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Early Neutral Evaluation: Overcoming pride and prejudice

Lawyers shaking hands outside of court Print publication

24/11/2016

Early Neutral Evaluation: Overcoming pride and prejudice

It is a truth universally acknowledged… that there can be a tendency for parties to litigation (and sometimes even their lawyers) to become so entrenched in their position that they can fail to see the weaknesses in their case and the merits of the case against them. Early Neutral Evaluation (ENE) is designed to help parties to overcome any pride and prejudice in such situations, to avoid deadlock and to promote productive settlement negotiations between the parties.

ENE is a form of alternative dispute resolution (ADR) in which an independent evaluator is appointed to assess the merits of each party’s case (or a particular part of it). It gives the parties an opportunity to obtain an impartial view on the relative strengths and weaknesses of their case before trial and can assist in avoiding trial altogether.

Suitability

ENE should be given particular consideration where the parties are willing to settle but there is a key point of dispute on which they cannot agree. It may assist the parties in overcoming this hurdle to reach settlement.

The evaluator

The evaluator will generally be a lawyer or expert in the relevant field. The evaluator can even be a judge and the court can order ENE as part of its general case management powers. This means, in theory at least, that the courts could undertake ENE even without the consent of the parties.

The evaluator’s view should reflect the likely outcome if the matter proceeded to litigation or arbitration. In contrast to mediation, the evaluator will take a more active role in the process and should be more decisive in stating an opinion. Generally, the evaluator’s decision is non-binding.

When in the dispute resolution process should ENE be considered?

As the name suggests, ENE is most commonly used towards the beginning of the dispute resolution process, though it may be used even before proceedings are issued or at any time up to trial.

In complex cases, parties sometimes wait until experts have produced their reports before commencing ENE. That being said, because ENE is often used to promote cooperation between the parties at an early stage, it may be the case that the evaluator is not provided with all the evidence that may be presented at trial. Even in those circumstances, ENE can still be a useful tool to identify and focus the scope of the dispute.

The agreement

Unlike with other forms of ADR (notably arbitration and mediation), it is rare for parties to include in a contract an agreement to engage in ENE. (This might be because, within England and Wales the process has so far been relatively little-known and under-used [1].)  Parties are therefore more likely to agree to appoint an evaluator once a dispute has arisen.

At this point, an ENE agreement should be drawn up, identifying the evaluator that will hear the dispute. The parties should also give consideration to including a term in the agreement that the process will be confidential and without prejudice, and that any documents produced during the process will not be disclosed in subsequent proceedings. The contract should also address any specific procedural requirements, such as whether oral hearings will take place. Generally parties will bear the costs of ENE equally, but a provision relating to payment should also be included.

Procedure

As there is no prescribed structure for ENE, parties are free to determine the procedure themselves. However, a fairly standard procedure is likely to follow these lines:

  • The parties provide the evaluator with the documents on which they will rely. This would normally include any existing pleadings; witness statements; a case summary; and/or written submissions.
  • There is often a meeting at which the parties are represented and make oral submissions. It is, however, open to the parties to agree that the process should be based on documents only and it is uncommon for oral evidence to be given.
  • The evaluator will make a decision, either orally or in writing.
  • Following the decision, the parties may then agree that further negotiation should take place, with a view to settling the dispute.

Advantages and disadvantages

As with any dispute resolution option, there can be advantages and disadvantages to ENE and whether it is a sensible choice should be assessed on a case-by-case basis.

Benefits of ENE include:

  • It gives parties an objective view of the merits of both sides of the case.
  • It provides an evaluation of the case before significant costs are incurred.
  • It can lead to swift settlement.
  • Even if it does not lead to settlement, it can help parties to narrow the scope of the dispute for trial (which can save on future costs).
  • ENE may be used in conjunction with other forms of ADR to reach a settlement.

Risks, however, include:

  • The outcome is not binding and will not necessarily correspond with a subsequent decision by the courts, particularly where all the evidence is not provided to the evaluator.
  • If an evaluator gives an unfavourable decision, this can weaken a party’s bargaining power in subsequent settlement discussions.

Other options

ENE is just one of a range of dispute resolutions solutions open to businesses today. Sometimes pursuing a case through the courts is the best or only option, but as the Civil Procedure Rules now state that litigation should be a last resort; in light of ever-increasing pressure on businesses to keep legal spend to a minimum; and in the current climate where even winning parties are likely to experience some element of shortfall when it comes to recovery of litigation costs, businesses are best advised to assess their ADR options at the outset of any dispute.  Alongside more familiar suggestions such as arbitration, mediation and expert determination, innovative and commercial new options such as ENE and the Shorter and Flexible Trials schemes [2] bear serious consideration.

If you would like any further information or advice, please contact Gwendoline Davies or any member of Walker Morris’ Commercial Dispute Resolution team.

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[1] ENE has been a part of alternative dispute resolution culture in the US since the late 1980s.
[2] See our earlier briefing for more information.

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