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Do your people know where/when to escalate potential disputes?
Do they understand how their earliest discussions with a counterparty could determine the outcome of a dispute and, for example, waive a breach of contract that could have otherwise entitled termination? Do they understand and appreciate the importance of without prejudice discussions?
All businesses need a considered disputes strategy whether they are potential claimants or defendants.
At this time more than ever, this should be viewed as vital as an operational risk assessment policy. Such a strategy should also include engaging in some form of ADR at the earliest opportunity.
As the economic fallout of coronavirus grows, many business are facing the following issues:
The right answer always begins with a commercial dialogue but right now this is hard to conduct and can easily stall. As such, understanding alternatives to that commercial resolution is critical.
In our previous article (here) we highlighted the need for parties to disputes (even potential ones) to focus on how to get the best out of the court system "as is" but also how to improve outcomes in light of the Civil Justice Counsel's rapid review into the effect of COVID-19 on the civil justice system.
That review has now concluded (here) and indications are that remote access to justice will become the norm. Whilst we also expect the historically slow pace of change to speed up in order to offer parties cheaper, faster outcomes and with better access to commercial dispute resolution – as we discuss below, some of these objectives can be achieved now.
It is standard practice for disputing parties to exchange their positions in writing and reach a stalemate. The logical next step may be to issue court proceedings, typically to increase leverage and make progress toward a conclusion (whether settlement or judicial determination). However, where proceedings are already long and costly (we'll discuss proportionality of costs in our next article), the backlog of cases and limited court capacity mean proceedings are likely to be even slower going forward. Therefore, how logical is that next step?
When we suggest engaging in some form of ADR at the earliest opportunity is a must, this also means doing so now - during any lockdown and not waiting for a return to "business as usual". For example:
A lot of different ADR methods are available, each with advantages/disadvantages. However, as a lot of recent attention has been applied to virtual mediations, we share some experience below.
Mediations have been a consistently popular form of ADR due to the generally perceived high success rate. This success rate can be attributed, in part, to the fact they typically require all the key parties under one roof and generate significant pressure (due to the time, expense and effort committed) to get a deal done.
But can the remote mediations taking place during lockdown restrictions and in the future (as people remain reluctant to meet in offices) be as successful?
Remote mediations are not a new concept as, for example, telephone mediations took place before Covid-19 (e.g. obligatory small claims mediations via the Court system). However, video mediations are now much more prevalent and immediately appear to offer some benefits:
With careful preparation and secure technological provisions in place, it can work. The technology can replicate most aspects and avoid the mediator stretching their legs (e.g. secure/confidential rooms for the parties to speak to their lawyers and for the mediators to speak to the parties). And agreed formats which allow adequate breaks and a set timetable set to ensure time is not wasted staring at a screen can help. Albeit, be prepared for a less smooth experience.
That said, our view and based on feedback from clients, is that remote mediations are not generally as successful as those held in person. This is because the virtual platforms cannot create the atmosphere "in the room" and do not deliver the impetus needed to reach settlement on the day. Therefore, parties should be prepared for a more iterative settlement dialogue following a remote mediation. Perhaps viewing them as a series rather than a climax to the dispute.
Tips on technology fixes and format certainly help but unless you can ensure proper commitment to the process, careful consideration is needed as to whether a remote mediation offers a better option to an alternative without prejudice dialogue.
Not all of the forms of ADR will be suitable for each case, however, engaging in some form of ADR is a bare minimum. If swift resolution is the objective, litigation alone is unlikely to deliver. Much better to front load with a formal ADR process, knowing that litigation can be pursued (if necessary) with the benefit of some costs protection.
Consider these questions:
If you have not yet got a disputes strategy or it activates only when a Letter Before Action arrives, you are likely to be behind the curve when you really need it.
If you would like some guidance on the type(s) of ADR, their suitability to your dispute and/or your disputes strategy please do get in touch.
