Family Law

The President of the Family Division, Sir James Munby, has endorsed the use of arbitration in financial remedy cases. Ruling in the case of S v S (Financial Remedies: Arbitral Award) [2014] EWHC 7 (Fam), [2014] 2 FLR (forthcoming) Sir James Munby commented that where parties have entered into arbitration and have bound themselves to accept an award through arbitration, it should be regarded as a ‘single magnetic factor of determinative importance'.

In S v S the husband and wife had been married for 26 years, and had one child together who was 18 at the date of judgment. They had assets of between £1.5 and £2m. The parties appointed an arbitrator and a final award was made, only 8 weeks from the couple signing the agreement to arbitrate.  Although Sir James Munby did not comment on the specifics of the award, he took the opportunity to provide some useful guidance on the principles of arbitration and the family court's approach towards it.

Sir James Munby stated that although judges do not act as rubber stamps, the facts of agreed arbitration mean that ‘it can only be in the rarest of cases that it will be appropriate for the judge to do other than approve the order'. He further stated that it would be difficult to contemplate such a case with an arbitration process as sophisticated as the IFLA scheme. This would generally be the case unless something had obviously gone wrong in the arbitral process so as fundamentally to vitiate the award.

The IFLA (or Institute of Family Law Arbitrators) is a non-profit organisation, created by the Chartered Institute of Arbitrators, the Family Law Bar Association, and Resolution, in association with the Centre for Child and Family Law Reform. The IFLA launched an arbitration scheme in 2012 ‘to enable parties to resolve financial disputes more quickly, cheaply and in a more flexible and less formal setting than a court room'.

The IFLA scheme covers the main financial and property disputes arising from family relationships, such as the Matrimonial Causes Act 1973, Part III Matrimonial Finance and Property Act 1984 and Sch 1 to the Children Act 1989.  As such, following on from S v S arbitration could prove appealing for numerous families with a variety of familial disputes. Important exceptions to note include disputes as to jurisdiction and stays, and arrangements for children (other than financial arrangements for children).

This decision confirms that, subject to the above-mentioned exceptions, the court is highly likely to convert an arbitration award into a court order, which has the obvious benefits of certainty and enforceability.

When the benefits of arbitration are considered it is not difficult to see why the President took this approach. First, there is a greater degree of flexibility than with the court process. Parties can pick their own arbitrator, choose how the arbitration process proceeds and decide the timetable to follow. This latter advantage was particularly beneficial in S v S where the arbitration was concluded 8 weeks after the parties completed Form ARB1. Additionally, the entire process is confidential by its nature. Unlike family court proceedings, arbitration hearings are barred to the press.  Further, it is likely that parties will save costs by using the arbitration process. Although they will have to pay the fees of the arbitrator, the ability to choose a timetable and avoid court delays allows for a more streamlined and therefore more cost effective process. Additionally, it is also expected that an increased use of arbitration will save court resources and reduce pressure on the already stretched family courts.

It is not surprising that the President reached this conclusion, although that is not to downplay the importance of this decision in encouraging parties to arbitrate instead of litigate. Part 3 of the Family Procedure Rules 2010 sets out that the court must consider at every stage of the proceedings whether alternative dispute resolution (ADR) is appropriate, and gives the court the power to adjourn proceedings at any stage in order to enable the parties to use ADR. Sir James Munby's decision merely endorses these rules.

It is also not the first instance of the court approving arbitration awards. Indeed, in AI v MT (Alternative Dispute Resolution) [2013] EWHC 100 (Fam), [2013] 2 FLR 371 the High Court endorsed a Jewish orthodox couple's wish to arbitrate under rabbinical law by the New York Beth Din. The English court then approved the order that had been reached in arbitration.

S v S is also consistent with the trend in family law towards focusing on the autonomy of individuals, as was evidenced in Edgar v Edgar [1980] EWCA Civ 2, [1981] 2 FLR 19 when looking at whether parties should be held to an agreement reached, then later in Xydias v Xydias [1999] 2 All ER 386, and then more recently in the Supreme Court decision of Radmacher (Formerly Granatino) v Granatino [2010] UKSC 42, [2010] 2 FLR 1900 in the context of pre-nuptial agreements (to name a few of the major decisions).

Following on from the President's decision in S v S, he has invited the Family Procedure Rules Committee urgently to consider publishing rules in order to allow parties to stay financial remedy proceedings pending arbitration and relief under the Arbitration Act 1996.

This decision is to be welcomed, as it will give confidence to family practitioners and the parties involved that they are not taking a risk by embarking on arbitration. As such, parties can enjoy the numerous benefits of the process, while freeing up the court's precious resources for those cases that do need the court's involvement.

Charlotte Sanders is an assistant solicitor at Vardags.

She joined Vardags in September 2013, having completed her training contract at Manches LLP where she gained experience in family, employment, litigation and private property, before choosing to qualify and specialise in family law.

Charlotte takes a keen interest in humanitarian issues: after graduating in 2009 she spent three months working for a law firm in Atlanta, USA, aiming to secure the release of three detainees held at Guantanamo Bay.

View her profile on LinkedIn.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.