Resolving a Commercial Dispute
A commercial dispute with a supplier, contractor, shareholder or business partner can be time-consuming and costly to resolve. Whether you are dealing with a breach of contract or professional negligence, it would always be preferable to avoid a dispute altogether.
However, where disagreement does arise, steps will need to be taken for resolution.
But before embarking on any dispute resolution process, take professional advice to consider the strengths and weaknesses of your case and the options available to you for resolving the commercial dispute.
What are your commercial dispute resolution options?
This is a matter for you to consider with your legal adviser. One of the first things they will do is review the contract at the centre of the dispute. Often parties to an agreement will include a commercial dispute resolution clause in the contract, meaning that in the event of disagreement there is a set process to follow. This usually involves recourse to an alternative dispute method such as arbitration. If there is no clause, then your legal adviser will recommend the best way to proceed.
Making a claim is generally seen as a last resort in modern dispute resolution. Alternative methods are being actively promoted by the courts under their duty to encourage use of alternative dispute resolution (ADR). ADR has to at least have been considered if not attempted before resorting to court action. Courts have powers to penalise parties by applying costs if there has been refusal to enter into ADR.
The two main forms of ADR are mediation and arbitration.
Mediation is a method of dispute resolution that facilitates rather than imposes a solution on the parties. The mediator is a neutral third party whose selection is agreed upon by all parties. As well as being impartial, the mediator should be experienced and suitable for the nature of the dispute.
The advantage of mediation is that it can speed up the settlement process, which usually means that costs, time and stress levels are lower than when the matter is litigated. Unlike litigation, mediation is not restricted to certain types of remedies; parties are in control of the decision-making process, resulting in a high degree of flexibility toward solutions as settlements can be agreed that would otherwise be unavailable under a court ruling.
Mediation is also confidential, unlike court proceedings.
However, as agreement and solutions cannot be imposed on parties, there is a risk that mediation will fail and litigation ensues regardless.
Note that any concessions made during mediation discussions are privileged, and cannot be used in the court process, and that mediation does not stop the clock on the time limit for taking a claim to court.
If a settlement agreement is reached, it will only be binding and enforceable if it is in written contract form and has been signed by all parties.
Arbitration is an adjudicative process. Although the parties voluntarily refer the dispute to an independent third party (an arbitrator), the resolution is imposed on them by the arbitrator, who (unlike a mediator) is not there simply to facilitate discussions.
Like mediation, however, the parties can choose the arbitrator and can select someone who has specialist knowledge in the area of dispute. As commercial disputes can often be technical, this can have a huge impact on the way in which evidence can be presented and the duration of the proceedings. Also in common with mediation, the process is private so is often favoured in commercially sensitive disputes.
Parties agree in advance to be bound by the arbitration award, and this can be enforced by application to the High Court just as if it were a court judgement.
If consensus cannot be reached between parties as to a suitable ADR method, or the matter cannot be settled out of court following ADR, then consideration will have to be given to litigation. Again, this is something that your legal adviser can support you to make an informed decision following on an appraisal of the strength of your case as set against the likely costs in time, money and reputation.
If you and your solicitor consider that you do have a legal basis for your claim, and the potential rewards outweigh the risks, then you must advise the other side in writing that you intend to raise a claim against them. It is likely that before raising a claim you will have to take certain steps as prescribed in the relevant pre-action protocol, or you risk being penalised by the court in expenses. In general, the pre-action protocol will insist on allowing time for the opposing party to consider your claim and offer a settlement if appropriate.
If no settlement is forthcoming then you can proceed to litigation. This will involve drafting a claim and lodging it with the appropriate court, and at the same time intimating it to the other party. They will have a set time to respond and, if they intend to defend it, the claim will be allocated to a track to proceed. There are three different tracks and allocation to these depends on the value of the claim, as well as the complexity or length of time estimated for its completion.
In fast and multi-track claims (those dealing with cases of higher value) lawyers require to prepare cost budgets at the outset, so you will be aware early on of the likely costs of winning or losing. The court will then make an ‘order for directions’ which will set out how the case is to be conducted including court timetables, document disclosure dates etc. Ultimately the case will be listed for trial and will proceed before a judge who will decide upon the case.
When should I take legal advice?
Commercial disputes are rarely straightforward, and there are a number of ways in which they can be resolved. Obtaining advice from a lawyer as early as possible is advisable so an assessment can be made of the strength of your case, whether you are bound by any commercial dispute resolution clause in the contract and, if not, what resolution process might be best for the particular situation you find yourself in. Ultimately court should be seen as a last resort, and a legal adviser will be able to guide you through the options to ensure the best outcome for you, and your business now and in the future.