DISPUTE RESOLUTION UPDATE
There is currently an increasing appetite amongst businesses to resolve disputes on a pragmatic and negotiated basis rather than having to resort to formal dispute resolution processes such as Court action or arbitration. Such an approach is encouraged by the Courts and in most cases will make commercial sense – allowing businesses to focus on their future growth rather than being distracted by resolving historic issues.
However, early legal advice and support through that negotiation process can often be invaluable in enabling the business to understand the legal strength of its arguments and accordingly the strength of its bargaining position. Additionally, advice can help prevent an organisation from tripping itself up in relation to some of the technical rules of negotiation. Two examples of potential areas of complication are set out here.
Offers and counter-offers
A recent High Court decision (DB UK Bank Ltd (t/a DB Mortgages) v Jacobs Solicitors  EWHC 1614 (Ch)) serves as a useful reminder of one of the potential pitfalls of negotiation. An offer which is not specifically time limited will usually be available for acceptance at any time unless it is withdrawn. However, where an offer of settlement is made by a party, a counter offer will have the effect of rejecting the original offer which will not therefore remain available for acceptance at a later date. Tactically, if Party A makes an offer to settle but then receives a counter offer from Party B which is not accepted, Party A may well relish the fact that Party B are unable to come back to accept the original offer. By that stage, Party B has "shown its hand" and Party A may seek to reduce the offer to take advantage of this.
There are specialist forms of offer made under the Court rules (Part 36 offers) in relation to which the above rules do not apply. Offers made on this basis can provide significant cost protection should Court Proceedings ensue and it is always sensible for a party to take legal advice to understand the value of making such offers and the strict process and form by which they are made.
Without Prejudice communications
The title "Without Prejudice" may be one of the most misunderstood and misused legal phrases. It basically enables parties to speak (or write) freely in any negotiations without fear that what they say will subsequently be held against them in Court.
Whilst there is actually no requirement to use the phrase, as all genuine negotiations are generally protected by the label, it is preferable for certainty, to make clear to the other party where you consider that communications are taking place on a without prejudice basis. However, you should be aware that there may be instances where you might want any judge who subsequently hears any unresolved dispute to be able to see the communications which have taken place. In those instances, the incorrect use of the Without Prejudice label may prevent the judge from seeing what has passed between the parties.
Parties should also be aware that once a settlement is reached, the without prejudice label no longer applies to that settlement.
What this means for you
Negotiation of settlements between parties which avoid formal dispute resolution procedures are always to be encouraged to the extent that they reduce the cost and time of resolution and may result in the parties preserving an on-going commercial relationship. However, early involvement of legal advice can help to ensure that you are fully prepared for that negotiation and improve the ultimate outcome for you.