Why has the CIArb introduced this new scheme?
BAS has been developed by the CIArb to be a viable option of dispute resolution for small businesses. Following the further hike in court fees introduced in March 2015—in some cases, a hike of up to 600% —it became apparent that small businesses in particular were disproportionately affected, and that many felt priced out of accessing justice through the adversarial court system. As the majority of small businesses commence court proceedings to recover unpaid monies, the financial barrier caused by the increased fees has meant that in some cases legitimate debt claims are no longer being pursued, having a knock-on effect on the cash flow of those businesses, and exacerbating small business insolvency.
This presented an opportunity not only for CIArb to educate small businesses about alternative means of resolving their disputes, but also to develop a specialist scheme catered towards small business disputes. Educating small businesses is an important part of our objective in promoting BAS. A recent survey by The Association of Independent Professionals and the Self-Employed (IPSE), found that only 5.5% of their members were aware of alternative dispute resolution (ADR). Those that were aware of ADR often found the landscape confusing and difficult to navigate.
Bearing in mind these challenges, at the forefront of our mind when developing BAS was simplicity. The scheme was created to be user friendly, not overly prescriptive, and to permit self-representation if desired by a party. Furthermore, we wanted to address the concerns that many businesses have about arbitration; the length and cost of proceedings. BAS was, therefore, developed to be a fixed fee scheme, to give certainty as to cost, and to offer a legally binding award within three months, thereby giving certainty as to the timeframe involved. These features serve to reassure users at the outset, and to better allow them to make an informed decision at the time of contract drafting as to whether this scheme is most appropriate for the types of disputes they are likely to face.
What are BAS’s distinctive features?
BAS provides simple, cost-effective and timely resolution of disputes before a sole arbitrator. The scheme applies solely to domestic disputes, with the arbitration governed by the Arbitration Act 1996. The scheme also applies solely to disputes of low to medium monetary value, where the amount claimed is between £5,000 and £100,000. In the event that a counterclaim is advanced by the respondent, the scheme may be used where the value of the claim and counterclaim together do not exceed £150,000.
By having such parameters, and providing for the appointment of a sole arbitrator instead of a three-member tribunal, we are able to offer the scheme as a fixed cost arbitration scheme, and this is one of its most appealing features, as users know what the arbitrator’s fees and CIArb’s administrative costs will be at the outset of the arbitration.
Another attractive proposition for small businesses is that there is a provision in the BAS Rules which specifies the timeframe by which the award must be issued. With the length of arbitration proceedings being a particular concern for parties, especially given its direct impact on costs and productivity, BAS offers the certainty of a final and legally binding award in less than 90 days from the appointment of the arbitrator. This is achieved by the arbitrator adopting the simplest procedure appropriate to the dispute, and explains why formal procedural steps under the scheme have been kept to a minimum. The arbitrator retains flexibility under the scheme to put in place a procedural timetable, and deal with procedural matters, in a way that works best for the dispute at hand, but he/she must always have in mind the overarching objective of the scheme and the deadline set under the scheme for the issuance of an award.
Other notable features that have been put in place to preserve the objective of the scheme are:
the ability for a respondent’s counterclaim to be withdrawn in the event of non-payment of its share of the costs of the arbitration
limitations on the legal costs recoverable, and
word count and size restrictions vis-à-vis each side’s statements of case and witness statements
The scheme envisages that the Statement of Claim, and Statement of Defence (and counterclaim, if applicable) will have been submitted by the time the arbitrator is in place, to get proceedings off to a quick start.
Who are the arbitrators and how are they appointed?
While BAS is administered by CIArb’s Dispute Appointment Service, appointments under BAS are to be made by the chairperson of the applicant’s local branch of CIArb, from a branch approved panel, within ten days of the commencement of the arbitration. In the event of a conflict, the appointment may also be made by CIArb’s president.
CIArb has created a specific panel of arbitrators for BAS, comprised of UK-based Fellows of the Institute who have applied to join the panel. All those listed on the BAS panel are experienced dispute resolution practitioners, who have obtained a high-level diploma qualification at the Institute, and have demonstrated to CIArb that they have a suitable level of knowledge, skill and experience in their discipline. In keeping with the diversity of CIArb’s membership, those on the BAS panel are experienced in a wide range of sectors, and come from all backgrounds and professions. This includes not just lawyers, but also architects, surveyors, engineers and accountants.
What are the costs and how much is recoverable?
The fixed fee payable by each party, which covers the sole arbitrator’s fee and CIArb’s administrative costs, is £1,250 plus VAT. This amount is payable by the claimant upon commencement of the arbitration and by the respondent within seven days of that date, and is on the basis that the arbitration will be on paper only. If the parties require a half-day oral hearing or a site visit, an increment of £500 plus VAT per party will be payable, with any expenses associated with that hearing or site visit to be charged separately.
As stated earlier, we have deliberately developed the scheme to be simple and user friendly, to allow those parties who want to represent themselves to be able to do so. For those parties who wish to be legally represented, they are free to do so, but should bear in mind that, unless the parties agree otherwise, the amount of legal costs recoverable under the scheme has been capped at £1,000. The winning party may also recover the fixed fee paid by them. The costs recoverable have been limited to protect parties against liability for their opponents’ high legal bills.
How much interest has there been in BAS since launch?
We have been incredibly encouraged by the amount of interest the scheme has received so far, from both potential users of the scheme, and also from Fellows of the Institute interested in serving as arbitrators under BAS. This supports the evidence that came out of a survey conducted by the Institute in the consultation phase, where from a participant pool of UK Fellows and small businesses:
94% found the scheme to be an attractive proposition for small businesses involved in low to medium value disputes
93% found the cost of the scheme appealing
98% found the short timetable of benefit, and
96% found the scheme easy to understand
BAS has also been looked upon favourably by various trade associations and chambers of commerce, who are supporting the increased use of ADR amongst their members, and are welcoming initiatives that empower their members to make more informed choices when asserting their legal rights.
BAS is also aligned with the government’s fiscal strategy to actively promote dispute avoidance and management through ADR mediums. The Enterprise Act 2016, which establishes a small business commissioner to help small firms resolve issues such as late payment, can now signpost small businesses to ADR schemes such as BAS, where appropriate. Therefore, while for some the creation of BAS is long overdue, in many respects it is also timely giving the present environment.
More generally, we are starting to see the creation of more bespoke ADR procedures, aimed at small business disputes and/or disputes of low to medium monetary value—The London Maritime Arbitrators Association Small Claims Procedure, HMRC’s ADR procedure, and The Ministry of Justice’s mediation scheme for small claims, are all such examples. This signals a positive shift towards the use of ADR as an effective dispute resolution tool for a variety of business disputes. As more small businesses become aware of the benefits of ADR, I am confident that we will start to see an increased uptake among that demographic, and a more forward-thinking approach to dispute management, with BAS clauses appearing more at the contract-drafting stage.
How does the scheme fit in with DAS’s other schemes and services?
The introduction of BAS complements, and further enhances, the diverse range of schemes and services already offered by the Dispute Appointment Service (DAS).
DAS stands out from other arbitral institutions, not only because we act solely as appointing body, but also because we charge for our service on a fixed fee basis, instead of adopting ad valorem or time-based charges. For our standalone appointment services, we charge a relatively low appointment fee of between £360–£600. For recommending the names of three suitable dispute resolvers, we charge a flat fee £120. As an offering, we have always appealed to those who want certainty as to the institutional costs involved, but who also do not want full case administration and want to preserve the costs benefit of ad hoc arbitration.
BAS fits in well with the variety of services we currently provide:
a standalone presidential appointments service for arbitration, adjudication, mediation and expert determination
a three-name suggestion service for those wanting to agree or appoint an arbitrator themselves
a set of arbitration and mediation rules to offer procedural guidance for those who want it, and
specialist ADR schemes catered to particular sectors or to low value monetary disputes