What is Alternative Dispute Resolution? 

Before a case goes through the Courts the parties should have considered and tried some type of Alternative Dispute Resolution (ADR) which is an alternative to court action.

What is a commercial dispute?

A commercial dispute is where two or more companies/businesses have a disagreement which they cannot resolve, and they need more formal assistance to reach a conclusion. It could end up in court action, but before it reaches that stage there are other types of alternative dispute resolution which could be beneficial.

There are several types of ADR available depending on the nature of the case. In a commercial dispute the most used ADR are Mediation, Conciliation, Adjudication, Arbitration, Negotiations and Evaluations.

Mediation

Mediation is used for the parties to a dispute to try and negotiate an agreement/ settlement with the help of an impartial, professional, trained third party who will facilitate the parties meeting and trying to resolve the matter. The Mediator will help the parties to break down the issues and discuss them while offering solutions to reach an agreement.

Conciliation

A Conciliator is a bit more involved than a Mediator in that they listen to each of the parties and then give their opinion on how the matter may be resolved. The parties then decide whether to follow the advice, but they may decide not to.

Arbitration

Arbitration in commercial disputes can be used as an alternative to court action when both parties agree. The Arbitrator can be appointed by or agreed to by the parties and hears both parties’ side of the dispute. They Arbitrator then makes a decision based on what they have heard which is legally binding on the parties.

Adjudication

Adjudication is used mainly in construction disputes. The Adjudicator will be in independent professional usually agreed on by the parties, who is an expert able to get through the issues and hear both parties’ evidence. The Adjudicator then has up to 28 days to make their decision. The decision can be challenged but in most cases the parties abide by the decision.

Benefits of ADR in a Commercial Dispute

Outcome

If successful, ADR can avoid the need for going to Court altogether. If not, it could still provide clarity on the relevant issues going forward into the Court process.

Cost

ADR is usually much less expensive than going to Court. The parties only need to pay for the Mediator, Adjudicator or Arbitrator, the venue if required and their own legal representatives’ costs which will be significantly less than if the matter goes to Court.

Time

The ADR process is usually a lot quicker than going to court in the time it takes to arrange the ADR meeting(s) or hearing(s) and the time taken to carry out the ADR which is usually days/weeks at most. The decision could be on the day, up to 28 days or up to 45 days depending on the nature of the case.

Confidential

The agreement or decision is usually confidential, although in recent years there has been more discussion about results of ADR being made public in certain cases. It depends on the nature of the case and what has been agreed by the parties.

Less formal & more flexible

The parties have more input and can talk through the issues with a view to reaching a more amicable conclusion. Points of issue can be clarified and even settled during ADR. If there are any remaining contentious issues, a decision will be made, or the parties can try to negotiate further to resolve the matter.

Parties can specify the credentials of the Adjudicator

The parties usually agree on the Mediator, Arbitrator or Adjudicator and can therefore ensure that they appoint someone who is the best person to make an informed and fair decision on the facts. They can check the credentials, experience and background of the professional in advance. None of this is possible when going to Court where a Judge is appointed without any input from the parties.

Conclusion

Alternative Dispute Resolution offers an important alternative to court action and there are many benefits. Due to the reduced cost, faster timings and providing that it serves the case, it should continue to be used widely in commercial disputes. This is especially relevant in current times where companies/businesses have gone through so much with Brexit and Covid and lost a lot of time and revenue as a result. Many companies/ businesses will not have the funds to go through the court process, putting even more value on ADR.

If you or someone you know wants more information or needs help or advice, please contact us on +44 (0)151 328 1968 or email [email protected].