The rising popularity of non-court dispute resolution for high net worth individuals

All family practitioners will attest to the marked increase in recent years in the number of divorcing couples exploring non-court dispute resolution (NCDR) alternatives to the 'traditional' litigious path through the family courts. 

This trend is notably more prevalent amongst the high net worth (HNW) individuals and cases, and while NCDR has been much more popular in London for some time, family practitioners are increasingly seeing the trickle through effect to 'the regions'. 

The reason for this shift is of course multifaceted, but arguably can crudely be reduced to: 

• The societal shift of people adopting a DIY approach to their lives due to the prevalence of available information online, together with a desire for greater autonomy in areas where historically one was forced to rely on a 'professional' for guidance;
• an intolerably overloaded Family Court system which appears to be sinking further below the relentless tide with no remedies (financial or otherwise!) on the horizon; and
• a combination of the above factors, resulting in legislative encouragement away from litigation and towards NCDR. 

There are different forms of NCDR, ranging from the 'kitchen table' approach of individuals resolving issues directly between themselves, through to the arbitration process. 

The rise of NCDR

In between, lies mediation, an option which is undoubtedly having its moment in the wake of the key changes to the Family Procedure Rules at the end of April 2024. Those changes mean that parties must now be proactive in their approach towards considering and engaging with NCDR options, or otherwise face the potential consequences (primarily cost sanctions or having a case adjourned for the purpose of exploring NCDR). 

It is notable that often clients assume these options are mutually exclusive, as opposed to understanding that in a large number of cases it is standard practice for parties to each seek independent legal advice 'behind the scenes' to help guide their engagement through the voluntary process(es). 

In this vein, solicitor to solicitor (or frequently solicitor to LIP) negotiations are of course technically another NCDR option. However, the mere whiff of solicitor involvement and the intrinsically adversarial 'us and them' feeling this can evoke, can be enough to derail what could have otherwise been a relatively smooth navigation. A large part of this of course lies with the solicitor in question, but as all experienced family practitioners know, even the most placatory and carefully crafted letters can spark a nuclear reaction. 

The private financial dispute resolution hearing (Private FDR) has been an increasingly popular choice for HNW worth individuals as a form of 'neutral third-party evaluation'. It mirrors the without prejudice hearing in financial remedy proceedings which is aimed at assisting parties in reaching an agreement by way of a non-binding indication from a Judge as to how they would determine issues at a Final Hearing. Private FDRs require the parties to have the available funds to secure a private 'Judge' to conduct the 'hearing', but are undoubtedly a much swifter and more cost-effective solution in comparison with proceeding to a Final Hearing. This being said, as the indication is only an indication, the success of a Private FDR is dependent on both parties being broadly accepting of the outcome and being willing to move negotiations forward to settlement on that basis. 

Benefits and drawbacks of arbitration

But what about when people are unable to reach their own conclusions with or without the assistance of a third party? Their options are essentially to have an outcome thrust upon them – either by engaging with the court process through to Final Hearing, or, increasingly, via opting for the remaining NCDR option of arbitration. 

Last year, The Institute of Family Law Arbitrators (IFLA) reported a significant 46% increase in the number of financial settlements via private arbitrations. 

This trend is obvious to family practitioners 'on the ground' and is entirely unsurprising given the clear benefits involved, which are outlined below. 

Speed 

The Family Court system is agonisingly overburdened, resulting in lengthy delays in even the most straightforward of financial remedy cases. Conversely, arbitration can offer an outcome in weeks/months, as opposed to years. 

Expense

It is only in the middle to HNW cases where parties have the option of engaging with arbitration. However, it is the undoubtedly less costly option when utilised as an early intervention solution in comparison to a case where parties are legally represented all the way to a Final Hearing. 

Flexibility 

Parties can request that the arbitrator deals with the case remotely, in person, or even on paper, and are also able to tailor the specific issues they would like the arbitrator to determine. 

Privacy

Since the end of January 2025, journalists and legal bloggers have been permitted to attend and report on family cases in England and Wales. Despite initial sporadic uptake, the very shift towards greater transparency has quite understandably raised concerns for any parties involved in contentious financial remedy proceedings. Arbitration, like mediation, protects confidentiality. 

Amicability

In many cases, all of the obvious 'pros' above are eclipsed by the importance of avoiding litigation and the inevitable impact it has on the parties' relationship. Many parties cannot put a price on simply keeping the temperature down, and avoiding an escalation of acrimony in what is almost always already a difficult and stressful situation. 

Certainty

Unlike the other forms of NCDR which are focussed on guiding parties towards a form of compromise they reach themselves, the decision made by an arbitrator is binding, providing certainty of outcome.

Clearly, the benefits of arbitration abound. It is imperative of course that parties ensure they have the right guidance to support them through the process. You don’t know what you don’t know, and relevant issues (which are very not often what the parties believe them to be) must be identified and properly addressed before a final determination can be made, ideally with the assistance of legal representatives. 

Overall, it is abundantly clear why HNW individuals are increasingly favouring arbitration as the route to reaching settlement on divorce. However, whilst certainty is a clear benefit, it can also arguably be viewed as the proverbial fly in the ointment when it comes to opting for this method of NCDR. 

The key difference between arbitration and other NCDR options is the binding determination. Whilst parties may be attracted by the obvious advantages, agreeing to be bound by a decision does not necessarily mean that you agree with the decision itself. 

The binding nature of arbitration

This means that adopting arbitration to settle a dispute regarding the appropriate financial settlement on divorce is in reality no different psychologically to proceeding to a Final Hearing in financial remedy proceedings. 

For many clients, there are nuanced elements of their case which have no foundation in pounds and pence. As family practitioners, we are confronted every day with the task of balancing how a client feels about a particular issue or outcome, with what we perceive to be in their best interests vis-à-vis the strict application of the law. 

It has been said that "Success is getting what you want - happiness is wanting what you get". A not dissimilar adage is frequently recited by family practitioners to clients approaching settlement negotiations - essentially that the 'right' outcome is most often the one with which both parties are equally unhappy. 

With arbitration, that uncertainty of outcome still looms large. It ultimately remains a process which removes the autonomy of compromise from those involved. And one might question the psychological impact of a decision which was imposed rather than (albeit begrudgingly) ultimately compromised, when those involved look back as part of navigating their journey forwards.