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Family law arbitration: balancing certainty and fairness

Since lockdown, family law clients are increasingly opting for arbitration. But what is it? And what are the pros and cons?

Over recent years, an under-funded and over-crowded court system has led many litigants in family law cases to look for alternative methods of dispute resolution. The covid-19 crisis has served to increase pressure on an already stretched court system.

What is arbitration?

Arbitration is a private and privately-funded ‘out of court’ form of dispute resolution for financial and children cases (including relocation) which can provide a final outcome if matters proceed on a contested basis. It is suited to cases seeking a speedy outcome, where court proceedings have already started but delays are looming, as well as those cases in the early stages of a dispute.

It is a highly adaptable process where both parties work with their appointed arbitrator to manage the case. Case management is bespoke, and processes can be streamlined by limiting or by-passing steps usually followed by the family court, to save costs and time. If agreement cannot be reached, the arbitrator will make the decision. Throughout the process you will have the same arbitrator.

The arbitrator can work remotely, with the parties and their legal representatives, to allow for hearings via Skype, Zoom and so on.

The arbitrator will give a decision, and award, within a very short period of time unlike the traditional court process. The family court is then asked to seal and approve the award by way of a court order.

Although there is the additional cost of the arbitrator’s fee, the consensus is that those additional costs are outweighed by the savings made by streamlining the process and obtaining an efficient outcome, not to mention avoiding much of the stress involved in what might otherwise be a long and drawn out process.

What about appeals?

Until the recent case of Haley v Haley [2020] EWCA Civ 1369, it was thought that to challenge an arbitral award, a party had to satisfy the strict requirements of the Arbitration Act 1996, which are that the arbitrator lacked jurisdiction, there was serious irregularity or that the award was wrong on a question of law. Earlier reported decisions had suggested that an arbitral award had to ‘leap off the page’ or be seriously or obviously wrong.

Proponents, and opponents, of arbitration have often been at polar opposites: those heartened by a limited opportunity for appeal from the final arbitral award, and those deterred from the process by the prospect of having limited opportunity to challenge an arbitrator’s award if they felt it was a wrong outcome, ordinarily capable of appeal in the family court.

Those in favour of arbitration championed the certainty offered by the process with limited option for challenge. In comparison, a family law appeal applies a less restrictive test: the party challenging the award must show that the award was ‘wrong’. Some were concerned that arbitration offered a client less recourse to challenge an outcome than in the usual course of litigation.

What has changed?

The Court of Appeal in Haley v Haley ruled unanimously that the court can decline to make an order reflecting an arbitration award where the order was wrong and there were substantial reasons for concluding that an injustice would be done were an order to be so made.  

The correct test to be applied in such cases is the less restrictive test governing family appeals against a judge’s decision under FPR 30.12(3)(a): the party challenging the award must show that the award was ‘wrong’ and that an injustice would be otherwise served.

The test is therefore lower than previously thought, but a test nonetheless, and the threshold must still be reached. Early legal advice should be taken if a party wants to consider the possibility of a challenge. The Haley case has also helped clarify the process to be adopted if a challenge is to be considered.

Will this dampen enthusiasm for arbitration?

In our view, no. The decision reaches a balance between fairness and certainty for clients, using the court process or arbitration.

In the majority of arbitration cases, the award is made into an order and is unlikely to be challenged, much like most family law court cases. The Court of Appeal made comments strongly supporting the Family Law Arbitration scheme. 

Lady Justice King said “It goes without saying that it is of the utmost importance that potential users of the arbitration process are not deterred from using this valuable service; either, on the one hand, because the outcome is not seen as sufficiently certain or, on the other, because arbitration is regarded as providing no adequate remedy in circumstances where one of the parties believes there to have been an unjust outcome.”

She went on to say “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 and the eyes of the media. 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, which is the inevitable consequence of "lockdown”.” 

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