When a business becomes involved in a dispute it can often lead to unbudgeted cost and expense with no guarantee of a successful outcome. Resolving disputes quickly, even if it means some form of compromise, is often the preferred commercial outcome for business owners. Alternative Dispute Resolution (ADR) is encouraged by the courts and should be considered before resorting to litigation. Mediation is the most common form of ADR but there are alternatives dependant on the parties’ budget and the issues in dispute.
Mediation is a confidential process that takes place without prejudice to the parties’ positions if the matter eventually goes to court. The parties appoint an independent mediator and the process normally involves a joint session followed by an assisted negotiation facilitated by the mediator. If a settlement is agreed it is not usually binding until it has been recorded in writing. If mediation does not result in a settlement an alternative is to appoint the mediator to act as an arbitrator and make an award in favour of one party. This is often referred to as Med Arb.
Expert evaluation and determination
Expert evaluation is usually appropriate for cases where the issues rely on expert evidence. For example in a construction dispute they may need to look at whether a structural engineer’s work had fallen below the standard of a reasonable structural engineer. Here the parties could turn to a third party independent structural engineer to provide their opinion on the matter. The parties can agree in advance whether or not they wish the opinion to be binding. If they choose it to be binding, this is known as expert determination.
Arbitration is a binding form of ADR. It involves the parties appointing one or more arbitrators who may be lawyers or specialists in the dispute subject matter. With the increase in court fees, which now stand at 5% of the value of the claim in most cases, arbitration can be a cost effective alternative. It can also be much quicker than litigation. Arbitration clauses can be inserted into contracts at the outset of the parties’ relationship to provide certainty as to the form of dispute resolution if a dispute arises. If doing business with a counter party abroad, arbitration may also help avoid falling subject to unfavourable jurisdictions. Unless the parties agree to a form of procedure, the arbitrator will set it in accordance with the principles of natural justice. By agreeing the procedure in advance this will often speed up the process and reduce the costs.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.