Arbitrating financial settlements in divorce: should I consider it?

In the words of Lady Justice King in Haley v Haley [2020] EWCA Civ 1369:

There is a common misconception that the use of arbitration, as an alternative to the court process in financial remedy cases, is the purview only of the rich who seek privacy away from the courts… If that was ever the position, it is no more… it is widely anticipated that parties in modest asset cases (including litigants in person) will increasingly use the arbitration process in the aftermath of the Covid-19 crisis as the courts cope with the backlog of cases…”.

Put simply, parties should consider arbitration as a way of settling their finances now more than ever but, whether it will be appropriate, will always be case specific and our friendly family lawyers will be able to advise you.

What is Arbitration?

Arbitration is a form of Alternative Dispute Resolution (ADR) which means that the parties need not need to go to court to find a solution. Other forms of ADR common to family law, include mediation and collaborative law. Sometimes the parties will have attempted solicitor-led negotiations before considering other forms of ADR.  Or, the parties may initially choose ADR as the appropriate forum for them.

Unlike mediation, arbitration is conducted by an arbitrator (as opposed to a mediator) and the arbitrator’s decision on your case is binding – save in very exceptional circumstances – in the same way as a judge’s decision would be, should you go to court. The difference with mediation, is that the mediator will assist the parties to try and reach an agreement. Where an agreement is reached in mediation, it will not automatically be binding, although it can become binding (and therefore enforceable) if converted into a court order. Mediation is held without prejudice, in other words, discussions are seen as a genuine attempt to settle a case and may not therefore be put before the court as evidence of concessions by either party.

Both parties agree the appointment of the arbitrator in advance and he/she will be a suitably qualified person. This is usually a senior family law barrister, or part time family judge, who will have experience of financial remedy proceedings, including how pension arrangements, complex business structures, large or small asset pots, inheritances etc. ought to be dealt with. One party’s legal team will usually suggest 2-3 arbitrators and the parties will then agree the identity of the arbitrator.

Why should I consider Arbitration?

Arbitration has the following benefits:

1. Flexibility – in other words, it avoids the need to attend court which can prove costly and time-consuming. The parties are able to agree the procedure, manage their own timetable and choose their own ‘judge’ based on experience and suitability. Historically, arbitration awards could not be challenged and any appeal would be dismissed pursuant to the Arbitration Act 1996. However, it was successfully argued in Haley v Haley that the Arbitration Act should not apply to family arbitrations under the Matrimonial Causes Act 1973 because of the requirement of fairness.  It is therefore possible, in limited circumstances, to appeal against the decision of an arbitrator.
2. Costs saving. Whilst arbitration can still be expensive – you have to pay for the arbitrator’s time over 1-2 days, as well as your solicitor’s time in preparing for the arbitration which is held as if it were a final hearing – it streamlines the process in order to keep costs to a minimum. This is particularly important in cases where there are limited resources.
3. Time saving. The significant backlog of cases in the family court system is resulting in very long delays before a matter is listed for a hearing. Arbitration avoids the parties being subject to the court’s timetable.
4. Detailed orders. The arbitrator has a wide discretion and extensive powers. The arbitrator will have more time to think through the provisions which ought to be included in the order to protect the parties’ interests.
5. Proactive approach. The arbitrator can make interim awards i.e. for interim maintenance or appointing an expert without long delays. The arbitrator can also order that a directions appointment be held on the issue of non-disclosure.
6. Informal. This can help keep things as amicable as possible, supporting the parties in other matters such as making arrangements for any children.

If you have read this article and think that arbitration might be suitable in your case, please do not hesitate to contact a member of our family team info@ts-p.co.uk and we can discuss the options with you.