Dispute Avoidance Pt.3: The increasing role of innovation in resolving disputes
In February 2019, an AI built by Canadian electronic negotiation specialists iCan became the first company to resolve a dispute in a public court of England and Wales using a robot mediator. Known as SmartSettle ONE, the machine was brought in after a telephone mediation with a court official had failed to achieve resolution. According to Graham Ross - an online dispute resolution expert, SmartSettle ONE’s algorithms quickly learned the bidding tactics and priorities that both parties employed, and was able to leverage this information to “nudge” both parties towards a settlement. Within an hour, the three-month dispute was resolved.
It sounds extraordinary, and it is. However, as early as 2017, we have seen predictive modelling and AI outperforming lawyers in predicting outcomes, so it’s unsurprising that there are some spectacularly accurate models available and that they are beginning to be more widely deployed in resolving disputes.
Of course, this doesn’t mean that should you become entangled in a commercial dispute, you need to go out and find a local company willing to lend you a mediation robot. It does however, raise a few interesting points about how disputes are solved. By understanding the nature of algorithms built into SmartSettle ONE and others like it, it becomes clear how easily we can leverage the data at our disposal to help reach an amicable conclusion.
How Can I Use Data in Dispute Resolution?
There are two key questions to ask yourself when considering dispute resolution, and the goal is always to have a clear strategy and make the most of data available to you.
What is the claim worth if you go to court or arbitration?
It’s vital to have a detailed understanding of the journey you are about to embark upon and to understand the true value of the claim. Detailed modelling allows us to map the journey of a claim, taking into consideration factors such as risk and the time periods to enforce it. Often, with interest and legal fees, the claim is worth substantially less than originally thought. I recently worked on a claim against a Middle Eastern Government which on paper was worth over a billion, but after modelling, the reality is it was worth just 6% of the claim amount.
It can be disappointing to realise that your claim isn’t worth as much as you thought, but having less at stake in terms of finance can provide new impetus to reach a speedy settlement. So, before you get the thumbscrews out, take stock of exactly how much a win could mean.
What pressure points are there that would encourage the other side to settle for an amount greater than the value of the claim?
Sometimes these factors are time related, and there can be a need for you to do something - or stop doing something - by a certain date. Other times, these factors may be reputational, for example there is a cost to a business’ reputation if it becomes known for not paying its creditors. Financial factors can also be considered, as sometimes, the cost of the parties borrowing increases if the creditors are concerned that the debtor can’t pay what it owes.
It’s crucial to understand the motivations of the other side, as they can be vital to the outcome of the claim.
Similar to how SmartSettle ONE’s algorithms learned both party’s tactics and motives and then acted accordingly, the key to overcoming disputes is understanding which levers to pull and when to exert the maximum focus on the other party to want to resolve the dispute with you. As court and arbitration processes can take years, if not decades, it’s often best not to threaten debtors with them. By threatening a lengthy process, you are buying them more time for the sake of some legal fees, and the likelihood is that there will be a settlement in their favour at some stage of the process.
In my opinion, the future of dispute resolution lies in using predictive modelling to determine the NPV (Net Present Value) and likely chance of claim success using historic information.
How could I help with dispute resolution?
I’d like to sum up with one of my favourite analogies comparing dispute resolution to an orchestra.
Often businesses appoint a law firm to handle a problem, which would be the first violin. But effective dispute avoidance requires many more counterparts working in harmony to deliver an outstanding performance. To reach its full potential, an orchestra requires a conductor, and in dispute resolution, the conductor needs to be experienced with handling significant disputes; The Conductor knows how to direct the orchestra to achieve the right outcome, which has been approved by the client.
The end goal of dispute resolution is to know how to conduct your orchestra to get maximum return in the shortest time, at a point in time which is greater than the calculated value of the claim.
When working in dispute resolution, I take on the role of Conductor, as well as bringing the ability to obtain funding for disputes. This ensures that the cost of handling a dispute doesn’t have to come directly from the cash flows of the business, but where interests align in getting the best possible economic outcome.
Thanks to legal innovation there is an increasing number of tools available to assist you with dispute resolution, and, just like a conductor, I know which will be the most effective at the right time.
If you’re in the midst of a dispute and require guidance, get in touch today and let’s get your business back to doing what it does best.