Arbitration Rules Ok
  • 30th Mar 2016

It has been four years since the inception of a new dispute resolution procedure for financial claims between separating husbands and wives.  This is an alternative option to court that closely replicates the court process. It is designed to be quicker by allowing the parties to jointly approve a qualified arbitrator to the entire case so avoiding the vagaries of judicial listing by the court and delay.    

For a long time in the commercial world, disputing parties have been able to have their decisions resolved in arbitration to save themselves a court battle.  The new family finance arbitration procedure has brought this opportunity into the realm of family law for divorcing couples.

Arbitration for parties begins by a joint application to the institute of Family Law Arbitrators for the appointment of a sole arbitrator from a family arbitration panel to ‘rule’ on their dispute.  In most cases an arbitral award will not be challenged but there has been a recent example of such a challenge.   

In a recent case DB –v- DLJ [2016] EWHC324(Fam) a husband issuing at court a notice to show cause why the arbitral award between himself and his wife should not be made into a court order.  In response, the wife claimed that the arbitral award was either vitiated by a mistake that was made over the value of her home, or alternatively that the value attributed to her home was invalidated by subsequent events (known as a Barder event).  The judgement in the case was very robust and favoured the arbitral award. The decision was based upon the fact that the arbitration rules contained in the Arbitration Act 1996 govern how to challenge arbitration awards and these do not extend to either a mistake or to a Barder event.    

The judge deciding the husband’s application observed that the award made by the Arbitrator, Gavin Smith, was “a thorough, conscientious and clear piece of work.  Its quality is a testament to the merit of opting for Arbitration.” 

Mr Smith decided that the parties property and cash should be shared equally.  The pensions should also be shared equally and that necessitated a court order.  The husband’s business (in which he was a 70% shareholder) was directed to be shared 60/40 to reflect the fact that it was well established at the time the parties began their relationship.  The wife would be paid maintenance of £36,000 a year until she received payment from a sale of 40% of the business. There was power to extend her maintenance if the provision from the shares would cause her undue hardship. 

The wife argued that the value of her home had potentially lost over £200,000 and that this was sufficient to unpick the Arbitrator’s award.  The decision taken was that that was not accepted since she had a safety net in the form of maintenance that would ensure her longer term needs could still be met.

This case is a sign of the court not interfering with an arbitration without very sound justification. The arbitration rules are to be respected. A Court is likely to make into an order, terms established by arbitration unless there are reasons that have a basis in law for the court using its discretion and choosing not to make the order.  Participants can expect almost all cases that are concluded with an Arbitration award will result in the court upholding that award.   

The court in this case was at great pains to show that they would adopt an approach of great stringency if an arbitral award were challenged. It is easy to see that the court wish to discourage parties from thinking they can treat the arbitral process as a dry run and then look to a re-hearing in court.

Often in arbitration and also court proceedings, neither party is particularly happy with the outcome and would rather certain decisions had gone another way.  That is the risk of putting decisions in the hands of those that will judge the facts and the law as they see it, not as each of the litigating parties want them to.  If putting a decision in someone else’s hands is something that a couple wish to avoid then they are more likely to choose the option of mediation or collaboration where they can retain control of the decision making process.

Users of the arbitration system are broadly very impressed with its results. The ability to fast track a dispute resolution without protracted delay of court proceedings is to be commended.   

You can also find out more information on the family pages of our website on all of these options. The family team at Whitehead Monckton have a wealth of experience providing guidance and advice in all areas relating to separation or divorce. If you wish to discuss any of the points raised in this article, please contact a member of the Family team.