Learning Outcomes
After reading this article, you will be able to explain the main alternatives to litigation for dispute resolution, including forms of ADR and effective settlement strategy. You will recognise when ADR is appropriate, distinguish between main ADR methods, and apply negotiation frameworks including BATNA. You will confidently advise clients on when and how to pursue ADR, and structure settlement discussions and proposals for SQE2 scenarios.
SQE2 Syllabus
For SQE2, you are required to understand alternative dispute resolution and settlement options from a practical standpoint. You should focus your revision on:
- the principal forms of ADR available in England and Wales, including their procedures and suitability
- the factors determining whether ADR or litigation is appropriate
- the practical advantages and disadvantages of ADR methods compared to litigation
- the processes for evaluating case strengths and risks to devise a settlement strategy
- use and explanation of negotiation tactics, including identifying a client’s BATNA
- structuring and presenting advice to clients on ADR, negotiation, and settlement proposals
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- Which ADR method involves a neutral party assisting parties to reach a voluntary settlement, without having power to impose terms?
- What does ‘BATNA’ stand for, and why is it important in settlement negotiations?
- Name three key factors a solicitor should assess before advising a client to use ADR.
- True or false? Courts may penalise a party in costs for unreasonably refusing to participate in mediation.
Introduction
Disputes can be resolved in several ways. Litigation should not be the default. For SQE2, you need to understand the effective use of alternative dispute resolution (ADR), know when settlement options should be considered, and be able to advise clients appropriately.
A solicitor must evaluate both litigation and alternatives, considering client objectives and risk. This article outlines the core ADR methods, when to use them, and how to construct a rational settlement strategy for clients.
ADR: Overview
Alternative dispute resolution (ADR) refers to processes for resolving disputes without a court’s final decision. There is a growing expectation that clients and solicitors consider ADR at an early stage, and courts may impose costs penalties for unjustified refusal to participate.
Key Term: alternative dispute resolution (ADR)
Any structured method for resolving disputes other than obtaining a court or tribunal judgment (e.g., mediation, conciliation, expert determination, or arbitration).
Main Types of ADR
Mediation
Mediation involves a neutral third party (the mediator) helping parties to reach a voluntary and mutual settlement. Mediation is confidential, flexible, and typically faster and less costly than litigation.
Key Term: mediation
A voluntary and confidential process in which a neutral mediator assists the parties to negotiate a self-determined settlement.
Arbitration
Arbitration is a formal process where parties agree to be bound by the decision of an arbitrator or panel, often chosen for their specialist knowledge. The process is private and the award is binding.
Key Term: arbitration
A process in which a neutral arbitrator makes a binding decision on a dispute, usually following a hearing.
Early Neutral Evaluation
A neutral evaluator assesses the strengths and weaknesses of each side’s case early on. The evaluation is not binding but may lead to negotiation and settlement.
Key Term: early neutral evaluation
Non-binding assessment of a case by a neutral expert to indicate likely outcome if decided by a court or tribunal.Key Term: conciliation
A process similar to mediation where a neutral third party helps resolve a dispute, but may play a more active role in proposing settlement terms.
Advantages and Disadvantages of ADR
ADR may be faster, cheaper, and less adversarial than litigation. It is confidential and suitable for preserving business or family relationships. However, it is not always appropriate—e.g., where urgent or interim relief is needed, one party refuses to cooperate, or precedent is essential.
When is ADR Appropriate?
A solicitor should consider ADR where:
- There is need for a private process
- Parties want continued relationship
- Legal costs and delay of trial are disproportionate
- Outcome certainty is less important than control or creative solutions
ADR is less suitable where:
- There are allegations of fraud or wilful non-cooperation
- A party wants a legal precedent or public judgment
- Immediate remedies (e.g., injunctions) are needed
Courts expect parties to consider ADR, and an unreasonable refusal can have costs consequences (see Halsey v Milton Keynes General NHS Trust).
Worked Example 1.1
Lucy’s business is in dispute with a supplier over defective goods. Both wish to preserve a future trading relationship, but communications have stalled.
Answer:
Mediation is likely to be appropriate as a flexible, confidential process that focuses on mutually acceptable solutions and helps preserve relationships.
Settlement Strategy and Case Evaluation
Settlement strategy is not just about making offers—solicitors must evaluate the merits and risks of the client’s case compared to alternatives.
Negotiation and BATNA
Effective negotiation is central to settlements. Before entering negotiation, a solicitor must clarify the client’s objectives, assess likely outcomes, and identify both sides’ best and worst alternatives if no agreement is reached.
Key Term: BATNA
Acronym for 'Best Alternative To a Negotiated Agreement'—the most advantageous alternative a party can take if negotiations fail.
Assessing BATNA gives clients a benchmark and ensures they do not accept a settlement less favourable than their next best option (e.g., going to trial).
Worked Example 1.2
Omar is suing for £20,000. He has legal expenses insurance. His case is average in strength, with an estimated 60% chance of success at trial. The defendant offers £10,000 plus costs. Should Omar accept?
Answer:
Omar should compare the net probable value of litigation (considering risks, costs, and time) to the offer. If, after honest assessment, litigation is expected to yield more than £10,000 (after adjusting for probabilities and costs), decline. Otherwise, consider accepting or negotiating further.
Key Factors in Settlement Advice
When devising a settlement or ADR strategy, consider:
- The client’s objectives, priorities, and core interests (not just legal rights)
- Merits and risks of the case (including evidence, law, costs, and delays)
- The other party’s interests and possible position
- Practical and commercial consequences of settlement vs. litigation
Solicitors should document advice given, explain all options, and regularly review strategy as matters progress.
Worked Example 1.3
A client wishes to proceed directly to court without considering ADR. What advice should you give?
Answer:
The client should be advised of the court’s expectation to consider ADR, the potential costs penalties for unreasonable refusal, and the potential benefits of a suitable form of ADR. The solicitor should record this advice and be prepared to justify any decision to proceed without ADR.
Exam Warning
For SQE2, remember that courts may impose costs sanctions for parties who refuse to consider ADR without a valid reason (e.g., Halsey v Milton Keynes General NHS Trust). Be able to identify when refusal might be reasonable.
Revision Tip
Use the BATNA framework with clients: always assess their best and worst alternatives to settlement, then compare the value and risks logically before recommending next steps.
Key Point Checklist
This article has covered the following key knowledge points:
- ADR is an umbrella term for several structured alternatives to litigation, especially mediation, arbitration, conciliation, and early neutral evaluation.
- Mediation is voluntary and focuses on party-driven settlement; arbitration leads to a binding third-party decision.
- Courts expect parties to consider ADR; unjustified refusal can result in costs consequences.
- Solicitors must evaluate merits, risks, and client objectives before advising on ADR or settlement.
- BATNA helps establish negotiation limits and align advice with the client's best interests.
- Effective settlement strategy requires honest risk assessment and ongoing review as a case develops.
Key Terms and Concepts
- alternative dispute resolution (ADR)
- mediation
- arbitration
- early neutral evaluation
- conciliation
- BATNA