Global Vantage: Avoiding a costly trial and the jurisdictional race to early settlement

It has been over 25 years since the Lord Woolf reform into the civil procedure process, which brought about the introduction of the Civil Procedure Rules 1998 and the pre-action protocol process, requiring cooperation among parties prior to any legal action commencing.  Recently, the Civil Justice Council commissioned a report on compulsory mediation, finding that this would be desirable in suitable areas of the justice system, and the Ministry of Justice issued a call for evidence as to how mediation can be more integrated into the court system.  We have previously reported on this, which can be found here.

With the recent focus on methods of alternative dispute resolution to litigation, we take this opportunity to look at the status of pre-action procedures in place in some of the jurisdictions that Beale & Co operate in around the globe.

United Kingdom

In England and Wales, the Practice Direction on Pre-Action Conduct and Protocols sets out the conduct of parties required by a court prior to instituting proceedings.  The Pre-Action Practice Direction sets out protocols currently in force for 14 particular types of dispute, for instance construction and engineering or professional negligence, or in the absence of a specific protocol, the steps a party is required to take.  The court has powers to stay proceedings while a relevant pre-action protocol is complied with and may in some instances make orders for costs in favour of one party for failure by the other to comply with the protocol.  While the steps to be taken and time frames can vary among the protocols, each is consistent in its objectives, being for:

1. the early exchange of information relevant to a dispute, normally in the form of a letter of claim by the claimant and letter of response from a defendant, with key documents to each parties’ position also to be exchanged; and
2. the encouragement of settling a claim before instituting proceedings occurs, with some protocols requiring parties to meet and identify the cause of the disagreement that, if no settlement is possible, will then aid in the efficient management of a proceeding by narrowing the issues in dispute.

In Scotland, there is only a mandatory pre-action protocol in respect of personal injury claims, with there being three other non-mandatory protocols that provide pre-action guidance for insurance and commercial actions.

While it is difficult to measure the effectiveness of the Pre-Action Protocols in contributing to the settlement of disputes, quarterly statistics released by the Ministry of Justice in the UK to September 2021, December 2021 and March 2022 all note that the number of claims defended and number of trials is lower than as at the equivalent stage of that year as there was in 2019.[1]  What impact the COVID-19 pandemic has had on this is also unknown; however, making it compulsory for the parties to undertake steps to resolve or if not possible, then to conduct a proceeding more efficiently cannot be detrimental to the caseloads coming before the courts in the UK.

United Arab Emirates

In the United Arab Emirates (UAE), the Constitution provides that each Emirate is able to elect to operate under the federal court system or their own judicial system. While four of the seven Emirates in the United Arab Emirates operate under the Federal Court system, Dubai, Ras Al Khaimah and Abu Dhabi each operate under their own judicial systems in which they apply federal UAE legislation, in addition to their own enacted laws.

The UAE Civil Procedure Code (Federal Law No. (11) of 1992) (UAE Code) is the main source of law governing civil matters before the courts in the UAE.  There are no mandatory pre-trial mediation or alternative dispute resolution procedures prior to instituting court proceedings required under the UAE Code.

Notwithstanding that there are no mandatory pre-trial procedures, since the early 2010’s, there has been a focus on the resolution of disputes through alternate means to arbitration or litigation. This has been facilitated through the establishment of the Centre for the Amicable Settlement of Disputes in Dubai and by the passing of Federal Law No. 6 of 2021 on Mediation for the Settlement of Civil and Commercial Disputes (Mediation Law).  This new Federal Law has brought about a more structured framework for mediation, including the codification of confidentiality in the mediation process, originally a sticking point for parties to take part in the process due to documents and statements traditionally later being able to be raised in court proceedings.  The UAE Code also provides for proceedings to be stayed for up to six months while parties attempt to negotiate a settlement.

In addition to the laws governing matters before the UAE Courts, the common law jurisdictions of the Courts of the Dubai International Financial Centre (‘DIFC’) and the Abu Dhabi Global Market (‘ADGM’) have also made strides to enhance their alternative dispute resolution offerings. The Courts of the DIFC introduced a Small Claims Tribunal which focuses on mediation between parties without the need for a lawyer, and if the matter cannot come to a resolution during the consultation phase, can then be escalated to be heard by a judge. The ADGM Courts offer a court-annexed mediation service which ensures that potential litigants can explore and achieve a settlement of their disputes by accessing alternative dispute resolution options with internationally accredited mediators from ADGM Courts.

Therefore, while Dubai and the wider UAE has embraced the concept of mediation to resolve disputes, it has not been adopted in a pre-proceeding sense to the extent that the United Kingdom has.  However, with the advent of the Mediation Law, and the offerings provided by the DIFC and ADGM, the use and knowledge of mediation continues to grow as an alternative to formal dispute resolution in the region.

Australia

In Australia, each of the separate states and territories have their own civil procedure rules governing the conduct of civil disputes in that jurisdiction.  At the outset, there is no compulsory pre-action conduct that parties are required to undertake prior to instituting proceedings in state jurisdictions.  It is only once a proceeding is on foot that a judge may make interim orders referring parties to a dispute to take part in mediation.  At a federal level, when instituting a proceeding an applicant is required to file a ‘genuine steps statement’ at the time of filing the application, setting out the steps that have been taken to try to resolve the issues in dispute prior to filing.  However, this is subject to certain circumstances and does not require parties to have met to attempt to resolve the dispute prior to the time of filing.

Where a resolution cannot be reached, then the objective of a pre-action protocol is to narrow the issues in dispute for the purpose of an efficient conduct of a proceeding.  The Courts of the various jurisdictions in Australia have their own practice notes and directions, some that focus on the efficient conduct of civil litigation or case flow management, for example Queensland’s Practice Directions 18 of 2018 and 4 of 2020 respectively.  However, the actions the subject of these practice directions to be taken by parties do not occur until after a proceeding has been instituted and in some instances, not until a proceeding is not progressing satisfactorily to the court.

Conclusion

Pre-action protocols may have some detractions, for example performing similar work to prepare, present and settle claims, just in a less formal context than a proceeding.  However, when that formal proceeding context is taken away, the pre-action process can allow the facilitation of a settlement and sometimes, the preservation of a relationship between two parties.  Where a settlement cannot be reached, the disclosure of relevant information and documents during the pre-action stage allows the trial process to be conducted more efficiently through the issues in dispute having been narrowed.

While any step in a litigation process can be used tactically to apply pressure to another party, implementing protocols that work to reduce the possibility of this should be strongly considered by civil legislatures.  Proactive early resolution of disputes should be prioritised as courts have experienced significant backlogs following the COVID-19 pandemic.  The focus going forward should be to move away from a reactive mindset of ordering parties to attempt alternative dispute resolution only once proceedings are on foot and significant legal costs have already been incurred.

[1] https://www.gov.uk/government/collections/civil-justice-statistics-quarterly