Good Divorce Week: Private FDRs and arbitration

Posted: 01/12/2022

Even prior to the Covid pandemic, funding cuts had created huge backlogs within the family court system. These backlogs were only exacerbated by the 2020/21 lockdowns, which saw months’ worth of hearings adjourned or vacated. Figures released by HMCTS this month have shown that the backlogs now top 110,000 cases, with an average time to complete a case of 43 weeks.

As a result of these delays, an increasing number of couples are turning to alternative dispute resolution methods, including those that offer what is effectively a private court system.

First steps: Private FDR

Falling under the umbrella of Early Neutral Evaluation (ENE) to resolve financial disputes upon divorce, or in relation to financial provision for children under Schedule 1 of the Children Act 1989, are financial dispute resolution hearings – known as ‘FDRs’.

Introduced into the court process (on a trial basis) in 1996, FDRs were permanently incorporated in the rules of court in 2000. They are designed to enable parties, with the assistance of the judge, to identify and attempt to resolve the issues in dispute as early as possible, with the aim of limiting the financial cost to the parties, reducing delay in resolving the case and easing the impact on families of further, often contentious, and acrimonious litigation.

FDRs are now the second of three hearings within the court process and are usually listed within 6 months of financial remedy proceedings being issued, although these timescales are increasing with the backlogs in the family court system. They provide the opportunity for both parties to present their respective cases to a judge on a ‘without prejudice’ basis, meaning any concessions made cannot be relied upon at a later date if the parties are not able to settle. The judge then gives an indication as to what they would do if the case were being heard at a final hearing. These indications are thought greatly to assist in settlement negotiations and, whilst there are no definitive figures, it is thought that between 90 and 95% of cases settle either at the FDR hearing, or shortly thereafter.

In consequence, a growing number of couples are turning to the private sector to get a hearing date more quickly than the courts are listing. These hearings are known as ‘private FDRs’, and are accompanied by several additional advantages:

1. Parties within the court system are allocated a judge, depending upon availability. That judge – who may have practiced predominantly in other areas of law previously - will not necessarily have expertise in financial remedy cases, or indeed more complex issues that arise on a case-by-case basis, such as trust structures or nuptial settlements.
   
   Opting for a private FDR gives the parties the ability, by agreement, to choose the identity of their evaluator, who is usually a senior barrister or a retired or part-time judge. Often agreement is reached on the basis that a particular individual has knowledge or expertise in an issue which has arisen and is well-placed to assist.

2. In light of the backlogs and funding cuts is that judges appointed by the court are usually extremely busy and, despite their best efforts, are not able to dedicate sufficient time to read into every case. It can also be many hours before a judge is ready to hear your matter around their other cases, and without their input, settlement discussions cannot progress.
   
   Hiring a judge privately affords you their undivided attention, meaning they are able to read into the case comprehensively, and provide considered guidance in relation to the issues at hand.

3. Court FDRs are usually held within a court building. Courts can often be crowded and busy, with inadequate room for parties to speak with their legal team before and after the hearing. In turn, this can impact upon the chances of settling a case. In contrast, solicitors’ offices, barristers’ chambers or private conference rooms are often used for private FDRs, providing a more comfortable environment, conducive to reaching settlement.
   
   Unfortunately, for many litigants, the cost of hiring a private FDR judge (which ranges in line with their seniority but is usually between £5,000 and £10,000 plus VAT per day) can appear prohibitive. That said, it is important to consider this expense against the costs which are likely to be incurred by both parties in waiting for a court date, often many months later, which can – in some cases – offset this fee completely.

Unresolved? Arbitration may be the answer

If parties are not able to settle with the aid of Early Neutral Evaluation or at a private FDR, they may consider using arbitration to progress their matter. Some parties also choose to opt for arbitration from the outset, and arbitration is available for disputes involving arrangements for children as well as financial matters.

Arbitration has been used extensively in other areas of the legal system for many years, but it has only more recently gained in popularity to resolve family law disputes.

Like private FDRs, parties that embark upon arbitration appoint an arbitrator of their choice. Having done so, they complete Form ARB1 in which they describe and define the scope of the dispute they have agreed to arbitrate. There are different ARB1 forms depending upon the nature of the dispute, for instance whether it relates to financial remedies upon divorce or children matters. The parties also expressly agree to be bound by the arbitrator’s written decision, subject to their right to appeal or any changes which a court making the order in due course may require (see below).

Once appointed, the arbitration process is very similar to that which the court follows, save that it is not restricted by backlogs and other such delays. Like court-based judges, arbitrators have the widest possible discretion to adopt procedures to suit the circumstances of the case. However, it is a distinguishing feature of arbitration that the process and the award are confidential, and disclosure is permitted only in prescribed circumstances. Unlike court-based hearings, which is moving towards greater transparency (including publication of case details and the admission of the press to family hearings in some cases), the media are not admitted to any meetings.

The power of the Family Court

Whilst alternative dispute resolution methods are an efficient and often cost-effective way to progress family law disputes it is imperative – particularly within financial remedy proceedings - that a consent order is drawn up expeditiously reflecting either the agreement reached at a private FDR, or the award made by an arbitrator, including the dismissal of each party’s respective claims against the other. An application should then made to the court to ratify that order, without which the agreement reached, or award made, will not be enforceable.

It is also important to understand that the court will always retain the power to hear a case until each party’s claims are dismissed by way of a final order, including to hear any challenge to a financial remedy arbitral award, which should be dealt with in broadly the same way, and subject to the same principles, as a financial remedy appeal.

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