How alternative dispute resolution can help you

Written by: Natalie Scott | Published:

Most businesses will actively avoid disputes – however, when a dispute cannot be avoided, a company should carefully consider taking advantage of alternative methods of dispute resolution as opposed to court proceedings, says Natalie Scott, associate solicitor at Slater Heelis

Recently, Sheffield City Council issued a strong statement about the conduct of the contracted operator of its household waste recycling centres, and questions were raised about the potential misuse of funds by the contractor; especially over the use of zero hours contracts.

The dispute is rumbling on and unions and other stakeholders are also deeply involved. The council’s final comment was that it had no confidence in the ability of the contractor to manage Sheffield’s household waste recycling centres and to act as a responsible provider of public services in the city.

Fortunately, most businesses within the recycling and waste management industry do not encounter substantial disputes like the above example very often, primarily on account of taking active measures to avoid them.

However, when they do occur, it can be a consuming and painful experience. Because of this, businesses should do all they can to help make these difficult yet necessary procedures go as smoothly as possible.

As a result of being ill-informed and believing it to be the only option, a lot of companies jump straight into court proceedings before taking the time to consider the alternatives.

Court proceedings are well-known for being slow, complicated, uncertain and, most importantly, expensive: court costs – payable up-front – have recently increased to five per cent of the sum claimed (up to a maximum of £10,000 on a claim for £200,000 or more) and may well increase substantially again in the near future.

While alternative dispute resolution (ADR) is becoming more popular, some businesses may not be aware that different methods of resolving disputes do exist. These are methods which may help them to reach a resolution sooner and more cheaply, while allowing them to retain some control over the process – an attractive prospect to all business owners.

Here’s a guide to the six main alternatives to court proceedings.

Negotiation

Negotiation is the most informal of the ADR methods. Put simply, the parties attempt to reach an agreement on the matters in dispute without the assistance of a third party. Often, this is attempted once both parties have had the benefit of legal advice.

Negotiation is private and can save the costs and time associated with other assisted processes. Discussions are usually undertaken on a ‘without prejudice’ basis. Therefore, if no agreement is reached, the parties’ rights are not prejudiced in any way, and if they do end up taking the court route, your case won’t be affected.

Mediation

Mediation is a more formal process in that it does involve the appointment of a third party – the mediator – but this person is neutral and is there solely to help identify the issues in dispute and explore the options for resolution. This form of ADR is voluntary, non-binding and private, and usually takes the form of a series of meetings at a neutral venue. As a party, you retain – at all times – control over the decision whether to settle and on what terms.

Mediation is considered by many to be one of the more effective ways of arriving at a settlement to which both parties agree, and can take place at any stage of the dispute – often when court proceedings are already under way. In fact, the court will penalise in costs a party that unreasonably refuses to mediate. The cost of mediation will vary according to the time allowed for the mediation and the value of the dispute, but it’s worth noting that the amount may not always be insignificant.

Early neutral evaluation

This – still private – option involves appointing an independent party to provide a non-binding opinion on the merits of the dispute, after evaluating the facts, evidence and law relating to a particular issue or the whole case.

The rationale is that once the parties have the benefit of an outside opinion, they will be able to negotiate an outcome in a timely and cost-effective manner. This is a good way of gaining insight into what may occur if the case were to progress to court proceedings.

Frequently used where there is a technical issue in dispute, this form of ADR involves the parties appointing an expert to determine an issue and ultimately produce a binding decision.

It is a private process which allows certain information to be kept out of the public domain and ought to result in a quicker decision at potentially less cost to the parties.

It is also likely to guarantee that the person making the decision has specialist or technical knowledge relevant to the dispute, which is not always the case in court proceedings.

Expert determination may not, however, be suitable where there are substantial factual uncertainties – something to consider before exploring this option.

Adjudication

Adjudication is a quasi-legal process whereby an independent third party is appointed to review the evidence and arguments and then make a decision. Typically, the decision has an interim binding effect – unless the contract states or the parties agree otherwise.

The right to adjudicate is contained in some industry-standard contracts; however, parties can agree to adjudicate at any time.

Adjudication is private and can enable a speedier and cheaper resolution for the parties, but it is a rough and ready process and may not be suitable for all disputes. The final option available is arbitration, which is effectively private litigation: the parties in a dispute agree to refer it to a third party who reviews all the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.

The rules of the arbitration will need to be determined and agreed to by the parties in advance. There are various standard institutional rules that can be chosen but, unless it is agreed that the process be abridged, arbitration can take just as long and be just as expensive as court proceedings.

It does, however, offer the advantage of the proceedings being private, and it can be beneficial to parties who wish to retain some control over the process.

With limited rights of appeal, it is considered to have finality.

Which method is most effective?

Ultimately, the best mode of dispute resolution will depend on the facts of the dispute – a lawyer will be able to assist you here.

There may be a reason why ADR is not suitable – for example, if you require an urgent injunction to prevent certain steps being taken.

However, it is important not to simply assume that it is court proceedings or nothing; take time to consider each of the alternative methods, as they may offer a quicker and cheaper way to resolve the dispute.

If you are considering negotiation or mediation, it is important to consider timing. These two alternatives are seen as those most likely to allow the parties to agree to a settlement. That said, the outcome will depend on each party’s willingness to compromise and, often, a party may be more willing to do so if court proceedings are commenced.

When choosing between traditional court proceedings and one of the above forms of dispute resolution, first and foremost you must consider what your aim is and how important the following factors are to you:

Cost: With the exception of arbitration, ADR can save on some of the costs associated with court proceedings.

Speed: ADR could mean that you get a quicker resolution to the dispute; for example, if you were to choose negotiation, it is possible to simply gather around a table and solve the dispute in a matter of hours, without the need for a representative.

Control: With ADR, you can choose and control the process to varying extents, compared with court proceedings, where, once the claim is issued, the agenda and timetable will chiefly be determined by the court.

Privacy: Is there a need to keep the dispute or certain information involved in the dispute private? If so, ADR may be ideal.

One incentive to adopting a mode of ADR is avoiding adversarial proceedings where the objective is focused purely on winning. ADR may provide a more suitable solution and allow business relationships to be preserved.

Popular alternatives

There will always be disputes where issuing court proceedings is the only way forward – sometimes, it can’t be helped.

However, the emerging popularity of the alternatives is encouraging.

It will allow more and more business owners to take control of their legal position, avoiding the potentially complicated, drawn-out and overwhelming experience of a formal legal battle, and ultimately result in the correct decision being made for their business.

For more information, visit www.slaterheelis.co.uk


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