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Family Arbitration: An Introduction

In his keynote address, delivered at a reception hosted by Collaborative Family Law last week, Lord Wilson of Culworth referred to the advent of an arbitration scheme to determine family disputes. In this article Timothy Scott QC of 29 Bedford Row Chambers offers an explanation as to how that scheme, which will be launched in February 2012, will work.

Timothy Scott QC, 29 Bedford Row Chambers

What is arbitration?
1. Arbitration is a form of dispute resolution. The parties enter into an agreement under which they appoint a suitably qualified person to adjudicate a dispute and produce a result which will bind them. In England the process of arbitration is governed by the Arbitration Act 1996 ("the Act"), a clear and helpful statute. The Chartered Institute of Arbitrators ("CIArb") is the professional body to which most English arbitrators belong.

2. Arbitration has a long history in certain areas; many commercial and construction contracts provide for dispute resolution by arbitration. There has been a widespread belief among family lawyers that arbitration cannot apply in family law disputes. This is a misconception. There is nothing in the Act or otherwise to preclude arbitration in family law matters. However, there has not until now been any scheme setting out rules within which family law arbitration could take place. For practical purposes this had ruled it out.

The IFLA Scheme
3. A growing feeling that arbitration might have a place in English family law (as it does in some other common law jurisdictions) led to the formation of The Institute of Family Law Arbitrators Limited, the IFLA: the CIArb, the FLBA, Resolution and the Centre for Child and Family Law Reform have all been involved. After consultation with the Family Justice Council and other interested bodies the IFLA has drawn up rules for a family law arbitration scheme ("the Scheme"). A not for profit company is being formed which will oversee the Scheme. In September 2011 an initial group of about 20 family lawyers were trained to become family arbitrators operating within the Scheme and have become members of the CIArb.

4. A further group of 20 is to be trained in January 2012, after which the Scheme will become operative. The Judges of the Family Division and the Senior District Judge at the PRFD have been kept fully informed. With effect from 22 February 2012 arbitration will be available as another alternative route for resolution of many family disputes.

What is covered by the Scheme?
5. Article 2 of the Scheme sets out its scope. In summary it covers any financial and property disputes arising from family relationships including (but not limited to):-

6. The Scheme does not apply to disputes directly concerning:- 

How does the Scheme work?
7. The first step is for the parties to complete and sign a form ARB 1 in which they agree to arbitrate and to adopt the rules of the Scheme. They summarise the issues to be arbitrated. They can either nominate an IFLA arbitrator or invite the IFLA to nominate the arbitrator. All arbitrations under the Scheme have to pass through the IFLA which charges an administration fee. They agree in the form ARB 1 that the arbitrator's decision will be final and binding and that if necessary they will apply for a court order to give effect to it.

8. After the form is submitted:- 

9. What happens after this will depend on what is agreed, or decided in default of agreement. In many cases there will be a final hearing, but arbitration can be entirely a paper exercise.

10. The judgment and order made by an arbitrator is known as an award. There can be interim awards dealing with preliminary issues such as interim maintenance or the ambit of disclosure. The arbitral process concludes with a final award. All awards must be in writing.

Arbitration is consensual
11. It is a central feature of all arbitration that it is consensual in that:- 

Powers of the arbitrator
12. Once an arbitrator has been appointed, he or she has wide-ranging powers to make decisions on any case management or substantive issues on which the parties cannot agree. In the absence of agreement, an arbitrator can:-

13. The appointment of an arbitrator can only be brought to an end by agreement or by a court order; the grounds for which are limited. However, the parties can agree to discontinue the arbitration at any time.

Flexibility
14. There are certain limits to what can be agreed under the Act and/or the Scheme: Article 3 provides that only English law can be applied. However, the flexibility of arbitration procedure is a very attractive feature. For example:-

15. Also it is for the parties to define the scope of the arbitration. In some cases they will want the entire dispute arbitrated. In others there may be a large measure of agreement but one or a few intractable areas of disagreement. For example the arbitration could be limited to discrete issues such as:- 

Discrete issue arbitrations could well be suitable for a paper only procedure which would produce an outcome very quickly.

16. A further area of flexibility is that the arbitration can take place at any time and anywhere:- 

17. Parties can even agree in advance to exclude a right of appeal. Section 68 of the Act provides that there is a right of appeal to the court on a question of law unless otherwise agreed by the parties.

Other advantages
18. Choice of arbitrator. Parties to a dispute never have the right to choose which Judge will try their case in court, but they do have the right under the Scheme to choose their arbitrator. Knowing that a dispute will be resolved by a selected specialist with appropriate experience (and who they can be sure will have read the papers) will be very attractive to many parties and their advisers. Many litigants are unsettled by the fact that they usually do not even learn who their Judge is until the day before a court hearing. Judges often do not have enough time to pre-read adequately.

19. Speed. It can be established in advance whether a possible arbitrator will be willing and able to deal with matters in an expedited way. It will be possible to find one who is. Subject to the arbitrator's availability the timetable is entirely in the hands of the parties. This is in marked contrast to court procedures.

20. Confidentiality. The entire process is confidential by its nature. Since the papers never go to a court, the risk of leaks is minimised. The parties can impose any terms of security that they wish and which the arbitrator is willing to agree to: e.g. that the papers are never to leave a secure office and the arbitrator is to do any preparatory work there.

21. Costs. In many cases there will be a saving of overall costs. On the one hand the parties have to pay the arbitrator's fees, the cost of any venue which is hired, and the cost of a transcription service if required. On the other hand the ability to limit disclosure and the ambit of the dispute, and the potentially huge saving of time will in many cases lead to a net cost saving.

What is not suitable for arbitration?
22. Some issues cannot be the subject of an IFLA arbitration, e.g.:-

23. An arbitrator cannot have any communication with one party only, so no order can be made without notice.

24. The limitations on the power of an arbitrator may make some cases unsuitable for arbitration in their early stages:- 

25. The court has power under the Act to make orders in support of an arbitration to fill these gaps. However, where it is likely that such orders will be required, it is probably not realistic to start on the arbitration route unless and until that stage of the proceedings has been completed.

Third parties
26. The arbitrator has no power over any person who is not a party to the arbitration. However, there will be many cases where arbitration will be a convenient, cheap and expeditious route to resolve issues involving third parties provided that they agree to take part. For example:- 

Costs
27. Article 14 of the Scheme provides that subject to (a) prior agreement and (b) the arbitrator's overriding discretion, the normal rule will be no order for costs. However:- 

The status of the award
28. The Act provides that an arbitral award is enforceable by leave of the court in the same manner as a judgment; and that when leave is given judgment may be entered in the terms of the award. One of the advantages of commercial arbitration is that under an international convention known as the New York Convention arbitral awards are readily enforceable internationally.

29. An award under the Scheme is final and binding, subject to review or appeal. If an award provides for continuing payments it can be subject to a further award or court order: plainly there has to be scope for variation.

30. Article 13(4) of the Scheme provides that "if and in so far as the subject matter of the award makes it necessary, the parties will apply to an appropriate court for an order in the same or similar terms as the award ... and will take all reasonably necessary steps to see that such an order is made."

31. In some Scheme arbitrations applications to the court will not be necessary: e.g. TLATA issues or discrete issue arbitrations to break a logjam in wider negotiations. More generally there is unlikely to be any need for an application to the court if the parties accept and comply with the terms of the award.

32. It is possible that at some point there may be a case which will test the precise juridical status of an award made e.g. under the Matrimonial Causes Act. It may be arguable as a matter of strict legal theory that since the jurisdiction of the court cannot be ousted, the court will not be bound to make an order which mirrors the award.

33. However, it is established law that any issues either of fact or of law which have been decided in an arbitration cannot be challenged in other proceedings except (in the case of a point of law) by appeal. In addition a Judge of the Family Division will surely regard an agreement to arbitrate as at least equivalent to an agreement to compromise, since the parties have agreed to accept and be bound by the award. They have signed up to the Scheme including Article 13(4). They will have had a full opportunity to argue their case and will probably have been (and certainly had the opportunity to be) legally represented.  The arbitrator would have been satisfied with the disclosure.  It seems extremely unlikely that a Judge would exercise judicial discretion in a way which departed from an award.