Early Neutral Evaluation (‘ENE’) is a flexible way to resolve business disputes without the parties needing to resort to full-scale litigation or arbitration. Like other alternative dispute resolution methods, one of the main reasons you may wish to engage with the ENE process is with a view to saving time and money. In this guide we’ll look at the key aspects of ENE, so that you are equipped with a thorough overview of when it’s best to utilise Early Neutral Evaluation and the advantages and disadvantages depending on your business’ circumstances.
- What is Early Neutral Evaluation (ENE)?
- Is Early Neutral Evaluation binding and confidential?
- Who can the parties appoint as an evaluator?
- When would you use Early Neutral Evaluation?
- Does Early Neutral Evaluation lend itself well to any particular types of dispute?
- How is an evaluator chosen and appointed?
- What are the main steps in the Early Neutral Evaluation process?
- How is an Early Neutral Evaluation clause drafted and used in a contract?
- Early Neutral Evaluation: advantages and disadvantages
- Early Neutral Evaluation in the UK courts
- What happens after the evaluation?
- Early Neutral Evaluation vs mediation
- What does Early Neutral Evaluation cost?
- How long does the Early Neutral Evaluation process take?
What is Early Neutral Evaluation (ENE)?
The purpose of Early Neutral Evaluation is to encourage settlement discussions, and it is a potential way to resolve business disputes without going to court. The way it works is that parties in dispute appoint an independent evaluator to assess the strengths and weaknesses of each side’s case. This neutral, expert viewpoint is then intended to form a starting point for negotiations to settle the disagreement.
It’s important for you to be aware that, unlike other forms of alternative dispute resolution (such as arbitration or adjudication), ENE doesn’t result in a final decision. The evaluator does not decide legal issues or advocate a way of resolving matters. Instead, by indicating what you and the other party might realistically be able to rely on if full-blown litigation took place, the evaluator provides a valuable incentive for an agreement to be reached.
Is Early Neutral Evaluation binding and confidential?
Another key point to highlight is that the outcome of the ENE process is usually non-binding on the parties. It is also carried out on a without prejudice basis, which means that anything disclosed during the ENE process can’t later be used as evidence in court without agreement. Nevertheless, it has become a popular and useful way for businesses in dispute to get a practical view of the merits of their respective positions without spending large amounts of money on litigation.
Who can the parties appoint as an evaluator?
The parties themselves can appoint an evaluator on a private basis. He or she may be an experienced Queen’s Counsel (QC), or another professional with an appropriate level of knowledge of the subject matter at hand. Alternatively, you should be aware that since 2015, it’s been possible for those in dispute to pursue ENE through the Technology and Construction Court (‘TCC’) and the Commercial Court. In both cases, this involves asking a judge to act as the evaluator. It’s worth pointing out that if, after a judge-led ENE the matter still proceeds to trial, the same judge cannot normally oversee those litigation proceedings.
The process of exactly how an evaluator is chosen and appointed is discussed in more detail further along in this guide.
When would you use Early Neutral Evaluation?
Early Neutral Evaluation is an type of alternative dispute resolution (ADR) method that’s often employed at the early stages of a dispute. You might also use it to decide standalone issues that are particularly difficult to find agreement on but that are preventing the resolution of a larger, ongoing conflict. Like other forms of ADR, one of the primary attractions of ENE is that it cuts down on costs and avoids the time and expense of a trial. It’s particularly appropriate in cases where the parties’ positions are so far apart that litigating immediately would inevitably lead to a waste of resources, as numerous preliminary issues are addressed.
Early Neutral Evaluation is also deployed when one side is being unrealistic about its chances of success at trial. A neutral evaluator can highlight weaknesses in a case that would be fully exposed if the matter were litigated.
Does Early Neutral Evaluation lend itself well to any particular types of dispute?
Early Neutral Evaluation is most commonly used in the commercial arena, but it’s also used in private disputes too. In fact, one of the crucial cases in the development of ENE by the courts involved a family dispute over an inheritance. That case – Seals v Williams (2015) – highlighted that ENE allows a judge to evaluate the respective parties’ cases in a direct way. It may provide you with an authoritative, albeit provisional, view of the essential legal issues of the case, especially when the parties have very differing views of the prospects of success and an inadequate understanding of the risks of litigation.
How is an evaluator chosen and appointed?
If you are involved in a contractual dispute or other commercial disagreement and you wish to use the ENE process, you must first agree with the other party on the identity of the evaluator you would both like to use. Parties are free to choose the evaluator themselves, but you ought to bear in mind that it’s a fundamentally important decision. Choosing an evaluator without the right mix of technical expertise and practical judgment could undermine any view he or she arrives at, which would then render the whole process fruitless.
The appointment of an evaluator can be done in one of two ways:
Several organisations (including the Chartered Institute of Arbitrators and the Academy of Experts) maintain panels of expert arbitrators. You are free to approach these organisations directly for help with sourcing an appropriate evaluator. Individual barristers and solicitors may also offer evaluation services and again, they can be contacted directly.
The TCC, Commercial Court and Chancery Division all provide ENE services. Parties wishing to go through the court can formally apply in accordance with the appropriate Civil Procedure Rules (CPR) that are applicable in the circumstances.
What are the main steps in the Early Neutral Evaluation process?
We’ve emphasised that the Early Neutral Evaluation process is flexible and consensual. If it is not developed with the agreement of both parties, the chances of a successful evaluation will be reduced. Whilst there are no hard and fast rules about how to run an ENE, once the parties have agreed upon and appointed an impartial evaluator, the following steps are likely to be present in each case:
Drawing up an Early Neutral Evaluation agreement
The parties and the appointed evaluator should set out in writing their respective roles and responsibilities in the process. You should ensure that the agreement is as detailed as possible to provide clarity, but as a minimum should contain clauses related to:
- The confidential and without prejudice nature of the process
- The impartiality of the evaluator
- The scope of documents each side will be required to disclose
- The evaluator’s remit, and instructions relating to what elements of the dispute are to be considered
- Whether the evaluator is required to explain the reasoning behind the evaluation
- The binding nature of the evaluation
- Responsibility for the evaluator’s fees
- The timetable for running the ENE
- Procedure for the ENE
Commencement of the proceedings
ENEs run according to the wishes of the parties. It’s up to you and the other side to decide between you whether the evaluator should hold a hearing, or whether the evaluation should be carried out solely by reference to documentation submitted by the parties.
Preparation of case summaries
Each party will almost certainly provide a case summary, which is your opportunity to put forward your best case to the evaluator and, where appropriate, suggest ways of resolving the dispute.
Decision issued by the evaluator
The evaluator’s decision is not a like a binding court ruling. It’s essentially a review of the case and an assessment of each side’s merits. As touched upon earlier, it may indicate the likely outcome of any trial and encourage further discussion between you and your opponent. The decision will be framed in accordance with the terms of the ENE agreement, and the evaluator will restrict his or her comments to the areas specified by the parties at the beginning of the process.
How is an Early Neutral Evaluation clause drafted and used in a contract?
We would always advise you to consider having an ADR clause inserted into any commercial contract that you’re party to, which would include the provision for ENE where appropriate. It’s important to obtain specialist advice when you are drafting your contract, so as to ensure that any ADR provisions are enforceable – this is because as ADR is inherently voluntary, it’s arguable as to whether an ENE clause is binding. However, you stand a greater chance of demonstrating agreement to ADR by:
- Being careful in the type of language you use when referring to ENE in the contract
- Ensuring precision as to the ENE timetable
- Referring to specific procedural rules (if possible)
Early Neutral Evaluation: advantages and disadvantages
The table below addresses some of the main advantages and disadvantages of the Early Neutral Evaluation process:
|Advantages of ENE||Disadvantages of ENE|
|Wide application to many types of dispute, including construction and general commercial cases.||Not always appropriate when there are significant issues of fact in dispute. Evaluator does not have the same opportunity to hear from witnesses as in other forms of dispute resolution.|
|It’s flexible and can be a short process.||Depending on the ENE agreement drawn up by the parties, the process can potentially become lengthy. This could prove expensive as ultimately, the evaluator’s decision is not binding.|
|It focuses minds on the key issues at stake.||The side favoured by the arbitrator in his or her decision may become emboldened to seek a more favourable outcome.|
|Evaluator will give a realistic assessment of prospects of success of each side. When parties better understand their legal position, they may be more prepared to come to the table and negotiate.||A losing side may not accept the evaluator’s decision and therefore decide to proceed with litigation.|
|The process will expose weaknesses in a case, enabling a party to negotiate more realistically.||If a judge decided the ENE, he or she will not be able to hear any related litigation. This leads to the risk that one side could use this rule tactically to ensure a judge it dislikes does not hear the case.|
|Wide choice of evaluators available, ranging from private experts to judges.|
Early Neutral Evaluation in the UK courts
As discussed above, ENE is available through private mediation organisations and individual lawyers. Since 2015, it has also been available in certain courts. Indeed, some courts actively encourage ENE as a way to resolve disputes in particular situations. As previously mentioned, ENE is available in the TCC, the Commercial Court and in the Chancery Division of the High Court.
Below is a brief outline of the approach each court takes when dealing with a case by way of ENE:
- The TCC – Parties involved in construction and technology disputes can agree to the appointment of a judge from the court to carry out an ENE. The approach of the court is generally accommodating to the parties: the judge will deal with either an entire dispute, or a portion of a more wide-ranging dispute, depending on the wishes of the parties. The parties can also decide between themselves the extent to which – if at all – the ENE will bind them and whether any of the information seen by the ENE judge can be used in any later trial (in the event that the ENE fails).
- The Commercial Court – The time to raise the possibility of ENE in the Commercial Court is at the case management conference (the ‘CMC’). If it’s approved, the nominated judge will issue directions on how the ENE is to be conducted. When the evaluation is made it will be supported by a brief explanation, which is often communicated orally to the parties.
- The Chancery Division – ENE in the Chancery Division usually involves an exchange of ‘position papers’, the exchange of documents and an oral hearing. A Chancery judge will issue a non-binding, confidential opinion to the parties. It’s open to the parties to agree that the judge’s opinion becomes binding.
What happens after the evaluation?
Unless you and the other party have agreed to be bound by the evaluator’s decision, it simply serves as a stepping-stone to further negotiation and discussion. Even if the ENE was carried out through the courts and the decision reached by a judge, it is nonetheless only an assessment of each side’s strengths/weaknesses and a prediction of what could happen if the case went to trial. Usually, the sides will meet following the decision to establish whether there is a possibility of a breakthrough in the dispute in light of the evaluator’s findings. If one party does not agree to settle on the evaluator’s terms, the other may consider making a so-called ‘Part 36’ offer. Because of the negative cost consequences for the party refusing to accept a Part 36 offer if the case is pursued and lost, it can pressurise that party into settling.
Early Neutral Evaluation vs mediation
Early Neutral Evaluation and Mediation have, like other forms of ADR, got a lot in common. They are geared towards giving control of the management of the dispute to the parties involved, with both processes being private and non-binding. Additionally, each of these methods of ADR represent a way to potentially avoid court, reduce legal costs and aim to find a quick solution to a commercial problem.
As we have shown, Early Neutral Evaluation results in an expert assessment of the conflict at an early stage to enable the parties to reach an agreement where possible. In reality, it is the case that mediation often follows an ENE. Whereas the evaluator in an ENE reaches a decision – or a considered view – on the issues presented to him or her, the mediator does not impose their views on the parties. Instead, it is the job of the mediator to facilitate agreement between the two sides.
What does Early Neutral Evaluation cost?
The goal of Early Neutral Evaluation is to find a cost-effective solution to a dispute. If run efficiently, the ENE process should be considerably cheaper than court action and many other forms of ADR.
If ENE is carried out through the courts, court fees will normally be split between you and the other party. In terms of legal fees for the process, both sides generally bear their own. Sometimes the costs of the ENE will be borne by the side that ultimately loses the related, wider case (in circumstances where the ENE related only to part of a larger dispute). When an independent evaluator is appointed, there will be an additional cost – the fees of the organisation that provided the evaluator as well as the evaluator’s professional fees will have to be met. Evaluators charging hundreds of pounds per hour are not unheard of.
How long does the Early Neutral Evaluation process take?
The length of time it takes to finalise an ENE will clearly depend on the facts of the particular case. As you are now aware, it’s designed to be a quick process that isolates strengths and weaknesses in each side’s case so that an early settlement can be facilitated. That said, the preparatory work can take up a considerable amount of time and there is a risk that time spent on an ENE will not yield results – simply because there is an inability to reach an agreement. Furthermore, there is always the chance that the party who obtains a favourable evaluation will be more inclined to maintain a firmer stance in any negotiation, making an agreement harder to reach. It’s always important before embarking on ENE or any form of ADR to get specialist legal advice; something which our skilled team of dispute resolution solicitors can help you with in early course.