The scheme has been given real impetus by the English courts. In the seminal Supreme Court case of Radmacher v Granatino  UKSC 42, prenuptial and postnuptial agreements came under the microscope and were emphatically endorsed. The seal of approval was given by the President of the Family Division, Sir James Munby, in S v S  EWHC 7 (Fam), in which the parties had agreed to arbitrate their financial and property disputes under the IFLA scheme. The arbitrator made his award, which the parties then presented to the court for its approval and implementation.
At para 21 of his judgment, Sir James said: “Where the consent order which the judge is being asked to approve is founded on an arbitral award under the IFLA Scheme or something similar (and the judge will, of course, need to check that the order does indeed give effect to the arbitral award and is workable) the judge’s role will be simple. The judge will not need to play the detective unless something leaps off the page to indicate that something has gone so seriously wrong in the arbitral process as fundamentally to vitiate the arbitral award.”
The President has now proposed to issue both a draft rule change to enable relevant applications under AA 1986 to be made in the Family Division (not just, as at present, in the Commercial Court) and also draft guidance dealing with a number of procedural matters not covered by S v S (“View from the President’s Chambers: the beginning of the future”, Family Law, March 2014).
The scheme is designed to resolve disputes by arbitration which are financial and/or involve property. It does not cover the actual granting of a divorce or matters to do with status, or disputes involving children, but does cover financial disputes under Sch 1 of the Children Act 1989 (CA 1989). It shelters under the statutory umbrella of AA 1996, which contains important provisions as to the duties of the arbitrator and of the parties to an arbitration, as well as other provisions vital to the expeditious and fair procedure for an arbitration. One very important part of the scheme is that while s 46(1)(a) of AA 1996, which is non-mandatory, gives the parties the choice of what substantive law the arbitrator should apply, the scheme makes it mandatory for the law of England and Wales to be applied.
An overarching ingredient is that the parties are under an obligation to make an application to the family court to turn the award into a court order where it is necessary to do so. Except for one statute – The Trusts of Land and Appointment of Trustees Act 1996 – it will not be possible for an award to be turned into an order of the court by the mere registration of the award; the court itself must exercise the discretion given to it under each of the statutes which the scheme covers.
Form Arb 1 from the IFLA website puts the process in motion. When signed by the parties, this forms the arbitration agreement and sets out, inter alia, the nature of the dispute or disputes to be arbitrated and the name of the chosen arbitrator. Paragraph 6 confirms several vital matters: first, that the parties have been advised and understand the nature and implications of the agreement to arbitrate; second, that once the arbitration has started they will not start court proceedings (or if already started they will apply for a stay); third that they have read the current edition of the IFLA rules and will comply with them. The fourth and fifth confirmations overlap and are at the core of the scheme. The parties confirm that they understand and agree that any award of the arbitrator will be final and binding, subject to any arbitral process of appeal or review or in accordance with Pt 1 of AA 1996. They also confirm that they will be subject to any changes that the court, to which an application is made to enforce the award, may require before it makes any orders embodying the award. The parties agree that they will apply to the court for orders to reflect the award, that the court has a discretion as to whether and in what terms, to make orders and that they, the parties, will take all reasonably necessary steps to see that such orders are made.The arbitrator’s fees are then agreed, s/he accepts the appointment and the arbitration then formally starts.
How is the arbitration conducted?
Rule 9 of the IFLA states: “The parties are free to agree as to the form of procedure…and, in particular to adopt a documents-only procedure or some other simplified or expedited procedure.” The procedure adopted will largely depend upon the issues in dispute and whether there are facts which require oral and/or written evidence. Once the issues have been defined, it is likely that the course of the arbitration will be determined, ie, will it be necessary for the arbitrator to look at the whole case like a family judge, or is it sufficient for the arbitrator just to decide a discrete, but important, issue which may then lead the parties to settle? Also, can it be done on paper or must there be an oral hearing?
Once the evidence and submissions are over, the ball is in the arbitrator’s court to write the award. Rule 13.1 shows the way. It must be in writing and dated and signed by the arbitrator. It will state the seat of the arbitration, ie, the jurisdiction with which the arbitration has its closest connection. Since the arbitrator must apply English law, the seat will be England. The parties are free, if both so choose, to relieve the arbitrator from having to state in the award any reasons why he has reached his decisions. But if, as is most probable, s/he is asked for reasons, s/he does not have to produce a script that would be worthy of a judge. S/he is required to give “sufficient reasons to show why [s/he] has reached the decisions contained in [the award]”. The award will not be seen by the general public. It will not set any precedent, nor may it be quoted in other arbitrations without the permission of the parties.
It is a document solely for the eyes of the parties and their legal advisers and its purpose is to tell them, and nobody else, in succinct and logical terms why the arbitrator has come to his/ her conclusions.
First, all proceedings before the arbitrator are entirely confidential (r 16). This is a real bonus for parties who do not relish their family disagreements, whether great or small, being bandied about in the national or local media. Will the parties lose their privacy when the award comes to the court for implementation? In S v S, the President simply said that he had read the necessary papers and approved the award and consequential orders. He added, at : “Why, after all, in case like this should litigants who have chosen the private process of arbitration have their affairs exposed in a public judgment?”
Second, flexibility. This arbitral scheme, when compared to litigation, is able to take hold of the core issues without having to go through the whole gamut of court process. The parties can submit for arbitration those issues which they see as the stumbling block to the resolution of their financial and property disputes, and, done in a way which they want, not in the way that a judge may feel that s/he has to impose on them.
Third, speed. The court system is, for many family finance litigants, particularly those of modest means, impossibly slow. Priority is rightly given to children cases, and there is a limited pool of judges. Thus, finance cases may be adjourned almost at the last moment – and sometimes several times because the courts are overworked. Generally speaking in the Family Division of the High Court, if a case is started on 1 January in year one it is unlikely that the date for the FDR (early neutral evaluation) will be given before the end of year one. If the case does not settle at or shortly after the FDR, then the hearing date is unlikely to be before the end of year two, and, if the case is complex, well after that.
Compare that to the IFLA scheme. My own informal research found that 11 concluded arbitrations of 26 started, but not all concluded, to date. One, S v S, was completed from the date of the appointment of the arbitrator to the delivery of the award in five months. Apart from that case, the longest period of time was eight months and the shortest period was four weeks. Such speed is quite unattainable in our court system.
Fourth, the arbitrator. Once s/he is selected and accepts appointment, the arbitrator must see the arbitration through to its conclusion. There is no chopping and changing of the adjudicator as is all too prevalent in the court system.
“The judge is free, the arbitrator must be paid”
The second part is true, the first part only partially true. Litigants must pay court fees. Furthermore, if the present government has its way, litigants in the commercial court will be charged a daily fee, set at a level designed to make a profit. If parties engage in arbitration and get their award through quickly, the saving in legal fees that would be otherwise expended while the case grinds through the court system to trial, will more than offset the cost of employing an arbitrator.
“Arbitration is only for the rich”
Not so. Among the 130 qualified arbitrators, a large number are prepared to tailor their fees for cases of very modest means. In any event, no doubt the choice of arbitrator will be influenced by the fees s/he proposes to charge and the parties can shop around.
“If I advise my client to choose X as the arbitrator (and s/he is appointed) but s/he then goes against my client in the award I will get the blame. If, by contrast, I let a judge (whom I cannot choose) decide the dispute and s/he goes against my client, well, s/he gets the blame, not me”
Lawyers spend their professional lives making such choices – is it not better for you and your client that you should have the opportunity together with the other side, to choose the “judge” in whom you have confidence, as opposed to the situation in the court system where there is no choice whatsoever and where the allocated judge’s qualities and experience to decide the particular disputes in question may be variable. Both parties could ask an experienced arbitrator to make the choice, rather like the president of the RICS does. Second, each party can submit to the other a list of three or four names and if there is one name common to both lists, then that person is nominated as the arbitrator. Third, one party serves a list of three names, the other deletes one, the first party can delete one, leaving the final name as the nominated arbitrator.
“If the award is binding that means there is no right of appeal”
No appeal in England and Wales from a decision of a family judge can be brought without the permission of the judge or the Court of Appeal. If an arbitrator makes an award which is wrong in principle or perverse, no family court is going to turn such an award into a court order if one party were to challenge the award. And it will not do so for the very reason that it retains its discretion under the various Acts of Parliament whether to make the orders or not.
“Awards are not enforceable or at the very least are at risk of being tinkered with by the courts”
I suggest the President’s decision in S v S has laid that red herring to rest.
“If all arbitrations are confidential then no award can be cited in another arbitration, thus creating the risk of inconsistent awards being made”
This risk is more apparent than real. In family finance cases, the inconsistency is likely to arise not by reason of the discretion given to tribunals under English law to determine the fair outcome, but by one arbitrator making a decision which is wholly outside the wide parameters of that discretion. That can be cured by the court.
Suitably adapted, the IFLA scheme could be exported, particularly in those countries whose family finance law is very similar to ours, eg, the Cayman Islands, the Channel Islands, Gibraltar, and Hong Kong.
We are fortunate in this country to have a good legal and judicial system. But it is under immense strain. Resources are constantly being cut or withdrawn. This leads to rigidity, delay, and expense. There is a lack of freedom in the court system for individuals to determine how they would like their differences to be settled. Here for the first time is an arbitral scheme, governed by English law, which empowers couples suffering a terminal breakdown in their relationship, to opt to have their financial and property disputes adjudicated in the way that suits them best.
In my estimation, the advantages so outweigh what are said, very inaccurately, to be disadvantages, that I confidently predict that within the near future family finance arbitration and private FDRs/mediation will complement the court system, just as private medicine complements the National Health Service.
This article is an edited version of a speech given by Sir Hugh Bennett MCIArb to the London Branch of the Chartered Institute of Arbitrators.