Family law has undergone a quiet revolution over the last few years with the introduction of the single family court, the introduction of compulsory mediation, and the withdrawal of legal aid for the majority of cases. Although much of the motivation behind these changes is an austerity-driven need to save money, there is also a belief that going to court should be seen as a last, and not a first, resort.
Family judges and lawyers have long recognised that the adversarial system is more likely than not to aggravate the financial and emotional fall-out from the end of a marriage with a particularly pernicious effect on any children involved. This shift in attitude has paved the way for a more creative approach to dispute resolution one of which, arbitration, is increasingly gaining traction as an effective alternative to court proceedings.
What is arbitration?
Arbitration is a flexible method for divorcing couples to resolve a dispute over finances and / or property outside court. If divorce proceedings are already being heard in court, arbitration can also be used to resolve discrete issues which may be holding up the case as a whole. Both parties appoint an independent arbitrator of their choice who hears all the evidence on both sides, understands what each wants to achieve and makes a binding decision (an arbitral award), later endorsed as a financial order by the family court. In a departure from the provisions laid down by the Arbitration Act, it is mandatory that the law of England and Wales applies to family law arbitrations. However, it must be appreciated that arbitration is an alternative to court so mediation and collaborative law should be considered first. It can succeed where other attempts at resolution have failed.
Who can be an arbitrator?
The Institute of Family Law Arbitrators (IFLA) now has 220 trained arbitrators on their panel who work throughout the UK. They are all family law specialists, either practising or retired lawyers, and members of the Chartered Institute of Arbitrators with a good working knowledge of the Arbitration Act 1996 (AA 1986) and subject to its disciplinary code.
What are the advantages?
Arbitration has several attractions:
Flexibility: it can take place when, where and how the parties choose. The arbitration can take place at the arbitrator’s place of work, or somewhere neutral, at a time which suits all involved. The parties can be present in person or the arbitration can be conducted in writing. It can also be used to resolve discrete issues which may be hindering the overall resolution of the case.
Confidentiality: the proceedings, the decision and the award are totally confidential (no journalists are present and the details are not made public), This makes the process particularly attractive for those in the public eye and the wealthy.
Speed: because parties can choose when, where and by whom the arbitration is conducted, it is generally a quicker route than court which is notoriously slow for a number of reasons: cases involving children get priority; litigants-in-person, unfamiliar with court procedures, slow up proceedings; and there are not enough judges. Finally, there is always the risk of having a case ‘bumped’ by a more urgent hearing.
Choice: unlike court where the parties have no say over the judge allocated to their case, the arbitrator is chosen by both parties (although the IFLA will appoint one if the parties cannot agree) and he or she will oversee the process from beginning to end.
What are the disadvantages?
The disadvantages are few but important to understand:
Binding decision: both parties must agree at the outset to accept the arbitrator’s decision. His or her decision is binding on both parties and cannot be subject to appeal except in exceptional circumstances (for instance if the order proves to be unworkable for whatever reason or if there was something intrinsically wrong with the arbitration process).
Full participation: the arbitration process only works if both parties participate fully and are prepared to be open and honest – if one party tries to hide assets, then going to court is likely to be the only option.
How does arbitration work?
In the first instance, both parties sign a form, downloadable from the IFLA website (Arb 1), which is the basis of the arbitration agreement and sets out the nature of the dispute and the name of the arbitrator. Within the form, both parties have to state that they understand the nature of the agreement and that, while the arbitration is underway, they will not seek to start court proceedings (unless the arbitration is started specifically to resolve a particular issue in which case the parties must ask for a stay of court proceedings). The way in which the arbitration is actually conducted is largely down to the parties involved and the nature of the dispute – both parties could be present or it could be done in writing.
How much does it cost?
This will depend on the arbitrator who is likely to charge to by the hour. There may also be room hire costs although, if the arbitration takes place at the arbitrator’s place of work, the use of a meeting room would hopefully be included in the arbitrator’s fee. As the parties are able to choose their arbitrator, they can factor in the hourly rate into their decision. Ultimately it will be the complexity of the dispute which will dictate how long it takes to resolve and thus how much it will cost. However, because both sides must agree to participate in the arbitration and because the arbitrator’s decision is final, arbitration in complex cases will almost certainly be cheaper than trying to battle it out in court.
Ideally the parties involved will agree in advance how they will apportion the costs; if they cannot agree the arbitrator can make an order about who pays what. Any arbitration costs are separate from costs relating to the divorce process itself and any related court fees including turning the award into an order.
Making the arbitral award
The arbitrator will make the award once all the evidence has been heard and assessed. The arbitrator is not obliged to state the reasons for his / her decision but most parties involved usually require this. The award is completely confidential and cannot set a precedent – it entirely unique to the parties involved. In a recent briefing Sir James Munby, President of the Family Division, confirmed that not all arbitral awards needed to be settled by a financial order. However, most parties will be encouraged to apply to the family court to turn the award into a financial order – simply registering the award will not suffice. In some disputes involving property there may be no need for a financial order. In other cases, any decision may have to be confirmed by a County court.
Challenging an arbitral award
As the arbitration process is predicated on both parties’ agreement and their acceptance of the outcome, challenges to an arbitral award are rarely successful. There are very specific grounds for challenge, which chiefly relate to the process, and these would normally be heard by a High Court Judge of the Family Division.
So, arbitration is the new black?
Yes, quite possibly. For those couples who broadly agree the direction of their divorce, arbitration is a cheaper, quicker, flexible and confidential way of resolving disputes over finances and property. The ability to use arbitration to resolve a particular issue within wider court proceedings is another bonus. Couples who have signed pre-nuptial agreements may also find arbitration a more efficient way to agree the split of assets after marital breakdown rather than using the courts. Of course, arbitration cannot be used to settle non-financial disputes concerning children and relies on a degree of consensus and cooperation between the parties to be really effective. Last but not least, those couples who want to avoid any publicity would do well to consider arbitration. For more information, visit the IFLA website or speak to one our divorce lawyers.