in terms of the award, for the parties to present to the court if they wish. They may need a court order for enforcement purposes.
    As to costs, the majority of arbitrators are not high flying London based QCs but are based in the provinces and will tailor their fees to the case before them. 
    So for many unrepresented litigants it will make commercial sense to agree to arbitrate and share the cost, which is based on the hours spent by the arbitrator on the case and which will be substantially less than incurring two sets of legal fees throughout the court process.
    They will also, unlike couples who again are expected to pay for mediation, have the certainty of an outcome, privacy, speed, informal surroundings to have their case heard and the knowledge their case will be handled throughout with the utmost professionalism by the arbitrator of their choice. I don't accept criticisms about the potential for a badly run scheme when there is no evidence at all of that and in fact to the contrary.
    Those couples too who already have lawyers they wish to retain, will also have the same opportunities and for those couples who may be at say FDR stage and caught up in the long wait to have the case heard, may decide the additional cost (which they will agree and decide how the cost is to be met)  is commercially worth it.
     Arbitration has been an effective tool in other areas of law. It doesn't replace the court system and for many won't, but for others who wish to remain outside the court system it does give the best, dignified form of alternative resolution service yet devised.
    Thank you for your comment.
    Marilyn

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    1. Thanks again, Marilyn.

      I still think it's a little misleading to suggest that an arbitration award is binding, when clearly it is not.

      I am not for one moment suggesting that the scheme will be badly run.

      As to the cost, we shall have to see. I hope I am wrong, but I have serious doubts as to whether arbitration will be for anyone other than the well-off. After all, it would take the average person 2 months to earn £5,000 - I think they would baulk at paying anything like that to someone for one day's work. Even at a very modest provincial lawyer's hourly rate of £200, that is £1600 for an 8-hour day. With preparation, many arbitrations will surely take longer. Will people of average or lower means be able to afford to share such fees, probably in addition to their own lawyer's fees?

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  2. Hi John
    A final few points? 
    My understanding is that an award is binding upon the parties and in the event the parties present the award to the court (which in some cases will not be necessary at all) it will be upheld. There is no misleading of anyone.
    As to costs, in complex substantial cases parties will no doubt have legal representation, but the arbitrator's costs won't significantly imbalance the outcome. The benefit to the parties is their privacy is maintained and they won't wait two years for an outcome as they may have to do going through the High Court.
    Parties with more average means who prefer to pay an arbitrator and represent themselves (as happens currently in mediation) will have only the arbitrators cost to cover between them but will have a fair, certain and binding outcome. There are therefore clear benefits to parties who may prefer to pay for what is, an excellent, strictly private service. 
    In less esoteric cases where lawyers still act, there are also potential cost benefits, because the arbitration system need not operate in the same way as a court system. An arbitrator is not bound by the same procedural rules. Under the scheme, an oral hearing may not be required and a case can be decided on paper. There are also no compulsory FDA's nor FDR's. The costs savings may be substantial or may end up the same, but an outcome will be achieved faster, will be less stressful than a court and done in private.
    I agree there is a serious problem about parties who can't afford arbitration at all. That must be a matter for the government at least to consider.  
    Overall I believe we should let the scheme get going and see how it unfolds.
    Marilyn

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    1. Hi Marilyn,

      Yes, although some of the things I have read suggest that an award is binding per se, the issue may be somewhat academic if the parties present it to the court, and I can't see any way a party could ultimately benefit if they renege on the agreement and refuse to do so.

      I do agree that arbitration could be very useful in higher money cases but, as you say, many at the other end of the scale will not be able to afford it.

      John

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