As courts continue to encourage parties to engage in alternative dispute resolution (ADR), questions about the recoverability of ADR-related costs are becoming increasingly important, raising the question: ‘Can ADR costs be recovered?’

Whether through mediation, arbitration, or early neutral evaluation, ADR is now viewed as a central part of the civil litigation process rather than simply an optional alternative to court proceedings. From a legal costs perspective, however, the position is not always straightforward. While ADR may reduce the overall costs of litigation, parties will often want to know whether the costs incurred in participating in ADR can themselves be recovered from the opposing party.

The answer will depend on the type of ADR used, the parties’ conduct, and the court’s approach to costs under the Civil Procedure Rules.

 

The Court’s Approach to ADR

The courts in England and Wales strongly encourage parties to engage in ADR wherever appropriate. This expectation now forms part of the wider approach to case management and proportionality in civil litigation.

In many cases, parties will receive an invitation to participate in mediation or another form of ADR before proceedings are issued, or during the course of litigation itself. The court will often expect parties to properly consider that invitation and provide reasons if they choose not to engage in ADR.

An unreasonable refusal to participate in ADR can result in adverse costs consequences, even where the refusing party is ultimately successful at trial.

 

What Types of ADR Costs May Be Recoverable?

Recoverable ADR costs can include a range of expenses associated with the dispute resolution process.

Depending on the circumstances, this may include:

• mediator or arbitrator fees
• preparation costs incurred by legal representatives
• counsel’s fees
• venue or platform costs
• expert fees connected to the ADR process

The recoverability of these costs will usually depend on whether they were reasonably incurred and proportionate in the context of the dispute.

 

Mediation and Recoverable Costs

Mediation is one of the most common forms of ADR in civil litigation and is frequently encouraged by the courts.

Where mediation is successful, parties will often agree how costs are to be dealt with as part of the settlement itself. However, where litigation continues after unsuccessful mediation, disputes may arise regarding whether mediation costs should form part of the overall claim for legal costs.

The court will generally consider:

• whether mediation was reasonable in the circumstances
• whether the costs incurred were proportionate
• the conduct of the parties during the process
• whether mediation had a realistic prospect of resolving the dispute

In many cases, the court will take a favourable view of parties who have made genuine attempts to engage in ADR.

 

Unreasonably Refusing to Engage in ADR

One of the most significant costs risks arises where a party is found to have acted unreasonably in refusing ADR.

The courts have repeatedly made clear that parties are expected to properly consider mediation and other forms of dispute resolution. A refusal to engage in ADR without good reason may lead to:

• reductions in recoverable legal costs
• adverse costs orders
• indemnity costs in certain circumstances
• costs penalties even where the refusing party succeeds at trial

This reflects the court’s broader objective of encouraging efficient and proportionate dispute resolution.

From a costs draftsman’s perspective, the conduct of the parties in relation to ADR is becoming an increasingly relevant factor in costs disputes and detailed assessment proceedings.

 

ADR Before Proceedings Are Issued

ADR is often encouraged at the pre-action stage, before formal court proceedings are issued.

The Civil Procedure Rules and relevant pre-action protocols place increasing emphasis on early engagement and settlement discussions. In some cases, a failure to properly engage in ADR before proceedings are issued may later influence the court’s approach to costs.

This is particularly relevant in lower-value disputes and small claims, where the court expects parties to take reasonable steps to avoid unnecessary litigation.

 

ADR in Fast Track and Multi-Track Claims

The role of ADR differs depending on the procedural track involved.

In fast-track claims, mediation is commonly encouraged as a way of reducing costs and avoiding disproportionate expenditure. In larger multi-track litigation, ADR may involve more formal processes such as arbitration or early neutral evaluation.

In both scenarios, however, the court will generally assess ADR-related costs by considering whether the process represented a reasonable and proportionate step in the litigation.

 

The Relationship Between ADR and Detailed Assessment

Where costs proceed to detailed assessment, ADR-related expenditure may become the subject of challenge by the paying party.

Common areas of dispute include:

• whether the ADR process was necessary
• whether the level of preparation costs was proportionate
• whether the fees incurred were reasonable
• whether multiple fee earners were justified in attending

As with other forms of litigation expenditure, recoverability will depend heavily on the quality of the evidence and the proportionality of the costs incurred.

 

Can ADR Costs Be Recovered on the Indemnity Basis?

In some cases, ADR-related costs may be recoverable on the indemnity basis, particularly where the conduct of one party has been unreasonable.

For example, where a party has ignored repeated invitations to participate in ADR or adopted an obstructive approach to settlement discussions, the court may consider indemnity costs appropriate.

However, indemnity costs remain the exception rather than the rule and will depend on the specific circumstances of the case.

 

Strategic Considerations

From a legal costs perspective, ADR should not simply be viewed as an additional expense. In many cases, effective engagement in ADR can significantly reduce overall litigation spend and improve costs recovery.

Parties should carefully consider:

• the timing of ADR
• the proportionality of the costs involved
• the likely impact on overall recovery
• the potential costs consequences of refusing to engage

Increasingly, the court expects ADR to form part of a reasonable litigation strategy.

 

How Greener Costs Can Assist

ADR is becoming an increasingly important factor in costs recovery and litigation strategy. Understanding whether ADR costs are recoverable, and how the court is likely to approach those costs, requires specialist expertise.

Greener Costs provides advice and support on all aspects of legal costs, including ADR-related expenditure, detailed assessment, costs budgeting, and disputes regarding recoverable costs.

By considering ADR strategically throughout the litigation process, parties can often reduce overall expenditure while improving the prospects of recovery.

If you require assistance, contact Greener Costs today:

📞 01204 263047
📧 info@greenercosts.co.uk

 

Frequently Asked Questions

Can mediation costs be recovered from the other party?

In some cases, yes. Mediation costs may be recoverable if the court considers them reasonably incurred and proportionate to the dispute.

What happens if a party refuses to engage in ADR?

An unreasonable refusal to engage in ADR can lead to adverse costs consequences, even if that party ultimately succeeds at trial.

Does ADR apply to small claims?

Yes, ADR is commonly encouraged in small claims disputes, particularly through mediation schemes aimed at resolving disputes before a final hearing.

Are ADR costs assessed at detailed assessment?

Yes, where costs are disputed, ADR-related costs may be scrutinised during detailed assessment in the same way as other litigation costs.