Commercial litigation is a fact of commercial life. At one time or other it is likely that every business will find itself involved in a dispute. In the past, it was not uncommon for a business to move straight to issuing legal proceedings whenever a dispute arose.

However, there are now many alternatives to formal court proceedings which should be considered. Martin de Ridder, head of dispute resolution at Ansons Solicitors in Staffordshire, advises on the options.

Does the business really want to be involved in legal proceedings?

It is very important to understand what the business is getting involved in. It is almost always better to find a commercial solution to a dispute. Consider:

• the value of the claim, the costs involved and the commercial implications of success or failure. Even if the business wins, it will not recover all of the legal costs it has incurred;
• what the business is trying to achieve from the litigation process;
• the time, cost and management commitment involved, most of which is incurred early on in the process;
• how it will affect ongoing commercial relationships;
• whether the mere existence of a dispute will create difficulties in bidding for new business or otherwise adversely affect the business’ reputation;
• whether there is a commercial advantage to the dispute (for example, by showing that the business is serious about trademark infringement);
• what the effect will be for both parties if the dispute is made public;
• whether the other party will be able to pay up if the business wins; and
• all remember that litigation is to some extent speculative (for example, how will the witnesses perform in the witness box?).

If the dispute cannot be avoided what are the alternatives to formal court proceedings?

Increasingly parties to a dispute use alternative methods to resolve it. Such methods are known as Alternative Dispute Resolution (ADR) and are encouraged by the court. A party who unreasonably refuses to participate in ADR can have costs sanctions imposed on it by the court in future legal proceedings.

The various forms of ADR are set out below:

Negotiation

Is it possible to negotiate a settlement? The most straightforward and flexible way to resolve a dispute is to hold discussions with the other side.

A business should not consider it a sign of weakness to approach the other side to explore the chances of a settlement. This can be done at any time during the litigation process, even during a trial. Settlement negotiations facilitated by a neutral third party (known as mediation) are increasingly popular.

Always take legal advice first to ensure the settlement discussions are conducted on a “without prejudice basis”. This means that anything said about the dispute during the settlement negotiations or in any written settlement offer cannot be used later at the trial. This protection only applies to statements made purely in an attempt to settle the case.

Consider who should handle any negotiations. It is generally advisable to appoint one person with overall responsibility.

If an offer is made, the business should consider its present-day value, bearing in mind how long it will take to get to trial and the potential cost of litigation.

Mediation

Mediation is by far the most frequently used method of ADR. Mediation can take many forms but most typically involves the parties participating in a meeting with a third party neutral mediator whose role it is to seek a settlement of the issues between the parties. Mediators are trained in the practice of mediating disputes and often have high settlement success rates. Whereas court proceedings can often only provide limited remedies, such as the payment of compensation, mediators can achieve more flexible and creative solutions like a discount on a future order, or the publishing of an apology.

Adjudication

Adjudication is typically used in the construction industry and is set out in most construction contracts. It is similar to a court process whereby an expert in the field typically makes a decision based on evidence put in front of them. Adjudication can be expensive but is usually conducted in a very short timescale so that the parties receive a decision promptly.

Arbitration

Arbitration is a form of litigation held in a private forum as opposed to a public court. Arbitration typically has the advantage of confidentiality unlike the public court process. However, other than the element of confidentiality, arbitration is a very formal process and arguably more formal than modern high court proceedings. The Arbitration typically results in an award being made in favour of one of the parties who can enforce in the courts as a debt.

Other forms of Alternative Dispute Resolution (ADR)

Less well used but other forms of ADR include:

• Conciliation – this is similar to mediation except the conciliator is often more actively engaged in seeking a settlement. It is often conducted by telephone and used most frequently in employment law disputes.
• Expert determination – this can be useful if there is one technical issue which will largely determine the outcome of the case. A surveyor will often fulfil this role in a boundary dispute.
• Early neutral evaluation – a legal expert is appointed and both parties will provide a summary of their case and evidence and the evaluator will give his view on the likely outcome. The result can often facilitate a settlement given the parties have received a neutral view on their prospects of success.

If your company is likely to be involved in a dispute, taking early legal advice could help save you time and money in the long run.

For confidential advice on alternatives to litigation or any dispute resolution problem contact Martin de Ridder at Ansons Solicitors in Cannock and Lichfield on 01543 431 186 or email mderidder@ansons.law.