With disputes rising post-lockdown, there are innovative options to avoid court

The COVID-19 pandemic has caused huge economic damage in the UK and worldwide. This will inevitably lead to more commercial disputes.

Why? Because agreements may no longer fit for purpose as they did not contemplate what would happen to rights and obligations in the event of a pandemic.

From leases to employment disputes, and from unpaid invoices because of cashflow to disputes arising from insolvency – the list will increase as furlough unravels leading up to October and beyond.

Litigating through the courts is costly, in the public domain and leads to an inflexible and binary yes or no decision. Plus the civil court system is likely to be overwhelmed.

But there are an alternative options for dealing with disputes known as Alternative Dispute Resolution (ADR). ADR is not – yet – compulsory in civil litigation, but judges are increasingly encouraging parties to try it. Here are the options:

Mediation. The parties choose (or ask a neutral organisation to nominate) a suitable mediator who acts as a neutral, brings the parties to a mediation meeting – actual or virtual – and helps them reach a resolution.

The chosen mediator’s skills and experience are key to the chances of success. And the parties must have decision makers in the room with authority to settle.

The mediator is usually paid by the parties in equal shares and usually for a day’s mediation to include preparation. The parties will also pay their lawyers for their input.

Mediation is confidential, and what is said and done under its “without prejudice” protection cannot be used in any subsequent proceedings if mediation fails.

The procedure and range of outcomes are flexible, which means important commercial issues such as future trading relationships, public relations, quid pro quos for a deal, apologies, and settling other disputes can all play a role.

Mediation is more of an art than a science, with a good mediator’s personal connections with the parties an important part of the journey.

Social distancing has posed a considerable practical problem, but the sector has quickly adapted, with organisations such as the Centre for Dispute Resolution (CEDR) and the Chartered Institute of Arbitrators (CIArb) using virtual e-meetings via Teams or Zoom.

Early Neutral Evaluation (ENE). The disputing parties choose a trusted neutral, perhaps a retired judge or arbitrator, and make written submissions, limited in length, on the claim or defence with accompanying key evidence.

The evaluator then prepares a written opinion of the merits of the case as they see them. 

The advantage is that it’s relatively inexpensive, and provides an early, independent view which is confidential, without prejudice and non-binding.

That said, it will be a brave party who “loses” an ENE but still persists with its claim or defence unaltered to trial. ENE may therefore be a catalyst to settlement.

The disadvantage is that it can be a “quick and dirty” process where the evaluator works from documents without seeing or crossexamining witnesses. Also, because it’s non-binding, underlying litigation may still continue.

Arbitration. A commercial contract may contain an arbitration clause, or the parties may decide to use an arbitrator to resolve their dispute.

This is similar to a judicial process but is private and confidential, and the parties can agree a specialist arbitrator for technical disputes.

It is typically quicker than litigation but usually no less expensive. An arbitration award is enforceable as a judgment. Rights of appeal are limited.

Expert determination. Here the parties agree to appoint an expert (legal, technical or both) to receive submissions, review evidence and come to a conclusion which is usually binding.

This is particularly useful in valuation and similar disputes as it provides a definitive answer in a cost-effective way with very limited rights of appeal.

For advice on tackling legal disputes call Stephen Rome on 0345 20 73 72 8 or email srome@thursfields.co.uk

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