Early Neutral Evaluation and Costs: What Happens When ENE Goes Wrong?

3173 Bidco Ltd & Anor v Roberts & Anor (No.2) (Re Costs of Early Neutral Evaluation) [2026] EWHC 2312 (Comm)

Early Neutral Evaluation (“ENE”) is increasingly being used by the courts as a means of helping parties resolve commercial disputes without taking them all the way to trial.

But what happens when the ENE itself goes wrong? Can one party be ordered to pay the costs of an unsuccessful or aborted ENE?

The Commercial Court has recently considered precisely that question in 3173 Bidco Ltd & Anor v Roberts & Anor (No.2) (Re Costs of Early Neutral Evaluation) [2026] EWHC 2312 (Comm).

The decision provides useful guidance for commercial litigants and their advisers. The central message is that the court has jurisdiction to make costs orders concerning ENE, but it will ordinarily be cautious about doing so. There are strong policy reasons for avoiding a costs regime which discourages parties from engaging with ENE and other forms of dispute resolution.

What is Early Neutral Evaluation?

ENE is a form of dispute resolution in which an independent evaluator — sometimes a judge — considers the parties’ respective cases and gives a non-binding assessment of the issues or likely outcome.

Unlike mediation, the central purpose is not necessarily to facilitate negotiations between the parties. The evaluator provides an objective assessment which may help the parties identify the strengths and weaknesses of their positions and narrow the gulf between them.

That assessment can provide a valuable reality check.

It may be particularly useful where a commercial dispute has become entrenched because the parties have fundamentally different views about a key question of contractual construction, liability or law.

What happened in 3173 Bidco?

The proceedings arose from a dispute concerning restrictive covenants following the termination of employment in a business providing professional trustee services to pension schemes.

The case was placed in the Shorter Trials Scheme and ENE was ordered.

The difficulty was that the ENE took place before witness statements had been exchanged.

During the ENE, the Defendants advanced an argument which had not previously been pleaded. In broad terms, they contended that the First Defendant was not actually competing with the Claimants because the respective businesses operated in different markets.

HHJ Pearce considered that the argument could not properly be advanced without amendment of the Defence.

That created a fundamental difficulty. The judge was being asked to evaluate the prospects of a defence without knowing whether the Defendant would actually be permitted to advance it and without the Claimants having had a proper opportunity to formulate their response.

The ENE was therefore adjourned and was not subsequently resumed.

The substantive proceedings later went to trial.

Who should pay for the failed ENE?

The Claimants sought their costs of the unsuccessful ENE from the Defendants, and sought them on the indemnity basis.

Their argument was straightforward: the ENE had effectively been derailed because the Defendants arrived with an important case which they had not pleaded.

The Defendants argued that the ENE costs should simply be costs in the case.

The court agreed with the Defendants on that issue.

Importantly, however, the judge confirmed that the court does have jurisdiction under CPR Part 44 to make a separate costs order concerning an ENE.

There is therefore no special immunity from costs merely because expenditure has been incurred during an ADR or ENE process.

A starting presumption: costs in the case

The particularly important part of the judgment is the court’s consideration of the approach which should ordinarily be taken to the costs of an unsuccessful ENE.

HHJ Pearce considered that there were powerful arguments for starting with a presumption that the costs should be costs in the case unless there are compelling factors pointing in another direction.

That approach reflects the broader policy of encouraging dispute resolution.

ENE is one of the ADR tools available to the courts. If parties routinely faced the prospect of a separate adverse costs order whenever an ENE failed, there would be a danger that litigants would become reluctant to participate in it.

That would undermine the very purpose of the process.

Avoiding satellite litigation about ADR

There is another practical difficulty.

Why did an ENE fail?

The answer may be far from straightforward.

One party may say that its opponent was inadequately prepared. The opponent may say that the real difficulty was inadequate disclosure. Another explanation might be that witness evidence had not yet been served, that a party’s case had changed or simply that the dispute was not sufficiently mature for meaningful evaluation.

Determining responsibility could therefore require the court to conduct what is effectively satellite litigation about the failed dispute resolution process itself.

That creates further expense and consumes court resources.

The judgment recognises the danger of turning an attempt to save litigation costs into another source of litigation costs.

But ENE is not a costs-free zone

The judgment does not establish that adverse costs orders can never be made following an unsuccessful ENE.

The court deliberately stopped short of that conclusion.

There may be circumstances in which a party’s conduct justifies a different order. An obvious example would be a party attending an ENE without any genuine intention of engaging with the process.

CPR 44.2 gives the court a broad discretion concerning costs and expressly permits the court to take account of the parties’ conduct, including compliance with ADR orders and unreasonable failures to engage with ADR.

The practical distinction is therefore between an ENE which simply fails — something which will inevitably happen from time to time — and conduct which takes the case outside the ordinary incidents of a genuine attempt at dispute resolution.

Why the Claimants did not recover their costs

There was some force in the Claimants’ complaint.

Indeed, HHJ Pearce accepted that the immediate cause of the failure of the ENE was the Defendants’ failure to plead their case fully.

Nevertheless, that did not establish that the Defendants should bear the costs.

There were other complications. The Claimants’ own case had been amended. The ENE had taken place before witness statements had been exchanged. Both parties had agreed to it proceeding at that stage.

Most importantly, the court could not safely conclude that, but for the Defendants’ failure, the ENE would have succeeded or that the costs would otherwise have been avoided.

The court therefore ordered that the costs of the failed ENE should be costs in the case.

The Claimants’ attempt to obtain indemnity costs also failed. Indemnity costs require circumstances taking the case outside the ordinary and reasonable conduct of litigation, and the court considered the arguments against an ordinary adverse costs order to apply with even greater force to the claim for indemnity costs.

A practical lesson: timing matters

Perhaps the most useful practical lesson from the decision concerns the timing of ENE.

An ENE conducted too early may take place before the parties’ cases have crystallised.

An ENE conducted too late may occur only after substantial litigation costs have already been incurred.

The objective should therefore be to identify the point at which the principal issues are sufficiently clear to permit meaningful evaluation, while there remains a substantial opportunity to save future costs.

In 3173 Bidco, the absence of witness statements proved significant. The judge observed that their exchange would have provided both the parties and the court with a better understanding of where the true battle lines lay.

That does not mean witness statements will always be necessary before ENE. In a dispute turning predominantly upon contractual interpretation, for example, ENE might usefully take place much earlier.

The procedure needs to be designed around the dispute.

Preparation matters too

There is also a straightforward lesson for litigants.

ENE should not be treated as an informal rehearsal at which new cases can safely be unveiled.

Before participating, parties should consider whether:

• their pleaded cases accurately reflect the arguments they intend to advance;
• any necessary amendments should be made first;
• sufficient disclosure has taken place;
• witness evidence is necessary to evaluate the critical issues;
• the evaluator has the documents needed to understand the dispute; and
• the issues referred for evaluation are sufficiently defined.

A tightly focused ENE dealing with one or two genuinely determinative issues may be considerably more useful than asking an evaluator to predict the outcome of an entire factually complicated trial.

ENE, mediation or both?

ENE and mediation perform different functions and can be complementary.

Where the principal obstacle to settlement is that both parties believe they will win a particular legal issue, an independent evaluation may substantially alter the dynamics of subsequent negotiations.

Mediation can then address matters which a court judgment cannot necessarily resolve: payment arrangements, continuing commercial relationships, confidentiality, future business arrangements and other negotiated outcomes.

In an appropriate commercial dispute, the sequence may therefore be:

ENE → informed negotiation → mediation → settlement.

The important point is to select the process appropriate to the dispute rather than treating ADR as a procedural box which simply has to be ticked.

The wider message

3173 Bidco is another indication of the increasingly important position occupied by non-trial dispute resolution within modern civil litigation.

The courts have the power to order ENE and to make costs orders concerning it. At the same time, the Commercial Court has recognised that excessive scrutiny of why an ENE failed could itself discourage parties from participating.

The decision therefore strikes a balance.

Parties are expected to approach ENE seriously and properly prepared. Serious misconduct may have costs consequences. But the mere fact that an ENE does not result in settlement does not mean that someone must be blamed for its failure.

For businesses involved in substantial commercial litigation, the more important question is often an earlier one:

Is there an issue which, if independently evaluated now, might prevent the parties spending substantial further sums arguing about it at trial?

If the answer is yes, Early Neutral Evaluation may be worth considering.

This article is for general information only and does not constitute legal advice.

[]Case: 3173 Bidco Ltd & Anor v Roberts & Anor (No.2) (Re Costs of Early Neutral Evaluation) [2026] EWHC 2312 (Comm), HHJ Pearce, 7 September 2026. ↩