Court and arbitration proceedings can be lengthy and expensive, so it’s unsurprising that most businesses want to find a resolution quickly. This has only been heightened in the face of the Covid-19 pandemic; In January 2021, the Guardian reported that Covid-19 could lead to a four year wait for England and Wales court trials as over 53,000 cases have now been delayed.
With the court system under pressure, now more than ever, businesses should embrace dispute avoidance techniques before turning to courts or arbitration centres.
The Cost Of Legal Disputes
Companies spend a significant amount of time, money and effort building relationships with trusted partners, but what happens when a dispute arises? Even though this may be the first time that two parties have come to a dispute, the ill-feeling it generates can quickly undo years of relationship building.
Matters are further complicated if the dispute spreads across borders and it’s often the case that a ruling in your favour is no longer enough. Trying to enforce court or arbitration decisions in another country can take years, and in the excitement of filling out their claim form, dispute lawyers can often fall into the trap of forgetting to tell their clients this important piece of information. If you are currently involved in a dispute that spans different countries, it is vital to consider this prior to starting the claim process.
Fortunately for businesses, if they find themselves at cross purposes there are still options available to prevent the issue from ever reaching the courts. I have briefly outlined the two most popular, but we should note that every option has its pros and cons, and that it’s important to understand each one properly before making a decision that has potentially serious ramifications for a commercial entity:
When a commercial dispute finds itself in mediation, usually an independent and qualified advisor will be nominated by the two parties to adopt a neutral position. The mediator won’t act as judge, nor will they impose their own recommendations, but they will work with both parties to find a solution before the matter goes too far.
When an accord is reached, both parties will usually enter into an agreement that represents compromise for everyone. Mediation should be one of the first ports of call for parties in dispute, as it tends to be far more cost and time effective than pursuing the issue through the courts or arbitration.
It is also worth noting that there can be benefits to mediation even if an agreement can’t be reached. Courts will often look favourably on parties that have demonstrated a willingness to reach a resolution, so a previous mediation, even if unsuccessful, can be a feather in your cap.
Many consider arbitration to be the same as or better than going to court, however, businesses should only use arbitration if they are convinced that it will lead to a positive outcome.
Some (usually businesses who haven’t been through an arbitration) think that arbitration is the answer to solving a dispute, but it can actually be slower and more costly than going to court. Arbitration is also conducted in private, which seems attractive at first, but this privacy also serves as a cloak for bad behaviour, often from a debtor wishing to delay judgment day.
There is a perceived advantage in arbitrations, and businesses can optimistically view them as de facto court hearings where they get to pick the judge.While this does have an advantage in certain sectors where an arbitrator with relevant industry experience can be a great asset, the result of the arbitration rarely pans out the way that one or both parties would like. Arbitrators have been accused of always trying to ‘split the baby’ to keep both sides happy, and that can lead to outcomes that are more based in compromise.
It’s also worth remembering that the arbitration award itself still needs recognition by a Court to be enforced, and in many countries that can be a further complicated, expensive and lengthy process, during which the award can be overturned, leaving you back where you started at square one.
Which option is right for me?
For disputing partners, knowing which avenue to pursue can be confusing. It can be very difficult to predict the outcome of a dispute, and an experienced advisor can take the stress out of resolution by working with you to build the roadmap to a favourable outcome.
If you are embroiled in a commercial dispute, I can help you to reach an efficient solution that gives both parties the best chance of resolving the dispute amicably and maintaining their relationship going forward.
Get in touch today to find out how I could help to resolve your dispute.
If you would like to learn more about Dispute Avoidance, stay tuned for Part 2 - What you can do to prevent a dispute.