The backlog in the family court system – exacerbated by the 2020 pandemic – puts divorcing couples in a frustrating position. Our family lawyers can see first-hand how the inability to get a hearing date at a reasonable time forces families having to put future plans on hold and to live with unresolved financial and child arrangement issues for long periods of time. Is arbitration the answer?

At Brookman we have always encouraged couples to try to agree to settle their differences away from court. And at a time when there’s increased delay in the family court service, alternative dispute resolution seems a more sensible approach than ever. We’ve discussed mediation and other forms of dispute resolution before. Here we look specifically at arbitration and whether it’s a reliable way to reach a financial settlement when you divorce.

Using Arbitration For A Divorce Settlement

Mediation may be a more familiar and commonly used dispute resolution mechanism. But the use of arbitration (traditionally only used in commercial disputes) has been greatly extended to family cases as a way of reaching a legally binding decision in private. Its suitability for settling sensitive family law disputes is well-recognised and promoted by The Institute of Family Law Arbitrators.

In a commercial context one of the most attractive aspects of arbitration is that the decision by the arbitration panel (called an ‘award’) is binding. It can only be challenged in very limited circumstances.

Challenging An Arbitration Decision

This finality is not always welcomed in family cases. If an arbitrator makes a decision that’s plainly wrong the aggrieved spouse may be unable to challenge the decision in court. That’s what happened in BC v BG (2019). The wife failed in her bid to get the court to overturn an arbitration decision she was unhappy with. The judge likened a decision to go to arbitration to the decision to sign a prenuptial agreement – that is, one with which the courts should only interfere with extreme reluctance.

This high barrier to challenging an arbitrator’s decision – the risk of being stuck with a decision you can’t challenge in court – is perhaps one reason why arbitration has not been used as much as it could be.

Hayley v Hayley: Making Challenges To Arbitration Easier?

If the 2020 case of Hayley v Hayley is anything to go by it seems that – to a degree – the courts position on challenging arbitration awards has shifted.

As in BC v BG the husband and wife in Hayley v Hayley were frustrated by delays in the court system. Unable to get a court date they opted instead for arbitration.  Mr Hayley was unhappy with the arbitrator’s decision and sought to challenge it. This was despite his agreeing before arbitration that the decision would generally be regarded as final.

The Court of Appeal decided that the arbitration decision could be revisited. It did not have to be ‘seriously or obviously wrong’ (the high test that applied in cases like BC v BG). Instead if the arbitrator’s award were ‘just wrong’ the family court was entitled to make its own order over and above that of the arbitrator.

The Court of Appeal decision acknowledged the benefit of finality in arbitration schemes. Crucially however, in an environment where parties should be encouraged to use alternatives to the courts to settle their differences, the court also emphasised that couples shouldn’t be put off from using arbitration for the sole reason that they wouldn’t be able to challenge the decision.

Hayley v Hayley has been interpreted as a decision that will usher in a new era where arbitration becomes a more common choice for divorcing couples – even those of modest means.

Comment

The decision in Hayley gives people unhappy with an arbitration award greater room for manoeuvre when it comes to challenging the decision. But it does not mean arbitration awards can be challenged easily. There is still a relatively high threshold to cross before the finality of an arbitration decision can be undone. Overall we agree with many commentators and think the Hayley judgment will lead to a greater take-up in arbitration as a means to settle family cases – without removing the sense of finality that an arbitrator’s award is associated with.

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