An introduction to dispute resolution in the UK

13 January 2014

English law and English jurisdiction is often chosen as the governing law of contracts and the dispute resolution mechanism respectively, even when there is no English party, for a number of reasons.

  1. There is a strong culture of favouring out of court settlement, which, when combined with the 'loser pays' costs rules, ensures litigation is avoided whenever possible.
  2. If a dispute does reach the courts then the rules governing disclosure and evidence create a litigation system trusted to provide a detailed analysis of a dispute and as near to the 'right' decision as possible.
  3. Extensive case law means lawyers can advise clients with a greater degree of certainty on the strength of their claim or defence than might be the case elsewhere, which in turn results in parties often settling out of court.

Common law and the UK courts

There is no civil code in England; instead, English law is made up of Parliamentary legislation which is then interpreted by the courts. A court cannot interpret the Parliamentary legislation in any way it wants, however; it is bound by the doctrine of precedent. This means a lower court must follow a decision on the same issue by a court of higher status. There are three main courts in England, which are listed below in increasing order of seniority:

  1. High Court (court of first instance - must follow previous Court of Appeal and Supreme Court decisions);
  2. Court of Appeal (can overrule High Court but must follow previous Supreme Court decisions); and
  3. Supreme Court (cannot be overruled and need not follow previous Supreme Court decisions).

English legislation and decisions of the courts are also subject to legislation adopted by the European Council and decisions of the European Court of Justice.

The Civil Procedure Rules

English civil litigation procedure is governed by the Civil Procedure Rules (CPR). Parties reveal their strengths and weaknesses in stages, with a High Court case typically taking 12-18 months to reach trial. The overriding objective of the CPR is to enable the court to deal with cases justly and at a proportionate cost. This includes, for example:

  • encouraging co-operation and settlement between the parties (including the use of Alternative Dispute Resolution (ADR) if appropriate);
  • identifying the issues in the case and deciding the order in which these issues should be dealt with; and
  • deciding on timetables and directions to ensure the efficient handling of the case.

Case management

The courts monitor cases to ensure that they are managed efficiently and proportionately according to the amount of money involved, the importance of the case, its complexity and the financial position of each party. In addition, the courts will expect parties to co-operate with one another and encourage the parties to settle their disputes by way of ADR.

Failure to comply with the courts in this regard may result in a costs order being made against a party who the court believes is acting unreasonably. It is important to note that the trial judge will not be involved in settlement negotiations himself. He will encourage ADR, but his impartiality might be compromised if he were to participate in negotiations.

Pre-action matters

The pre-action protocol requires parties to act reasonably with a view to resolving the case before issuing proceedings or at the very least identifying or narrowing the issues. The CPR requires the parties to exchange information to allow each side to understand the other's position, and so make an informed decision about how to proceed. Parties who do not comply with these requirements may be penalised by the court when the costs of the case are decided.

Issuing proceedings, defence and counterclaim

Litigation in China is labour intensive at the beginning; a party who wishes to commence litigation must first submit their case documents along with sufficient evidence to demonstrate that they have been wronged by the other party.

Litigation in England is, in theory, similar in that the parties are expected to have undertaken a good deal of work prior to commencing proceedings in the form of identifying the facts and gathering the main aspects of the evidence. In practice, proceedings could be started with very little work being done, ie the claimant simply issues and serves a claim form and then seek to settle the claim. In all but the most simple cases, this course of action is not to be recommended.

The Claim Form and Particulars of Claim set out a summary of the basic facts (but not the evidence) of the claim against the defendant. A claimant pays a fee to issue the Claim Form, the amount of which depends on the value and nature of the claim, and varies from £35 to £1,670 (for money claims). The Claim Form and Particulars of Claim have to be served on (i.e. sent to) the defendant in accordance with special rules and within prescribed time frames.

A defendant served with a Claim Form must indicate whether he accepts the claim or intends to defend the claim (or in some cases, whether he wishes to challenge the jurisdiction of the English court). If the defendant wishes to defend the claim, he must serve a Defence (including any Counterclaim) normally within 28 days of receiving the Claim Form. A failure to serve a Defence will allow the claimant to enter judgment in default against the defendant.

The claimant's assessment of its chances of success may change on receipt of the Defence and Counterclaim. A settlement between the parties sometimes stems from these initial exchanges although if the pre-action steps have been properly taken, the defence should contain no surprises. If no settlement is reached at this stage, the court will schedule a case management conference (CMC) to consider how the rest of the case should be conducted. Among other things, the judge will set a timeline for parties to give disclosure, evidence and a date for the trial.

Disclosure

The court will usually order "standard disclosure", which requires each party to disclose to the other:

  • the documents upon which he relies; and
  • the documents which adversely affect his own case; or
  • another party's case; or
  • support another party's case.

However, the parties may agree, or the court may order, a different type of disclosure order such as one based on and limited to the issues in dispute or, if appropriate, an order for no disclosure. For the purposes of disclosure a "document" is defined as anything upon which information is stored, whether it be paper based, electronic or otherwise.

The disclosure rules in the CPR seek to strike a balance between ensuring that key evidence is brought to light and avoiding disproportionate expense. Therefore, for the purposes of standard disclosure a party need only give disclosure of documents which are or have been in that party's control, and is only required to disclose those documents which have been found by a "reasonable search".

Preservation

Once litigation is contemplated, a party is under a duty to preserve and keep all documents (including electronic documents) which may become disclosable in that action. A failure to preserve documents at the outset, or give proper disclosure once litigation has commenced, can result in judicial criticism, penalties or adverse inferences which are harmful to the case. A party (or expected party) to litigation in England must therefore maintain all copies of disclosable documents, and must not mark or annotate disclosable documents.

Withholding documents

Some documents need not be disclosed because they are "privileged". Privilege is a complex area of law and we will not discuss it in depth here, but the two most common grounds of privilege relied upon are legal advice privilege and litigation privilege. Legal advice privilege protects confidential communications between lawyers and their clients which are created for the dominant purpose of seeking, providing or receiving legal advice.

Litigation privilege protects confidential communications between lawyers and their clients, or the lawyer or client and a third party, which come into existence for the dominant purpose of being used in connection with actual or pending litigation.

Confidential documents

Documents that are confidential but not privileged must be disclosed. However, confidentiality in disclosed documents is preserved by a rule in the CPR which provides that no ancillary or collateral use may be made of any disclosed document without the consent of the disclosing party unless and until it is:

  • read out in court;
  • referred to in a public hearing; or
  • the court gives permission.

In some cases the court may order that the document can only be examined 'in camera' (in secret), thereby preserving confidentiality.

Evidence

In addition to evidence in the form of documents, the remainder of the evidence in any matter comprises witness evidence, both factual and expert. Each party discloses such evidence in written format in advance of the trial. This is a vital stage in the proceedings because a party's arguments and the strength of its case will become more apparent from its evidence.

Fact evidence

Fact evidence is given by way of a "witness statement". A witness statement should set out the facts to which the witness will testify orally at the trial. The written version must be certified to be true by the witness and then the witness must be available to be cross-examined by the other side at trial.

Expert evidence

It may be necessary to call on expert opinion evidence in order to prove or disprove a case. If necessary, one or more independent experts can be asked to give evidence. The expert's role is to assist the court, not to act as an advocate for either party. Expert evidence is exchanged after disclosure and exchange of witness statements of fact. The experts must then be available to be cross-examined by the other side.

The court will also encourage, by order if necessary, discussions between experts with a view to finding areas of agreement and therefore narrowing the issues at trial.

Trial

The trial will be heard by a single judge (except in civil fraud and defamation cases, which are heard by a jury). The judicial system is adversarial as opposed to inquisitorial which means that the process is focused at the claimant seeking to prove its case rather than the court seeking to establish what happened.

The trial process is usually as follows:

  1. Each party's lawyers give an opening speech.
  2. Witnesses of fact and opinion are cross-examined.
  3. The parties present arguments as to any relevant law.
  4. Finally each side will give a closing statement.

Cross-examination is the process by which evidence is tested. The lawyers will analyse a witness' statement in advance of trial to identify possible omissions, exaggerations, inconsistencies or untruths and will question the witness closely at trial. The system is designed to test the accuracy and reliability of the evidence being submitted.

The judge will deliver a detailed decision, reviewing all of the evidence including his perspective on the evidence and the witnesses. The judgment will set out the relevant law and apply it to the facts as found and render a decision on whether the claimant has proved its case.

Enforcement

English judgments can be enforced in many jurisdictions around the world by international agreement. They are relatively easy to enforce throughout the EU and in many other countries through reciprocal treaty obligations.

Appeals

There is limited opportunity to appeal a judgment. Permission to appeal will only be granted if the court considers that the appeal would have a real prospect of success or that there is some other compelling reason why it should be heard. Appeals may only be based on matters of law and not fact.

Costs

The general rule is that the loser pays the winner's costs. This acts to deter weak and speculative claims. However, the winner will almost never be awarded all of its costs. When assessing how much of its costs the winner should be awarded, and the court will consider factors such as the parties' conduct, whether the winning party lost on certain issues, the respective parties' approach to negotiations and the circumstances of the case generally. On average the winner is awarded approximately 60-70% of its costs.

Settlement and ADR

A party may make an offer to settle a dispute at any time. The party making the offer to settle is granted specific cost advantages (provided that the offers to settle meet the prescribed requirements). For example, a party may make what is known as a "Part 36 offer" to its opponent to settle at a particular amount of damages. If the recipient refuses a Part 36 offer, but is later awarded an amount equal to or less than the sum offered by the Part 36 offer, that party will suffer costs penalties despite succeeding in its claim. A party receiving a Part 36 offer should therefore consider it carefully.

Similarly, the parties are free to attempt ADR at any stage of the proceedings and are encouraged to consider other options before litigation begins. There are a number of forms of ADR in the UK, the most popular of which is mediation.

Mediation

Mediation is a non-binding process in which the parties are brought together in face-to-face negotiations led by an impartial mediator. The mediator does not decide the case, instead he works to bring the parties together to reach an agreement. Mediation is useful in preserving important business relationships and provides a confidential and effective means of resolving the dispute. Mediation meetings and discussions will usually be confidential and cannot subsequently be referred to in court.

Arbitration

Although some regard arbitration as a form of ADR, it is not really "alternative" at all in the sense of being alternative to a formal process of third party-imposed dispute resolution. It is a parallel system to court litigation and is supported by a statutory framework. The awards are enforceable in courts worldwide. It is a private and confidential forum in which an independent arbitrator, often with extensive technical expertise in the relevant area, assesses the issues as presented by the parties and makes an award.

Arbitration clauses are common in UK contracts, particularly in construction and cross-border matters, because the process is private and enforcement is often easier. The courts will usually only intervene to overturn decisions if there is evidence of misconduct. This is, however, rare.

Conclusion

English law and procedure enables parties to settle disputes by mediation, arbitration or litigation. If litigation is the chosen route then the rules of disclosure and evidence exchange followed by cross-examination of witnesses provide a very thorough review of the facts, ensuring that an experienced judge is fully informed of all relevant aspects in a case and enabling him to make the best decision possible.


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