Divorcing couples can sometimes achieve savings of both time and money by opting for arbitration, rather than court proceedings, as a means of resolving any financial disputes. However, as a guideline High Court case underlined, arbitration has its potential downsides and it is vital to remember that arbitrators’ decisions are generally treated as final.

Faced with the prospect of having to wait several months for a court date following the breakdown of their ten-year marriage, a middle-aged couple chose to submit their differences to an arbitrator. He decided that the net capital assets of the marriage should be divided 60 per cent to 40 per cent in the husband’s favour.

Such division was to be achieved by the sale of the family home and was designed to enable each of them to purchase a new property. The wife was awarded 76 per cent of the husband’s pension and he was required to pay her maintenance at steadily reducing rates up to the date of his retirement. The wife was, however, dissatisfied with the arbitrator’s award, arguing that it was untenable.

She claimed, amongst other things, that the arbitrator had failed to take into account her inability to take on a mortgage and the husband’s excessive spending following the end of the marriage. In those circumstances, she argued that the award should not, as is usual, be recognised in the form of a court order.

In ruling on the matter, the High Court noted that arbitration awards are binding in their own right, although they are generally confirmed by court order so that they can be enforced against third parties. However, an arbitration agreement, or an award, does not oust the Court’s jurisdiction under the Matrimonial Causes Act 1973 to investigate the circumstances and make an order in different terms.

The effectiveness of the arbitration scheme, however, depends on awards being generally treated as effective and binding. In pursuit of a swift resolution of the dispute, both husband and wife had freely entered into the arbitration process with the benefit of legal advice. Both had also signed a form by which they signalled their understanding that the arbitrator’s award would in principle be final.

In dismissing the wife’s arguments, the Court found that she had failed to establish any fundamental change in circumstances, or mistake on the arbitrator’s part, sufficient to undermine his clearly reasoned and balanced award. In the circumstances, the Court made an order in the terms of the award.

Source: Private Client Library Content