Early Neutral Evaluation

This guide highlights the key issues relating to Early Neutral Evaluation.

Alternative forms of dispute resolution (ADR) provide alternatives to traditional dispute resolution processes such as arbitration and litigation and are often cheaper, faster and more flexible.

Early Neutral Evaluation (ENE) is a form of ADR that has become increasingly popular in recent years. It has been encouraged by the English courts¹ and is now expressly provided for in the Civil Procedure Rules (CPR),² with ENE being offered in the Chancery Division, Commercial Court and the Technology and Construction Court. ENE schemes are also provided by numerous private providers.³ 

ENE may be used as part of a series of dispute resolution processes, such as in a tiered dispute resolution clause where ENE may be followed by mediation and then arbitration, or as a stand-alone process. For more information on Tiered Dispute Resolution Clauses, please refer to our Quickguide on this subject. 

What is ENE?

In an ENE, an independent and impartial evaluator is appointed by the parties to give an assessment or "evaluation" of the merits of their respective cases.  The evaluator can provide an authoritative (albeit provisional) view of the issues at the heart of the case and an experienced evaluation of the strength of the evidence available to deploy in addressing those legal issues.  This evaluation may then be used as the basis for settlement negotiations.

ENE can be used to explore any combination of legal, evidential, factual or technical questions. ENE is usually non-binding and the process without prejudice, meaning that what is said by one party in ENE proceedings cannot be used later by the other party in any proceedings (with very limited exceptions).

When to use ENE

ENE may be useful in cases where:

• the parties have reached an impasse on a particular element of or issue in the case: an independent evaluator may be able to break such a deadlock by giving an unbiased opinion of what the outcome would be if the matter proceeded to a court or an arbitral tribunal;
• there is a great disparity between the parties' positions: ENE can focus the minds of both parties and narrow the gap between them;
• one party has an unrealistic view of the case: receiving an independent evaluation of the case may help a party to realise that their arguments are unlikely to succeed in court; and/or
• confidentiality is essential: ENE is not a public process and does not produce any publically available judgment or decision.

Advantages of ENE

ENE can be an effective means of dispute resolution in that it can:

• highlight and clarify the issues in dispute;
• be faster than more traditional forms of dispute resolution;
• demonstrate the limits of a party's case, any gaps in the evidence and the risks involved in pursuing litigation; and
• assist in settlement negotiations by encouraging parties to move to a more realistic negotiating position.

Disadvantages of ENE

ENE can be problematic because:

• the "winner" of the process is likely to become more entrenched in their position as a result of a positive evaluation, which may lead to them becoming more demanding in negotiations, thus hindering the settlement process;
• conversely, the "loser" is likely to find their negotiating position significantly undermined, thus decreasing their chances of achieving a satisfactory settlement; 
• ENE can be disproportionately expensive and time-consuming, if it does not result in a settlement;
• ENE may be too short and informal to deal with complex technical or factual questions, unless they can be broken down into single issues; and
• if ENE is carried out by the court, the judge carrying out the evaluation will not be able to take part in subsequent proceedings, unless both parties agree. ENE may therefore be used tactically to exclude a particular judge from hearing the case.

Selecting an ENE process

As ENE is a voluntary process to which all parties must agree, the parties are free to determine the process and the identity of the evaluator.⁴

ENE can be pursued through the courts or through an organisation.  However, it is important for the efficacy of the ENE process that the parties respect the chosen evaluator. Where one or more of the parties to the dispute perceives the evaluator not to be sufficiently independent and impartial, they will be less likely to respect the evaluation that is handed down at the end of the process. For this reason, the parties may wish to consider conducting ENE through the courts in the first instance.  

ENE through the courts

Although the court previously had power to order ENE through its inherent jurisdiction,⁵ ENE has been expressly available through the CPR since October 2015.

The court's case management powers, namely CPR 3.1(2)(m), provide that "the court may take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case".

ENE is currently available in the Chancery Division, TCC and Commercial Court and, to start the process, an application must be made to the court for a judge in the chosen court to conduct the ENE:

• ENE in the Chancery Division and TCC - In appropriate cases, either of the Chancery Division and the TCC will provide an ENE of an entire case or particular issues within the case, with the agreement of all parties. No procedure is prescribed, but the appointed judge will give such directions for the preparation and conduct of the ENE as he considers appropriate. A specimen draft order for directions in the Chancery Division and the TCC can be found at paragraph 18.15 of the Chancery Guide and paragraphs 7.5.1 and 7.5.4 of the TCC Guide respectively. In particular, it is worth noting that the Chancery Guide recommends that short hearings, of up to half a day, are preferable to solely written proceedings.⁶ If the parties wish, they may agree that the ENE evaluation is to be binding and not without prejudice, but the opposite is more usually the case.⁷    
• ENE in the Commercial Court - The Commercial Court also provides a without prejudice, non-binding ENE process in appropriate cases. The Commercial Court Guide does not specify matters of procedure beyond the required approvals and the appointment of a judge to conduct the ENE, though again it does make provision for the judge to give such directions as he considers appropriate.

In all three courts, the parties should attempt to agree draft directions. The terms of such directions will be  based primarily on the provisions of the relevant court guide. However, thought should also be given to whether any provisions that may be included in an ENE agreement used outside the court process (see "Entering into an ENE agreement" below) could be usefully imported into the court procedure.  For example, the parties may want to specify what documents will be produced to the court and/or whether they can seek clarification of the evaluation after it is delivered. 

As noted above, the judge conducting the ENE in any of these courts will take no further part in the proceedings, unless the parties expressly agree otherwise.⁸ 

Costs of ENE through the courts

Where ENE is conducted through the courts, there is no "evaluator fee" as such, but certain mandatory court fees will be incurred by the parties.  These currently stand at a few hundred pounds and will usually be shared equally between the parties.  Parties also usually agree to bear their own costs of the process, although orders for the costs of the ENE to be paid by whichever party ultimately loses the underlying case, known as "costs in the case", are also seen. 

ENE through an organisation 

ENE is available, not only through the courts as described above, but also through the direct appointment of an evaluator, such as a QC, or through various organisations that facilitate the appointment of an evaluator and administer the process. These organisations include:

• Academy of Experts;
• ADR Group;
• CEDR (Centre for Effective Dispute Resolution);
• CDP (City Disputes Panel);
• Chartered Institute of Arbitrators;
• London Court of International Arbitration; and
• RICS (Royal Institute of Chartered Surveyors).

These organisations often maintain lists of approved evaluators, against which the names of proposed evaluators can be checked or from which they may make recommendations. We note that certain organisations charge a fee for their services, on top of the evaluator's fees (discussed below).

Entering into an ENE agreement

Once the identity of the evaluator has been agreed upon by the parties, or confirmed by an appointing organisation, the parties and the evaluator are required to enter into an ENE agreement.  This agreement should set out the parties' agreement as to how the ENE will be conducted, what is expected of the evaluator and how his evaluation should be delivered. As it will also serve as the parties' instructions to the evaluator, it should set out clearly what is expected of the evaluator.

In addition to the key provisions around whether the process will be without prejudice and whether the evaluation will be binding or non-binding, we would also recommend the ENE agreement includes the following information:

• confirmation of the evaluator's duty to act impartially;
• the procedure to be adopted for the ENE, or how the procedure is to be determined (see "Procedure for ENE" below);
• a statement that the parties shall give full assistance to enable the ENE to proceed and be conducted within the stipulated time;
• the timetable for the exchange of documents, conduct of the hearing and provision of the evaluation;
• whether the evaluator is expected to give a reasoned or "bare bones" opinion;
• whether the scope of the evaluation must be limited to information provided by the parties, or whether the evaluator may consider other matters, or request additional information from the parties, orally or in writing;
• whether the evaluator may obtain independent advice, and if so whether he will provide a copy of the advice to the parties so that they may also have an opportunity to comment on it;
• whether the parties are permitted to ask questions or seek clarification once the evaluation has been issued;
• the extent to which the evaluator will have immunity from suit following the ENE; 
• a statement that the ENE is confidential, all information disclosed is disclosed on a privileged and without prejudice basis and no privilege or confidentiality is waived by disclosure; and
• how the evaluator's fees and parties' costs are to be dealt with (see "Costs of ENE through an organisation" below).

Procedure for ENE

As with the identity of the evaluator, the parties have discretion in determining the procedure for the ENE process.  How much of the procedure the parties wish to set will depend on the facts of the dispute, but in general, the parties may agree either that the evaluator is to determine the procedure or that the parties are to determine some or all of the procedure themselves.

If the parties want to set some or all of the procedure themselves, they should agree this at an early stage of discussions, as the agreed procedure should be recited in full in the ENE agreement. Where the parties have agreed some or all of the procedure, they should ensure that the proposed evaluator is willing to conduct the process under their agreed procedure.

What procedural matters need to be considered?

The parties may specify any element of the ENE procedure, but as a minimum should consider the following:

• whether it is necessary for the parties to provide the evaluator with a case summary and, if so, whether this should be prepared jointly or by one party with the other party to comment or provide their own separate case summary (as in litigation); 
• how many submissions each party may make and whether they should be limited in any way;
• whether there is to be an opportunity for a discussion of the conduct, procedure or other relevant matters prior to the ENE (which may be useful in a complex dispute), and if so whether this is to take place by teleconference meeting or in person;
• whether the ENE will be conducted by way of a hearing, or proceed on the basis of written submissions and documentary evidence only;
• where a hearing is to take place, whether the parties will have an opportunity to present their evidence and make submissions, and whether there is to be any oral examination of witnesses;
• what documents the parties are expected to provide to the evaluator and/or whether there is to be a core bundle of agreed documents; 
• whether to limit the number or length of supporting documents;
• whether the parties are to be represented or assisted at any hearing; and
• the maximum duration of any hearing.

When discussing procedural matters, it should be borne in mind by the parties that the aim of ENE, as with ADR mechanisms generally, is to resolve disputes in a timely and cost-effective manner. Accordingly, when determining the ENE procedure, the parties should consider the need to balance these ADR aims with the requirement to put the evaluator in a broadly equivalent position to that of a trial judge. While excessive preparation time and costs would de-value the ENE process, insufficient materials being placed before the evaluator may lead to a lack of confidence in the final evaluation properly reflecting the position between the parties. 

Costs of ENE through an organisation

In contrast to ENE through the courts, where ENE takes place by appointment of an evaluator directly or through an organisation, the evaluator will charge for their services. These fees vary but typically are charged at hourly rates of between £250 and £600 per hour.⁹ In addition, as noted above, where the evaluator has been appointed by one of the organisations that facilitate appointments, additional costs will be incurred in the fees of the organisation.¹⁰ Similarly, with ENE through the courts, these fees will usually be shared equally between the parties and parties will typically bear their own costs.  However, the parties retain the ability to agree to an alternative arrangement in the ENE agreement. 

The evaluation and next steps

Subject to agreement otherwise, the evaluation does not take the form of a binding judgment, even where the process has taken place in a court with a judge serving as evaluator for the parties. Rather, the evaluation amounts to the preliminary opinion of the evaluator on the issue, or issues, in dispute and the likely outcome were the dispute to proceed to trial. 

Following delivery of the evaluation, the parties will need to consider how to progress to a resolution. Where both parties are satisfied as to the independence and impartiality of the evaluator, and respect his opinion, this may be as informal as a negotiation meeting or settlement discussions. Alternatively, the parties may have agreed to mediate the dispute following the evaluation, if necessary. Parties may often also make a Part 36 or "Calderbank" offer or vary any that have already been made at this time.  

1. Seals and another v Williams [2015] EWHC 1829 (Ch).
2. CPR 3.1(2)(m).
3. Examples of private providers include the ADR Group, the City Disputes Panel and the Centre for Effective Dispute Resolution.
4. It is arguable - as is the case with other forms of ADR, such as mediation (see Dunnett v Railtrack Plc [2002] EWCA Civ 303) - that an unreasonable refusal to undertake ENE may lead to adverse costs sanction or an ADR order from the Court. Accordingly, a suggestion of ENE by the opposing party should not be dismissed out of hand but should be given careful consideration.
5. Seals and another v Williams [2015] EWHC 1829 (Ch).
6. Paragraph 18.11, Chancery Guide.
7. Paragraphs 18.8 and 18.12, Chancery Guide; paragraphs 7.5.1 and 7.5.4, TCC Guide.
8. Paragraph 18.14, Chancery Guide; Paragraph G2.5, The Admiralty and Commercial Courts Guide; Paragraph 7.5.3, TCC Guide.
9. Based on CEDR information http://www.cedr.com/solve/ene/.
10. By way of example, the CEDR fee for this service is £2,000 plus VAT, as of July 2017.