5.1 Choosing Arbitration, Mediation or Litigation

Why the choice of mechanism is functioning knowledge

A newly qualified solicitor in England and Wales does not start every dispute with a claim form. The SRA’s SQE1 FLK1 specification asks you to apply the characteristics of arbitration, mediation and litigation that make each an appropriate mechanism. That is a client-advice question: cost, speed, confidentiality, the need for a binding decision, the need for interim relief, the location of assets, and whether a continuing commercial relationship matters.

The Civil Procedure Rules treat court proceedings as a last resort, but they do not treat ADR as optional window-dressing. CPR 1.1(2)(f) (in force from 1 October 2024) provides that dealing with a case justly and at proportionate cost includes, so far as practicable, promoting or using alternative dispute resolution. CPR 1.4(2)(e) requires active case management to include ordering or encouraging the parties to use ADR and facilitating that use. CPR 3.1(2)(o) confirms the court’s power to order the parties to engage in ADR. Those rules implement Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416: a court may stay proceedings for, or order, a non-court process provided the order is proportionate and does not impair the right to a judicial determination under Article 6 of the European Convention on Human Rights.

The Practice Direction – Pre-Action Conduct and Protocols, paragraph 8, states that litigation should be a last resort and that parties should consider negotiation or another form of ADR before issuing. Paragraph 11 warns that silence in response to an ADR invitation, or an unreasonable refusal to participate, may be treated as unreasonable and may lead to additional costs orders. That costs risk is a characteristic of litigation, not of mediation: it exists because the court controls costs. Use it when advising a client who wants to “just issue and see”.

Compare the three mechanisms by legal character

Mediation: when the characteristics fit

Mediation is appropriate where the parties need a negotiated outcome that a court cannot easily give. Classic examples are a continuing supply relationship, a family-owned company dispute in which a clean break and a confidentiality clause matter more than a declaration of legal rights, or a personal injury claim in which quantum is the real issue and both sides want to avoid a three-day trial.

The mediator is a neutral facilitator. They may hold joint sessions and private caucuses. They may reality-test a party’s best alternative to a negotiated agreement. They must not decide the dispute. If a proposed mediator is a friend, employee or regular adviser of one party, independence is compromised: the process will not command confidence, and a court later looking at costs will not treat a refusal to use that particular person as an unreasonable refusal of ADR. The proper response is to propose a genuinely independent mediator, not to reject mediation as a class of process.

Settlement at mediation is not automatic. If the parties reach terms, those terms should be recorded in writing and signed. If proceedings have already been issued, the usual vehicles are a consent order (where the terms are to be embodied in an enforceable court order) or a Tomlin order (a stay on scheduled terms, with liberty to apply to enforce the schedule). Until a binding agreement is made, either party may walk away. That is a feature, not a defect: it is why mediation is suitable when a client cannot risk a binary win/lose outcome, and unsuitable when the client needs a determination against an opponent who will never agree.

Mediation is usually cheaper and quicker than a contested trial, but it is not free. Each side still needs enough information to bargain. The Pre-Action Conduct PD expects a letter of claim, a reasoned response and exchange of key documents before positions harden. A mediation held in a factual vacuum often fails. If limitation is about to expire, issue a claim form to stop time running and then mediate under a stay; do not miss limitation because “we were going to mediate”.

Arbitration: private adjudication with a statutory backbone

Arbitration is appropriate where the parties want a binding decision from a specialist decision-maker, in private, often with easier international enforcement than an English judgment. Construction, commodities, shipping, insurance and cross-border share sale disputes are the everyday illustrations. The process exists because the parties agreed to it. If there is a valid arbitration agreement covering the dispute, section 9 of the Arbitration Act 1996 requires the court to stay legal proceedings on the application of a party (made before taking a step in the proceedings to answer the substantive claim), unless the court is satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed. Stay is not a discretionary “might be nice”; it is the statutory consequence of the agreement.

The Arbitration Act 2025 amended the 1996 Act with effect from 1 August 2025 for arbitration proceedings commenced on or after that date. Functioning knowledge includes section 6A: the law applicable to the arbitration agreement is the law the parties expressly agree applies to that agreement, or, if they do not, the law of the seat. Agreement that a particular law governs the main contract does not, by itself, count as an express choice for the arbitration clause. That statutory default matters when you are asked whether an English-seated arbitration clause in a New York-law share purchase agreement is governed by English law: unless the clause itself chooses a law, the seat supplies it.

Other current features you should be able to deploy: arbitrators owe a duty of disclosure of circumstances that might reasonably give rise to justifiable doubts as to impartiality (section 23A, inserted by the 2025 Act); the tribunal decides the dispute and issues an award; court intervention is limited; and a well-drafted award can be enforced as a judgment (s.66) and, abroad, under the New York Convention. Those characteristics make arbitration a poor fit when the client needs an urgent freezing injunction against a third-party bank, when necessary defendants are not parties to the clause, or when the client’s real objective is a public judgment to deter other counterparties.

Litigation: compulsion, publicity and a full procedural code

Litigation is appropriate where at least one of the following characteristics is needed and cannot be obtained elsewhere. First, compulsion: the opponent will not agree to mediate or arbitrate, or a limitation deadline requires a claim form. Second, interim remedies against the defendant or third parties. Third, disclosure and evidence-gathering under Parts 31–35, including non-party disclosure. Fourth, multi-party shaping under CPR 19. Fifth, a public, appealable determination (for example a point of construction that will govern a book of similar contracts). Sixth, enforcement machinery against assets in England and Wales (judgment, charging order, third-party debt order, insolvency processes).

Litigation is usually the slowest and the most expensive of the three, and it is conducted in public. Costs shifting under CPR 44 means the loser typically pays a substantial share of the winner’s costs, subject to track, fixed recoverable costs, qualified one-way costs shifting in many personal injury claims, and conduct. That costs exposure is itself a reason some clients prefer mediation. It is also a reason an unreasonable refusal to mediate can be expensive even after a win.

Putting the advice together

Work through the client’s objectives in this order: Is there already a binding arbitration clause covering this dispute? If yes, the default is a stay and a reference, not a Part 7 claim. If no, can the parties be brought to a negotiated solution, and is a neutral facilitator enough? If the opponent is willing, mediation is usually the first process to try. If the opponent is unwilling, the court can still order a proportionate ADR attempt, but you must still protect limitation and, where needed, obtain interim relief. If the client needs a determination, a precedent, or remedies against non-parties, issue and serve, then keep ADR under review throughout the case (PD Pre-Action Conduct, paragraph 9).

Exam traps. Do not treat “ADR” as a single process: mediation and arbitration have opposite decision-makers. Do not tell a client that a mediator can “make them pay”. Do not issue in court in breach of a valid arbitration agreement and then file a defence on the merits; that may waive the stay. Do not refuse a reasonable mediation invitation merely because you think you will win: Halsey costs principles survive as a conduct analysis, and Churchill plus the 2024 CPR amendments go further by allowing the court to order the process itself.