Commercial Dispute Resolution... An Easier Way

Richard Kerry, Commercial Litigation Team Manager with Hatchers, explains an option available to businesses when trying to resolve commercial disputes, which can help speed up the process and ensure a fair-handed approach.

It is an unfortunate fact of business that disputes happen.  If one party feels that the other has not delivered on their side of an agreement, it usually results in payments being withheld.

The potential scenarios where disputes could arise are too numerous to list here, but for the purposes of illustration, a good example would be a construction project.  A client engages the services of a contractor to construct a building to an agreed specification.  The contractor completes the project, but the client is less than happy and feels that they have not complied with the requirements of the specification.  The client withholds some or all of the payments and a dispute commences.

Sometimes, these situations cannot be avoided.  However, this is little comfort to both parties concerned because they cause immense stress, cost money and, perhaps most importantly, are very disruptive to the smooth running of a business.  This is at its worst in smaller organisations as it impacts on the day-to-day running of the business with key staff being tied up by the dispute.

What are the options available?  Litigation is probably the one that most people are aware of – and perhaps most fearful of as the outcome can be disastrous.

There are, however, a number of alternatives to litigation including mediation, where a third party helps ‘referee’ between the two conflicting parties.  However, mediation needs both parties to accept the suggested resolution as the mediator cannot force a legally binding settlement.

Arbitration, on the other hand, can prove a very useful tool in solving disputes.  Like mediation, it involves a third party in arriving at a resolution.  The main difference between mediation and arbitration is that with arbitration the parties agree before the process commences to be bound by its decision.

Some contracts contain an arbitration clause requiring the parties to use arbitration to settle certain disputes rather than commence legal proceedings.  Where an arbitration clause does not exist the parties need to agree an arbitration agreement, which is essentially a contract for the resolution of the dispute.  The parties agree to appoint one or more persons who will act in a completely impartial way and decide the case. 

The benefits of arbitration are numerous, but the main ones are:

Privacy – unlike court proceedings, parties to the arbitration process are subject to duties of confidentiality.

Flexibility – unlike court rules which are fixed, an arbitration can be tailored to the particular dispute and the parties can agree procedures which are the most efficient and speedy.

Choice – the parties have the ability to choose an arbitrator with expertise relevant to the particular dispute.

Speed – in many cases, arbitration can take place without the long delay that is often involved when going to court. 

Binding nature – the options for challenging the award are very limited.

Arbitration is certainly a useful process and can often mean that the parties go into the process feeling like they are settling a business disagreement, rather than going to war.  Their relationship can be kept intact – particularly when the media won’t be publicising details of any final decision – nobody loses face and industry gossip is halted.

My firm has an excellent track record in resolving problems for its clients in this way so if you are at the early stages of a dispute, I would urge you to consult a good commercial litigator as soon as possible.