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Resolving commercial disputes

Iain Wharton, partner and Head of Litigation looks at how commercial disputes can be resolved cost effectively.

Legal battles are unwelcome for most companies – the distraction can have a serious impact on the business. So, when facing a dispute it’s important to consider the options rather than rush into litigation.

If facing deadlock in a dispute, your lawyer can offer an objective view and help you think strategically, looking at alternative angles so that a commercial decision can be made about how to progress. For example, in cases ostensibly about money, deadlocks might be broken by offering some other means of providing value apart from purely monetary. Or sometimes introducing a neutral third party facilitator such as a mediator is enough.

Costs of litigation

The Ministry of Justice has recently increased Court fees for commencing Court action. To start a claim for £50,000 costs £2,500, a claim for £100,000 costs £5,000 and pursuing a claim for £300,000 or more costs a hefty £10,000.

Once proceedings are underway there are further Court fees. The trial fee itself can be up to £1,090. If applications need to be made to the Court during the case or the Court’s help is needed to enforce its judgement or determine costs recoverable, more Court fees are payable. Added to this, once Court proceedings are issued, parties no longer set their own timetable – the Judge will do that. This means significant work needs to be carried out by lawyers to adhere to the timetable which will incur significant lawyers’ costs. Failure to adhere means the party in default may have their claim or defence struck out or severely weakened, as they may not be allowed to call on vital evidence, so the work must be done.

What are the other options?

Companies can use alternative dispute resolution (ADR) such as a settlement meeting, mediation, arbitration or expert determination. The Court expects parties to consider ADR before and after Court proceedings have commenced and can issue a stay of proceedings for this to happen.

A settlement meeting conducted with the parties’ lawyers in attendance can be an effective alternative to Court action. Another alternative is arbitration. Even without a contractual arbitration agreement in place, parties can agree to settle their differences through ad hoc arbitration. Arbitration has the advantage of confidentiality and the parties have more control of timing of the process than if the Court was involved.

If the dispute is narrow, a qualified expert can be appointed to determine the issue, which can also be a quicker and less expensive option.

What are the legal, business and reputational issues?

Companies and their lawyers should consider the merits of a case balanced against costs, time, and other resources that may be incurred in a legal battle. As Court trials are public, parties should also consider the potentially damaging reputational risk of going to trial. Many companies find a confidentially agreed settlement a better solution.