The author of this article says it's an open question whether increased flexibility of arbitration awards will make arbitration more or less popular for handling divorce wrangles in future.

We regularly run commentaries about high-profile divorce cases, or court wrangles between people who, while they are not famous, experience situations that can set precedents. Given the large financial sums at stake, divorce remains an area that private client advisors need to track. 

This article examines the future of arbitration in family law and comes from Harriet Errington, partner at the family practice of Boodle Hatfield. The editors of this news service are pleased to share these views; as usual, editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

A recent Court of Appeal judgment (Haley v Haley [2020] EWCA Civ 1369) has radically changed the landscape in relation to arbitration in the context of divorce proceedings. It has highlighted, once again, the wide-ranging powers enjoyed by the family courts in England and Wales. 

In 2020, Mr and Mrs Haley’s divorce was progressing through the court system as normal. However, just days before the two-day final hearing in relation to their finances, they were informed that the court could not hear their case due to “judicial availability,” a situation in which the court cannot, for whatever reason, provide the judge required to hear the case. Sadly, this is becoming increasingly common as family courts have been suffering severe delays, even before the deleterious effect of COVID-19 on the legal infrastructure. So, Mr and Mrs Haley found themselves, after months of legal preparation and substantial fees incurred in the run up to the trial, delayed by several months. They therefore decided at short notice to resolve their dispute by other means - arbitration. 

Arbitration is a form of alternative dispute resolution more often found in commercial courts, in which an arbitrator is appointed jointly by the parties to act as a judge to determine the outcome of their case. Importantly, by signing up to arbitration, the parties agree to be bound by the arbitrator's decision.

Arbitration has been growing in popularity in family law matters in recent years, partly due to the log-jammed court system and partly due to the appeal of being able to agree the choice of judge rather than leaving it to chance. However, many people have, often rightly, shied away from arbitration because of the lack of recourse to an appeal, in marked contrast to the appeal system in court proceedings.

Commercial courts famously apply strict rules to arbitration and the family court approach has in recent years increasingly leant towards these rigid commercial arbitration principles - at least until the case of the Haleys. 

The divorcing couple, mired in delay, quickly found themselves an arbitrator and the arbitration commenced. When the arbitrator handed down his final award it was not at all to the husband’s liking, so he applied to the High Court to overturn the award on the basis that it was wrong and unfair. The High Court, applying strict arbitration principles, declined to overturn the award.

Next, Mr Haley applied to the Court of Appeal. The court held that the particular nature of the family court's supervisory duty to achieve fairness cannot be ousted nor overridden by delegation to an arbitrator. It was held that, in determining whether to overturn a decision, the same test should be applied to an arbitrator's award as that which is applied to a court's ruling. In other words a consideration not of whether the decision had been "obviously wrong" per the relevant arbitration rules, but rather "not seriously or obviously wrong…just wrong."

The inevitable result of this ruling is that it will now be considerably easier to challenge an arbitrator's award. This ought now to allay any concerns as to the lack of recourse to an appeal in arbitration and reassure divorcees that if an award really is wrong, they will not be prevented from returning to the court system 

It remains to be seen as to whether the increased flexibility of such arbitration awards, and the consequential loss of durability in the face of challenge, will make arbitration more or less popular going forward, though one suspects slightly more. This judgement does, however, highlight the family court's relentless ability to drive a coach and horses through the principles so rigidly adhered to in other areas of the law.

Be it in arbitration, the ability to reverse transfers of assets arranged prior to a divorce, or even the ability of the family courts to invade longstanding family trusts, suffice it to say, if it concerns a marriage, particularly one which is breaking down, increasingly the chances are that family law principles will be dominant.