Magnetic factor: the power of arbitration in family proceedings

The time has come for practitioners to seriously consider arbitration as a dispute resolution process following firm guidance by the High Court in the case of S v S ([2014] EWHC 7 (Fam) Solicitors Journal, 15 January 2014).

Arbitration was introduced to the family law arena in February 2012 when the Chartered Institute of Arbitrators (CIArb), the Family Law Bar Association, and the family lawyers' group Resolution, in association with the Centre for Child and Family Law Reform, came together to create the Institute of Family Law Arbitrators (IFLA). Like all new processes it has been overlooked by most practitioners pending judicial authority.

There have been 19 recorded arbitration agreements since the inception of the scheme, all of which were commenced by the ARB1 application form. The arbitration process is concluded by the delivery of a final award which is then converted into the form of a consent order, to present to the court.

To date, no order has been rejected by the court and no party has refused to enter into the terms of an order which reflects the award. This has left practitioners with no clear indication about the approach that the court will take when presented with a consent order reached as a result of an arbitral award. Only one county court judge explained in a letter how he dealt with the order but until now practitioners have had no real benchmark.

Few cases

Arbitration in family law proceedings is governed by the rules developed by IFLA and the Arbitration Act 1996. There have been three cases published in the past 18 months that deserve attention, the third case is the most relevant as it deals with an arbitration under the IFLA scheme.

The case of T v T [2012] EWHC 3462 (Fam) concerned an Hemain application by the wife to prevent the husband from pursuing arbitration in a foreign jurisdiction. The matter was dealt with by Nicholas Francis QC sitting as a deputy district judge; he is also an arbitrator under the IFLA scheme.

The parties had agreed by a clause in their pre-marital agreement to be bound by arbitration in the event of marriage breakdown. The agreement was signed in the USA where arbitration is more commonly used. The wife's application was dismissed, at paragraph 23 the judge indicated:

"Whilst I acknowledge the recognition that has been given to family law arbitration, and the public policy interests in supporting this initiative, I am not sure that the existence of the IFLA scheme in England & Wales has much, if any, bearing, on the decision that I have to make."

Although this judgment gives recognition to the IFLA scheme, the case itself doesn't focus on the use of arbitration in this jurisdiction.

Three months later, Mr Justice Baker handed down judgment in the case of AI v MT ([2013] EWHC 100 (Fam), Solicitors Journal, 4 February 2013).

The parties in that long-running case had agreed to use arbitration in the New York Beth Din. The parties agreed that they wanted to deal with matters concerning the children and financial matters.

The judge indicated the following: "I would endorse the parties' proposal to refer their disputes to a process of arbitration before the New York Beth Din on the basis that the outcome, although likely to carry considerable weight with the court, would not be binding and would not preclude either party from pursuing applications to this court in respect of any of the matters in issue."

Financial claims only

When handing down the judgment Mr Justice Baker noted the development of the IFLA scheme of arbitration (paras 20 - 21). The most important matter that he highlighted is the fact that under the terms of the IFLA scheme welfare concerns regarding children can't be dealt with by arbitrators. The scheme limits arbitrators to dealing solely with financial claims; they can deal with matrimonial finance cases, TOLATA, applications under Schedule 1 of the Children Act and Inheritance Act disputes. They can't deal with residence or contact cases as these are reserved to the court.

In this case the parties obtained an award from the New York Beth Din. The order recites the fact that the order was made pursuant to the final award. The judge supported the parties' decision to attend arbitration and endorsed the outcome; he considered his decision to do so to be fully in accordance with the Family Procedure Rules 2010. He concluded by stating: "The outcome was in keeping with English law whilst achieved by a process rooted in the Jewish culture to which the families belong."

This highlights another important factor of the arbitration process under the IFLA scheme. Only the law of England and Wales can be applied to those cases being arbitrated using the IFLA rules. The judge in this case was willing to allow the parties to pursue ADR using the Beth Din in New York; however it was clear from the outset that although any award would carry considerable weight with the court, the award would not be binding upon the court.

Profound effect

The ruling in S v S [2014] EWHC 7 (Fam) was delivered on 14 January 2014, following on from an arbitration under the IFLA scheme. This case should have a profound effect on the way that family finance practitioners advise their clients about the effectiveness of arbitration.

Following on from the award delivered by the arbitrator, the solicitors submitted the consent order to the court in the usual way. The matter was transferred from Guildford County Court to the President of the Family Division, who indicated that there was little doubt that the order should be approved.

Sir James Munby felt that it would be appropriate to give some guidance about the proper approach of the court in these cases.

His guidance can be summarised as follows:

1. The starting point is that the parties' decision to use arbitration should be respected. Their willingness to be bound by the award of the arbitrator should be a magnetic factor pointing the path to court approval.

2. The judge will not need to play detective in respect of the consent order unless something "leaps off the page to indicate that something has gone so seriously wrong in the arbitral process as fundamentally to vitiate the arbitral award."

The judge will need to see the award to ensure that the order accords with the terms of the award but, beyond that, it is only in the "rarest of cases that it will be appropriate for the judge to do other than approve the order".

3. Orders that are made pursuant to the arbitration process can be streamlined through the court process in the same way as orders made following the use of the collaborative process.

4. The parties must lodge with the court the ARB1, the statement of information in support of the consent order, the arbitrator's final award and the draft order.

Robust approach

In the event that one of the parties wants to resile from the award and refuses to sign a consent order, the other party should apply to the court using the "notice to show cause procedure". The president envisages that "the court will no doubt adopt an appropriately robust approach, both to the procedure it adopts in dealing with such a challenge and to the test it applies in deciding the outcome."

In the event that the attempt to resile is plainly lacking in merit, the president indicates that the court can summarily make an order reflecting the terms of the award and providing for enforcement if necessary.

This is very positive news for the IFLA scheme and provides practitioners with a cost-effective way of helping clients to reach an early conclusion of their financial dispute.

Typically an arbitrated process takes about three months to conclude from filing the ARB1 to the delivery of the final award. As the time limits are agreed between the parties and the arbitrator for their mutual convenience, the process can be quicker or slower if they wish.

Although the parties will need to bear the additional cost of the arbitrator, that cost is usually a fixed sum and can start from as little as £500 plus VAT for a simple single issue dispute. Overall, the costs are generally thought to be the same as or slightly less than the litigated process.

Following on from the clarification provided by the president in this case, there is no reason why family practitioners should not be offering arbitration as a real alternative to the litigated process. SJ

 

ARBITRATION ESSENTIALS

When can an arbitrator be instructed? 1. From the outset of the case; 2. In the event that either mediation or collaborative processes have reached a conclusion or deadlock; 3. After a first directions appointment if the parties don’t wish to engage in the FDR stage they can agree to go straight to a final hearing or deal with matters by either written or oral submissions to the arbitrator; 4. After the FDR if the waiting time for a final hearing is too long for the parties to wait; 5. To deal with an MPS as a discreet issue. What issues can the arbitrator be asked to deal with? 1. All financial issues. 2. Discreet issues such as pension sharing orders, maintenance term or quantum. 3. Any issues left unresolved by the mediation or collaborative law process. What are the options in respect of the process? 1. The parties can choose to mirror the financial remedy process. Although the arbitrator can’t conduct an FDR, the parties could opt to have a private FDR with another arbitrator or family law professional. 2. The matter could be dealt with by written submissions only without any oral hearing. The exchange of written evidence and the form of that evidence is agreed between the parties and the arbitrator by way of directions. Many of the concluded arbitrations have followed this format. 3. The matter can be dealt with by oral submissions following the exchange of written evidence. 4. Given the format of the arbitrations to date, it has been rare for the parties to give oral evidence at a final hearing. However it is an option if the parties want to deal with matters in this way. How are directions given? 1. Directions can be dealt with by way of telephone conference or Skype between the arbitrator, the lawyers (if any) and the parties if their attendance is necessary. 2. Directions could be dealt with by email correspondence.

 

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Mena Ruparel is a family solicitor and arbitrator. She will discuss the S v S case at a webinar for CLT on 5 March 2014.

www.menaruparel.com

 

 

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