When practitioners ask, ‘why use alternative dispute resolution?’, the answer is often framed around speed and flexibility. From a costs draftsman’s perspective, however, the question is more strategic: how does ADR affect recoverability, exposure, budgeting, and overall litigation risk?

Alternative dispute resolution (ADR) is no longer peripheral to the court system. Courts expect parties to engage with ADR seriously. The refusal to do so can directly affect costs outcomes, even where a party ultimately succeeds at trial. For those advising on costs strategy, ADR is not simply about settlement; it is about managing financial risk.

 

ADR’s Role in Costs Law

Alternative dispute resolution ADR encompasses a range of resolution processes designed to resolve disputes without a full trial. ADR, including mediation, arbitration, expert determination, and early neutral evaluation, provides mechanisms for parties involved to attempt resolution before or during court proceedings.

From a costs perspective, ADR offers three immediate strategic advantages:

• It can deliver a cost-effective pathway to a quick resolution.
• It reduces exposure to adverse costs orders.
• It strengthens conduct arguments in a detailed assessment.

The key issue is not whether ADR replaces litigation entirely, but how it positions a party within it.

 

Conduct, Costs and the Court’s Expectations

The courts have repeatedly confirmed that parties must meaningfully engage with ADR. Where parties submit to a mediation process or other ADR scheme, they demonstrate a willingness to seek a mutually acceptable outcome.

By contrast, a party that refuses to engage without good reason may face adverse consequences when costs are assessed on the standard basis. The court system places significant weight on proportionality and conduct. Failure to attempt to resolve disputes through a common form of ADR can be characterised as unreasonable.

Importantly, ADR does not undermine a party’s position. Instead, it can protect it. Demonstrating efforts to find common ground strengthens arguments that costs were reasonably incurred and proportionate.

 

Cost Control Before Court Proceedings Escalate

Litigation costs escalate rapidly once court proceedings move beyond early case management. Disclosure, witness evidence, expert reports, and trial preparation all increase exposure.

ADR can interrupt that trajectory.

A mediation process, led by an independent third party or neutral third party, can narrow issues significantly. Even where settlement is not achieved, ADR often reduces the scope of dispute, shortens hearings, or leads to partial agreement.

This narrowing effect has direct costs consequences:

• Reduced trial preparation time
• Fewer contested issues at the hearing
• Lower expert evidence expenditure
• More predictable budgeting

For costs draftsmen, this can materially affect both incurred and estimated phases within a costs budget.

 

Binding and Non-Binding Outcomes

One of the most important distinctions within alternative dispute resolution ADR is whether the outcome is legally binding.

Arbitration, for example, typically results in a binding decision. The parties submit to the arbitrator’s jurisdiction and agree in advance to be bound by the outcome. This removes the matter from the traditional court system and replaces it with a private adjudicative framework.

Mediation, by contrast, only becomes legally binding if a settlement agreement is reached and formalised. Until that point, it is facilitative rather than determinative.

From a costs perspective, both models have value. Binding ADR provides certainty and can limit further cost accrual. Non-binding processes preserve flexibility while still demonstrating the reasonableness of conduct.

 

ADR and Proportionality

Proportionality remains central to modern costs assessment. The question is not simply whether costs were incurred, but whether they were justified in light of the dispute’s value and complexity.

ADR supports proportionality in several ways.

First, it can align expenditure with the realistic value of the claim. Secondly, it shows an attempt to avoid unnecessary escalation. Thirdly, it may prevent parties from incurring irrecoverable costs that exceed potential recovery.

Where ADR is attempted and fails for legitimate reasons, that attempt still carries evidential weight. It can assist in resisting arguments that litigation was pursued disproportionately.

 

ADR Clauses and Cost Consequences

Many commercial agreements contain a clause in the contract requiring mediation or arbitration before litigation. Ignoring such a provision can have immediate procedural and costs consequences.

Courts may stay proceedings, penalise conduct, or adjust costs orders to reflect non-compliance. From a drafting and advisory standpoint, early identification of any ADR scheme is essential to risk management.

Failure to comply with pre-action ADR requirements can undermine otherwise strong costs arguments later in the proceedings.

 

When ADR Does Not Succeed

It is important to recognise that ADR is not synonymous with settlement. Not all disputes can be resolved without trial.

However, even unsuccessful ADR attempts can strengthen a party’s costs position. Courts assess the behaviour of the parties involved. A genuine attempt to reach an agreement demonstrates reasonableness, even if no resolution is achieved.

In many instances, ADR reshapes the dispute in ways that later influence settlement negotiations, Part 36 offers, or final costs recovery.

 

Why Use Alternative Dispute Resolution?

From a pure litigation strategy perspective, ADR is about control.

It offers:

• Greater predictability of spend
• Opportunities for quick resolution
• Reduced exposure to adverse costs
• Improved positioning at assessment
• Demonstrable compliance with court expectations

For legal practitioners instructing costs specialists, ADR should not be viewed as an alternative to costs strategy. It is part of it.

 

FAQs

Why use alternative dispute resolution instead of going to court?
ADR can provide a quicker and more cost-effective way to resolve disputes than full court proceedings. It allows parties involved to retain greater control over outcome, timing, and costs exposure.

Does ADR produce a legally binding outcome?
Some forms of ADR, such as arbitration, result in a legally binding decision. Others, such as mediation, only become binding if a settlement agreement is reached and formalised.

Can the court penalise a party for refusing ADR?
Yes. Courts may impose adverse costs consequences where a party unreasonably refuses to engage in alternative dispute resolution ADR, even if that party ultimately succeeds at trial.

Is ADR suitable for all disputes?
ADR is not appropriate in every case, particularly where urgent injunctive relief or public law issues arise. However, in most commercial and civil disputes, courts expect parties to consider ADR seriously.

How does ADR affect recoverable costs?
Engaging in ADR can strengthen arguments that costs were reasonably and proportionately incurred. Conversely, refusing ADR without justification may undermine recovery at assessment.

When should ADR be considered?
ADR should be considered at the pre-action stage and reviewed throughout proceedings. Early engagement can significantly reduce overall litigation spend and risk.

 

How Greener Costs Can Assist

Understanding why use alternative dispute resolution requires more than procedural knowledge. It requires clarity on how ADR decisions will influence recoverability, budgeting, proportionality, and assessment.

At Greener Costs, we advise on the costs implications of ADR at every stage of litigation. This includes guidance on budgeting for ADR, analysing proportionality arguments, assessing exposure where ADR is refused, and supporting recovery of reasonably incurred mediation or arbitration costs.

Whether you are considering ADR before issuing proceedings, responding to an opponent’s proposal, or preparing for detailed assessment following settlement, our team can help you evaluate the financial consequences with precision and confidence.

If you would like to discuss the costs strategy surrounding ADR in your case, we welcome the opportunity for a confidential, no-obligation conversation.