Early Neutral Evaluation
19 June 2019
19 June 2019
This guide highlights the key issues relating to Early Neutral Evaluation.
Alternative forms of dispute resolution (ADR) provide alternatives to traditional dispute resolution processes such as arbitration and litigation and are often cheaper, faster and more flexible.
Early Neutral Evaluation (ENE) is a form of ADR that has become increasingly popular in recent years. It has been encouraged by the English courts1 and is now expressly provided for in the Civil Procedure Rules (CPR),2 with ENE being offered in the Chancery Division, Commercial Court and the Technology and Construction Court. ENE schemes are also provided by numerous private providers.3
ENE may be used as part of a series of dispute resolution processes, such as in a tiered dispute resolution clause where ENE may be followed by mediation and then arbitration, or as a stand-alone process. For more information on Tiered Dispute Resolution Clauses, please refer to our Quickguide on this subject.
In an ENE, an independent and impartial evaluator is appointed by the parties to give an assessment or "evaluation" of the merits of their respective cases. The evaluator can provide an authoritative (albeit provisional) view of the issues at the heart of the case and an experienced evaluation of the strength of the evidence available to deploy in addressing those legal issues. This evaluation may then be used as the basis for settlement negotiations.
ENE can be used to explore any combination of legal, evidential, factual or technical questions. ENE is usually non-binding and the process without prejudice, meaning that what is said by one party in ENE proceedings cannot be used later by the other party in any proceedings (with very limited exceptions).
ENE may be useful in cases where:
ENE can be an effective means of dispute resolution in that it can:
ENE can be problematic because:
As ENE is a voluntary process to which all parties must agree, the parties are free to determine the process and the identity of the evaluator.4
ENE can be pursued through the courts or through an organisation. However, it is important for the efficacy of the ENE process that the parties respect the chosen evaluator. Where one or more of the parties to the dispute perceives the evaluator not to be sufficiently independent and impartial, they will be less likely to respect the evaluation that is handed down at the end of the process. For this reason, the parties may wish to consider conducting ENE through the courts in the first instance.
Although the court previously had power to order ENE through its inherent jurisdiction,5 ENE has been expressly available through the CPR since October 2015.
The court's case management powers, namely CPR 3.1(2)(m), provide that "the court may take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case".
ENE is currently available in the Chancery Division, TCC and Commercial Court and, to start the process, an application must be made to the court for a judge in the chosen court to conduct the ENE:
In all three courts, the parties should attempt to agree draft directions. The terms of such directions will be based primarily on the provisions of the relevant court guide. However, thought should also be given to whether any provisions that may be included in an ENE agreement used outside the court process (see "Entering into an ENE agreement" below) could be usefully imported into the court procedure. For example, the parties may want to specify what documents will be produced to the court and/or whether they can seek clarification of the evaluation after it is delivered.
As noted above, the judge conducting the ENE in any of these courts will take no further part in the proceedings, unless the parties expressly agree otherwise.8
Where ENE is conducted through the courts, there is no "evaluator fee" as such, but certain mandatory court fees will be incurred by the parties. These currently stand at a few hundred pounds and will usually be shared equally between the parties. Parties also usually agree to bear their own costs of the process, although orders for the costs of the ENE to be paid by whichever party ultimately loses the underlying case, known as "costs in the case", are also seen.
ENE is available, not only through the courts as described above, but also through the direct appointment of an evaluator, such as a QC, or through various organisations that facilitate the appointment of an evaluator and administer the process. These organisations include:
These organisations often maintain lists of approved evaluators, against which the names of proposed evaluators can be checked or from which they may make recommendations. We note that certain organisations charge a fee for their services, on top of the evaluator's fees (discussed below).
Once the identity of the evaluator has been agreed upon by the parties, or confirmed by an appointing organisation, the parties and the evaluator are required to enter into an ENE agreement. This agreement should set out the parties' agreement as to how the ENE will be conducted, what is expected of the evaluator and how his evaluation should be delivered. As it will also serve as the parties' instructions to the evaluator, it should set out clearly what is expected of the evaluator.
In addition to the key provisions around whether the process will be without prejudice and whether the evaluation will be binding or non-binding, we would also recommend the ENE agreement includes the following information:
As with the identity of the evaluator, the parties have discretion in determining the procedure for the ENE process. How much of the procedure the parties wish to set will depend on the facts of the dispute, but in general, the parties may agree either that the evaluator is to determine the procedure or that the parties are to determine some or all of the procedure themselves.
If the parties want to set some or all of the procedure themselves, they should agree this at an early stage of discussions, as the agreed procedure should be recited in full in the ENE agreement. Where the parties have agreed some or all of the procedure, they should ensure that the proposed evaluator is willing to conduct the process under their agreed procedure.
The parties may specify any element of the ENE procedure, but as a minimum should consider the following:
When discussing procedural matters, it should be borne in mind by the parties that the aim of ENE, as with ADR mechanisms generally, is to resolve disputes in a timely and cost-effective manner. Accordingly, when determining the ENE procedure, the parties should consider the need to balance these ADR aims with the requirement to put the evaluator in a broadly equivalent position to that of a trial judge. While excessive preparation time and costs would de-value the ENE process, insufficient materials being placed before the evaluator may lead to a lack of confidence in the final evaluation properly reflecting the position between the parties.
In contrast to ENE through the courts, where ENE takes place by appointment of an evaluator directly or through an organisation, the evaluator will charge for their services. These fees vary but typically are charged at hourly rates of between £250 and £600 per hour.9 In addition, as noted above, where the evaluator has been appointed by one of the organisations that facilitate appointments, additional costs will be incurred in the fees of the organisation.10 Similarly, with ENE through the courts, these fees will usually be shared equally between the parties and parties will typically bear their own costs. However, the parties retain the ability to agree to an alternative arrangement in the ENE agreement.
Subject to agreement otherwise, the evaluation does not take the form of a binding judgment, even where the process has taken place in a court with a judge serving as evaluator for the parties. Rather, the evaluation amounts to the preliminary opinion of the evaluator on the issue, or issues, in dispute and the likely outcome were the dispute to proceed to trial.
Following delivery of the evaluation, the parties will need to consider how to progress to a resolution. Where both parties are satisfied as to the independence and impartiality of the evaluator, and respect his opinion, this may be as informal as a negotiation meeting or settlement discussions. Alternatively, the parties may have agreed to mediate the dispute following the evaluation, if necessary. Parties may often also make a Part 36 or "Calderbank" offer or vary any that have already been made at this time.