Courts Can Now Order ADR in Commercial Disputes — With Costs Sanctions for Refusal

What changed in October 2024

The changes to the Civil Procedure Rules followed the Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 (November 2023). The court held that judges can order parties to engage in non-court dispute resolution, departing from the widely followed view, taken from Halsey v Milton Keynes General NHS Trust (2004), that they could not.

The court's general powers of management now include the power to order the parties to engage in alternative dispute resolution. When giving case management directions in claims allocated to the fast track, the intermediate track, or the multitrack, the court should consider whether to order or encourage the parties to engage in ADR.

The costs provisions are the sharpest teeth in the new rules. When considering costs in a claim, the courts must now consider whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution. In plain terms: if a court orders ADR and a party refuses, or if a party unreasonably declines to engage in ADR even without a court order, they risk a costs sanction — even if they ultimately win the case. Whether a refusal is unreasonable depends on the facts.

What costs sanctions actually mean

A costs sanction is not a minor administrative inconvenience. It means the court can deprive a winning party of some or all of its costs — or order it to pay the other side's costs — on the grounds that its refusal to engage in ADR was unreasonable.

In Northamber PLC v Genee World Ltd [2024] EWCA Civ 428, the Court of Appeal held that the defendants' silence in response to an offer to mediate, together with their breach of a court order requiring them to explain it, was unreasonable. The penalty was modest: the claimant's costs recovery against one defendant was increased from 70% to 75%. The court also said a costs penalty does not follow automatically.

In Henderson & Jones Ltd v Salica Investments Ltd [2025] EWHC 838 (Comm), the defendants failed to beat the claimant's Part 36 settlement offer. The judge awarded enhanced interest at 10% above base rate on the judgment sum of £2,154,285 from 21 November 2023. That is the usual consequence of failing to beat a claimant's Part 36 offer, but the judge also noted that the defendants had unreasonably refused to mediate or engage in ADR on numerous occasions, and that was one reason he would not reduce it.

The consequences of unreasonable refusal depend on the facts of each case, but they can be real.

What this means for businesses in commercial disputes

The practical implications are straightforward. If you are involved in a commercial dispute — whether as the party bringing a claim or the party on the receiving end — you now need to take ADR seriously from the outset, not as an afterthought.

Courts are very likely to seek assurance that parties have considered ADR options and may increasingly require parties to attempt ADR before allowing cases to progress to full litigation.

For the party bringing a claim, proposing ADR early and in writing creates a record. If the other side unreasonably refuses to engage in ADR, the court must take that into account when deciding costs. For the party receiving a claim, see our guide on why agreeing to Dispute Neutral can make sense.

For the party receiving a claim, ignoring an ADR proposal — or refusing it without a proper explanation — carries real financial risk even if the underlying claim is eventually defeated.

The DMCC Act 2024 consumer ADR rules: what they mean for businesses

Separately, the Digital Markets, Competition and Consumers Act 2024 introduced a new mandatory accreditation framework for ADR providers handling consumer contract disputes. These provisions and the regulations made under them came into force on 6 April 2026, replacing the framework under the 2015 ADR Regulations.

This is an important development for businesses with consumer-facing operations — it changes the obligations around signposting consumers to accredited ADR providers and the standards those providers must meet.

The DMCC Act ADR regulations apply to consumer contract disputes. The CPR changes from October 2024 apply to civil litigation in England and Wales generally — including commercial disputes between businesses. Both are significant, but they address different contexts. For businesses dealing with B2B commercial disputes — unpaid invoices, trade debts, professional fees, and similar — the CPR changes are the more directly relevant development.

A private neutral decision process: ADR that produces a binding outcome

Not all ADR is the same. Mediation requires both parties to agree on a settlement — and if they cannot, the dispute remains unresolved. A private neutral decision process is different: an independent neutral, an independent lawyer with at least 15 years' practical experience, acting as an expert, not an arbitrator, reviews the documents and written submissions from both sides and issues a binding determination. Both parties agree in advance to be bound by the outcome.

This distinction matters in the context of the new CPR rules. Agreeing to a binding neutral decision is a genuine attempt to resolve the dispute other than by a full court process, which is likely to be looked on favourably on costs, and it produces a definitive outcome rather than a process that might not resolve anything. If a court has ordered a particular form of ADR, though, you need to comply with that order.

For commercial disputes up to £150,000 in England and Wales and Northern Ireland, Dispute Neutral provides this, if both parties agree: a private, binding decision within 10 business days of the matter being ready, for a fee banded by the amount in dispute. See our companion page on why Dispute Neutral is a strong fit for the current ADR landscape for more detail.

Can a court actually force my business to go to mediation or ADR?

Yes, in England and Wales. The Court of Appeal confirmed in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 that courts can order parties to engage in ADR, and since 1 October 2024 the Civil Procedure Rules say so expressly. An order must be proportionate and must not impair the right to a judicial hearing. The court has discretion on when to use the power. Northern Ireland has its own court rules.

What happens if I refuse ADR when ordered by the court?

Failure to comply with an order for ADR may result in costs sanctions on the party that refuses to engage. This means you could be required to pay more of the other side's costs, or be deprived of some of your own costs, even if you win the case on the merits. How much depends on the facts: in Northamber PLC v Genee World Ltd the penalty for ignoring an offer to mediate was a modest five-point change in costs recovery, from 70% to 75%.

Does the DMCC Act apply to disputes between businesses?

No. The consumer ADR provisions of the Digital Markets, Competition and Consumers Act 2024, which came into force on 6 April 2026, govern consumer contract disputes: disputes between a business and a consumer. They do not apply to business-to-business disputes. The more relevant development for business-to-business disputes is the October 2024 CPR changes, which apply to civil litigation in England and Wales and give courts the power to order ADR in commercial claims.

Is a binding neutral decision considered ADR for the purposes of the new rules?

Yes. Expert determination and other binding neutral decision processes are recognised forms of ADR. Genuinely engaging in one is an attempt to resolve the dispute other than by a full court process, which is likely to be looked on favourably on costs. Unlike mediation, it produces a definitive outcome. Whether any particular conduct is reasonable depends on the facts, and if the court has ordered a specific form of ADR, you should comply with that order.

Ready to engage with ADR on your terms — before a court orders it?

If both parties agree, a private neutral decision process gives a binding outcome within 10 business days of the matter being ready, for a fee known in advance, and is consistent with the courts' expectation that parties explore ADR before and during litigation.

Private • Fixed-fee • Binding decision in 10 business days once the matter is ready