Alternative dispute resolution for the financial aspect of divorce

Resolving the financial division of marital assets via the courts can be stressful, expensive and time consuming. Without a prenuptial agreement in place, the parties can find it difficult to decide how the marital wealth will be divided. Alternative dispute resolution is becoming more popular as a way for parties to resolve their differences and to come

Most couples would prefer to agree a settlement without going through the courts to reduce costs and to try and reduce animosity. It is a popular misconception that solicitors wish to exacerbate such animosity for their own gain. In reality, the legal framework and legal professionals allow for and actively encourage non-court forms of dispute resolution. In short, reaching agreement away from the court is preferable and in fact, more usual.

Alternative forms of dispute resolution, which vary in their degree of solicitor involvement, can allow a couple to divorce and divide their finances without the need for court intervention. Ultimately, what is best will depend on one’s individual circumstances.

Alternative Dispute Resolution (ADR)

There are four main options of non-court dispute resolution:

• Mediation
• Collaborative law
• Solicitor negotiations
• Arbitration

Since 2014, it has been necessary for separating couples to meet certain requirements before an application to the court for a financial remedy can be made. These include:

• Mandatory attendance at a MIAM (Mediation Information and Assessment Meeting) unless limited exceptions apply. This is a private mediation session where it will be discussed if mediation if suitable.
• Considering the suitability of ADR at every stage of the proceedings
• Not making an application if a settlement is likely

Mediation

Mediation involves both parties engaging in confidential discussions with a qualified mediator, who acts as an impartial third party. Agreements reached during mediation are not binding but can be made into a binding court order known as a consent order.

Mediators often have legal backgrounds, and this knowledge can be crucial where substantial assets or multiple jurisdictions are involved, but there is no requirement to select a solicitor or other legal professional as your mediator. If you cannot reach agreement between yourselves regarding selecting a mediator, the court can appoint one for you.

Mediation is not free but is certainly less costly and time consuming as the court process, which is beset by delays.

Arbitration

Arbitration involves the appointment of an independent, impartial third party with a wealth of relevant knowledge who will make a binding decision – known as an award – based on the circumstances of the case. Parties can nominate an arbitrator, or arbitrators, otherwise one can be selected for you by the relevant arbitration authority.

During arbitration, parties can represent themselves or appoint a lawyer to represent them. Whilst arbitrators themselves are often legal professionals, this is not always the case.

It is difficult to challenge an arbitrator’s award and this involves going to court. This would increase the costs of arbitration, which can be considerable even though it provides a quicker resolution than via the court route.

Collaborative law

Collaborative law involves each party appointing specially trained solicitors – known as collaborative lawyers – who sign a document agreeing not to go to court, otherwise new solicitors will have to be instructed on both sides. There is therefore a strong desire on both sides to reach resolution. Once signed, four-way meetings take place between the parties and their respective representatives in an attempt to reach settlement.

Discussions during these meetings are ‘without prejudice’ meaning they cannot be referred to in later court proceedings if settlement is not reached.

Although this process does involve lawyers, parties are able to communicate directly with one another during any four-way meetings and therefore the channels of communication remain open between the couple.

The benefit of the involvement of solicitors in collaborative law is that once consensus is achieved, the lawyers can quickly draft a consent order for the court to approve. Binding orders tend to lead to better adherence to the settlement agreement as penalties can be imposed if an order is breached.

Solicitor-led negotiations

Solicitor-led negotiations is most similar to the court process with regard to the role of legal professionals and relies upon the heavy involvement of lawyers. Indeed, the success of this method is to a great extent dependent upon the strength of both parties’ legal representation.

Any settlement would again need to be confirmed in a consent order to become binding on the parties.

When ADR may not be appropriate

As demonstrated above, there are various means of reaching a financial settlement during a divorce without using the courts.

It is important to note that even methods that can seem to exclude lawyers entirely – such as mediation – may often require some solicitor involvement if you are looking to have your informal agreement enshrined in a binding consent order of the court.

ADR can be a wonderful tool in helping to maintain good working or co-parenting relationships following divorce but will not be suitable in cases where there has been alleged domestic violence, inherent mistrust or an imbalance in power between the parties