The ongoing Student Group Claim (SGC) is a series of group litigation orders (very much like the UK version of class action lawsuits) by students against universities for a breach of contract as a result of how they handled education during the pandemic. The students’ argument is as follows: there is a contract between a student and their university. The student pays their tuition fees, and the university agrees to provide various things in exchange for this fee, including 'in-person tuition, access to facilities and other services as set out in its contractual documents, prospectuses, and promotional materials'. The students allege that many universities in the UK breached this contract by failing to provide some or all of these things.
Whatever one's thoughts are on this argument, the first 'test case', David Hamon and others v University College London [2023] EWHC 1812 (KB) is incredibly fascinating. Having failed to come to a settlement outside of court, the SGC went to court in pursuit of a Group Litigation Order. On July 17 2023, the High Court, at the first instance, ordered a stay of court proceedings so that the parties could explore alternative methods of dispute resolution. It is on this debate between alternative dispute resolution (ADR) and conventional litigation that this article is focussed. In examining the benefits and drawbacks of ADR, it will be argued that on balance there is plenty of justification for ADR to be a tool heavily relied upon by courts to serve the interests of both parties in a commercial dispute.
What ADR is and why it is beneficial
ADR essentially encompasses any way of settling disputes outside of the courtroom. Examples include negotiation, mediation, conciliation and arbitration. The arguments in favour of ADR can broadly be separated into policy arguments which make it desirable generally, and arguments which suggest it is desirable for the parties involved specifically in the dispute. The strongest policy argument in favour of ADR is that it reduces the workload of courts. Indeed, the resources of the court system in the UK are already spread very thin – there was a 6% increase between April and June 2023 in the number of civil court claims that went to trial. As Joanne Edwards, former chair of Resolution, puts it in an old piece by the Financial Times: 'not only does it reduce the burden on courts, but it is normally better for people to reach their own agreements rather than have them forced upon them'. This equally rings true today as it did when the article was written in 2015.
Turning now to the benefits of ADR for the two parties specifically, perhaps the most obvious is the reduced monetary and time costs for both parties involved. This was recognised by the High Court in the SGC case where it held that ADR would 'if successful, limit costs substantially because legal representation may be unnecessary'. The aforementioned piece by the Financial Times explains how despite cuts to legal aid during the austerity period in the 2010s, mediation in family disputes nearly trebled, between 2010 and 2013, largely because of how much more cost-efficient it is compared to litigation. Although the Student Group Claim organisation prides itself on its 'No Win, No Fee' approach, the fact that it takes 35% of any compensation received means that the cost of litigation should be a substantial concern for the students involved. Moreover, for large corporations, the potential financial savings are a huge benefit of ADR, given that their primary objective is typically profit maximisation. To put this into perspective, SGC's statement of costs for the one-day GLO application hearing was £227,454.71 and UCL's statement of costs was £329,432.96, according to the Law Society Gazette.
There is also definitely a philosophical argument to be made about the greater autonomy provided by ADR. It should be prefaced that this is only applicable to non-third party means of ADR (such as negotiation or a settlement conference), not arbitration. In these non-third party forms of ADR, the parties, if able to resolve the dispute, may feel less significantly aggrieved by the situation than a judicial ruling because they themselves have agreed to a settlement instead of being told what to do by a court. Even in arbitration, where the award is 'top-down' from the agreed arbitrator, ADR, the proceedings may be less adversarial than court cases because the parties can choose the arbitrator and governing rules. Whilst this perhaps seems far too idyllic, given that it is difficult to imagine one of the parties involved in the SGC case not feeling aggrieved by the outcome, it is still desirable for the parties to keep any feuds behind closed doors, as opposed to a highly publicised court case.
Significant value should also be placed in the confidentiality of ADR proceedings. The parties can decide to keep the proceedings and outcome private whereas all litigation is public?. This may be desirable in, for example, family disputes, where neither party wishes to make details regarding their private affairs publicly available. Equally, it is desirable in disputes between large corporations who do not want to be scrutinised by the media and the public or give up trade secrets, which may happen if there is a high-profile court case. Admittedly, in some circumstances, one of the parties may want media attention – for instance, the Student Group Claim organisation, so that more students join the claim. A corporation may also want this, if it feels it is championing a particular issue that would capture public support. However, in the debate between ADR and conventional litigation more broadly, the confidentiality of ADR is a worthy point to consider.
The two big drawbacks of ADR
As to be expected, there are reasons why parties would prefer litigation to ADR. The World Intellectual Property Organization points out how arbitral awards are confined to the relationship between the two parties, not setting any binding precedent. By contrast, a court judgement may lead to the establishment of a new precedent, helping a party clarify its rights not only in the particular dispute, but in the future too. This 'drawback' is, of course, a side-effect of the confidentiality ADR provides. In that sense, it is not really a 'drawback' at all: the consensual nature of ADR enables the parties to decide themselves if they value the greater clarity on their rights that a court judgement would entail, or if they want the dispute to remain out of the public eye. Of course, the parties may not agree on this, but in such circumstances, ADR likely would not have been applicable anyway because it is founded on cooperation between the parties. The upshot here is that the lack of the precedent where disputes are resolved by ADR is not necessarily an issue; the parties must weigh up the value of confidentiality and autonomy with the greater clarity on their rights that a court would offer.
The second major criticism of ADR is that its objectivity is 'dubious'. In third-party forms of ADR, such as arbitration, each party typically chooses an arbitrator and the service chooses a panel chair. Both parties are obviously likely to pick an arbitrator who sees the issue the way they want, especially when the parties are large corporations with the resources to hand pick whichever arbitrator they see fit. Not only can this limit progress, since the arbitrators may struggle to come to an agreement just like the parties did, but it also generally defeats the purpose of arbitration because neutrality is compromised. There is not much that can be done about this issue, but given the huge potential savings on the cost of litigation, it is arguable that arbitration is nevertheless worth trying. However, importantly, this argument is not a drawback for ADR generally, because there are 'self-help' forms of ADR, as well as third-party forms. Negotiation (for instance at a settlement conference) will not be affected by the dubious objectivity of third parties, because it is a meeting between only the two parties involved in the dispute.
A bigger issue stemming from compromised objectivity is that the parties may struggle to agree on a form of ADR. In the SGC case, UCL's argument against the case going to court was that the students should first go through their own internal complaints procedure, and, if that did not work, then the Office of the Independent Adjudicator for Higher Education (OIA). Nevertheless, the fact that the court directed the parties to ADR, exemplifies that even if one of the parties does not see value in ADR, or wants to do it only on their terms, resolution is still possible. Notably, from this test case, it is clear that other universities facing similar claims will be expected to accept requests for ADR, which could gradually see the process be used more in commercial disputes too.
Conclusion: on balance, ADR is beneficial
The judge in the SGC case against UCL made it very clear that she was not mandating ADR. Her wording was that she 'strongly encouraged' the parties to engage in ADR because 'these claims are all individually of law or modest value [and] group litigation can be costly'. This judgement indicates some wishful thinking on the court's part, with significant emphasis placed on the parties taking 'a more consensual approach ... and do[ing] their best to use [the duration of the stay] productively'.
The gist of this judgement is that avoiding litigation is in the interests of both the SGC and UCL, and so opting for ADR is mutually beneficial. Although some may argue that there are several hidden costs associated with ADR (such as paying for the time of neutrals, the meeting room, as well as travel and discovery costs), it will still almost certainly be cheaper than full-fledged courtroom litigation. Not only that, but legal fights can often create negative publicity for large corporations, which can cause their share prices to fall. ADR not only provides a solution to this problem, but it can also potentially salvage the commercial relationship between the two parties if they are able to come to an agreement, where a court case may cause this relationship to deteriorate further. Given these clear benefits, parties involved in a commercial dispute would be fools if they did not at least consider ADR.
Cover image: Vuk Valcic/ZUMA Press Wire/Shutterstock