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Arbitration - No Dress Rehearsal for Marriage Breakdown

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These days, couples whose relationship has broken down rarely find themselves shoe-horned into litigation. Thoughtful family lawyers do not present litigation as the first option to their clients. Instead, time will be spent at an initial appointment –

It’s encouraging that so many new clients now come to us with some knowledge of the alternative dispute resolution options which exist.  One of these options is arbitration.  This is, in some respects, the closest of all the options to litigation, in that the parties are still entrusting their case to a third party decision-maker who will determine how matters between them are to be settled.  The marriage arbitration process is, however, much more streamlined than litigation.  The scope of the matters to be considered will be determined by the parties themselves, as will the identity of the arbitrator and the timing of any hearing. 

Arbitration resembles litigation in another important respect: the binding nature of any decision made.  This differs from agreements reached at mediation.  Such agreements, even if encapsulated in a Memorandum of Understanding, are neither binding nor can their substance be referred to in any subsequent court proceedings.  In contrast, it is almost a matter of routine that any arbitral award will be converted into a court order once made.  Furthermore, an arbitral award can be overturned in only the most limited of circumstances.

This feature of arbitration was highlighted in the recent case of DB v DLJ [2016] EWHC 324 (Fam), a High Court decision of Mr Justice Mostyn (Mostyn J).  The wife’s refusal to permit the arbitral award to be converted into a court order prompted the husband formally to apply to the court for the wife to “show cause” (explain) why the arbitral award should not be made an order of the court.  She gave two reasons: (a) there was a mistake as to the true value of the family home in Portugal (which she was to retain) and (b) supervening events had occurred since the award was made.  Either point should lead to the arbitral award being set aside.

Mostyn J’s careful judgment analyses in great detail the circumstances in which an arbitral award may be set aside.  In a nutshell, those circumstances are extremely limited.  According to relevant arbitration legislation, a court may correct or clarify any clerical mistake, error or ambiguity - but mistake does not extend to any oversight in production of evidence.  Failing mistake, the challenge must focus on the jurisdiction of the tribunal, a serious irregularity (including fraud) or a question of law.  Challenges to financial remedy awards in family cases may also be made on the basis of supervening events.  Mostyn J highlights that “an assertion that the award was “wrong” or “unjust” will almost never get off the ground”.

The form ARB1 signed by parties before launching the arbitration process confirms that the arbitral award is to be “final and binding” although, as it also provides for the award to be made into a court order, it does imply that the court retains overriding discretion to interfere with its terms.  The scope of that discretion is clarified by the earlier case of S v S (Arbitral Award: Approval)(Practice Note) [2014] 1 WLR 2299 in which the court found that “only in the rarest of cases that it will be appropriate for the judge to do other than approve the order”.

In DB v DLJ, Mostyn J found that a key principle in relation to “supervening events” is that the event in question cannot have been reasonably foreseeable.  In this particular case, the possibility that certain planning authorisations might have been rejected and the price of the property impacted was “eminently foreseeable” and even if it had not been, he did not agree that it invalidated the arbitrator’s decision, which still fell within the parameters of fairness.

Mostyn J further found that a key principle in relation to “mistake” is that the claimant cannot obtain alternative mainstream relief which broadly remedies the injustice caused by the mistake.  In this particular case, he found that the wife had the benefit of a safety net which allowed her to vary a certain element of the order if she did not receive the anticipated sums. 

Mostyn J was critical of a failure on the wife’s part to follow procedural rules in relation to the introduction of evidence, sceptical of the merits of that evidence and, in any event, keen to drive home the point that arbitral awards should almost always be upheld.  He has a clear message for would-be participants in the arbitration process:

“It would be the worst of all worlds if parties thought that the arbitral process was to be no more than a dry run and that a rehearing in court was readily available.”

Those considering arbitration can accordingly remain confident that the process will result in a binding decision.  For those wrestling with the emotional uncertainty of relationship breakdown, certainty as to outcome – without incurring the financial and emotional cost of litigation – may be something worth exploring.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.