Introduction to Dispute Resolution

Dispute resolution is the process of resolving disputes between parties in a fair and efficient manner. Alternative dispute resolution (ADR) offers a range of methods to resolve disputes without going to court, including mediation and arbitration. ADR can be used to resolve civil disputes, commercial disputes, and construction contract disputes. The goal of ADR is to find a mutually acceptable solution that satisfies all parties involved, while minimising legal costs and court proceedings. 

By opting for ADR, parties can often achieve quicker and more cost-effective resolutions compared to traditional litigation.

In this blog, we explore the different ADR methods typically available to parties in dispute. 

Negotiation

Negotiation is a communication process between parties that is intended to reach a compromise or agreement to the satisfaction of both parties. Negotiation is usually the starting point when trying to resolve a dispute, as it helps parties identify common ground and work towards a mutually acceptable solution. 

Negotiation does not involve a third party and discussions usually proceed on a without prejudice basis.

Expert determination

Expert determination is an informal alternative dispute resolution process that produces a binding decision. It involves appointing an independent expert on the subject matter and is often provided for in high value commercial agreements. 

The expert will either be agreed on by the parties or will be appointed by their nominee. The process ensures that any confidential information shared during the determination remains protected. 

The powers of the expert are usually set out in a separate ‘terms of reference’. The parties will have to pay the expert for his time and costs. The expert has no authority to make an order as to costs following the determination unless the parties grant him such authority in the contract. 

Expert determination is the most suitable form of alternative dispute resolution for disputes requiring technical knowledge but may not be suitable if the parties wish to be fully heard and there are issues of credibility.

Early neutral evaluation

Early neutral evaluation (ENE) is where an independent and neutral evaluator, often a leading barrister (a “KC”) or a retired judge, meets with parties early on to give a non-binding and confidential assessment of the dispute. ENE is usually most effective if attempted during the early stages of a case and before significant costs have been incurred. The rationale is that, once armed with the opinion, parties will be able to negotiate an outcome, with or without the assistance of a third party, thereby settling the dispute early. There are no procedural requirements for ENE beyond those agreed between the parties. 

The Commercial Court in the UK specifically encourages parties to consider ENE.

Mediation

Mediation is a collaborative process in which a neutral third party—the mediator—helps the disputing parties reach a mutually acceptable settlement. It is typically informal, confidential, and non-binding unless an agreement is reached and formalised. Mediators act as a neutral go between in order to foster dialogue between the parties in dispute, without going so far as to come up with an alternative. 

 Mediation is particularly useful where parties wish to preserve their relationship or resolve a dispute quickly and cost-effectively. It gives participants greater control over the outcome, as opposed to having a decision imposed by a court.

Conciliation

Conciliation is similar to mediation except that, usually, the third party will actively assist the parties to settle the dispute. The agreements reached through conciliation are not legally binding unless formally documented and signed by the parties. The term is widely used to describe the facilitated settlement discussions that occur in connection with employment disputes. The advantages and disadvantages of conciliation are similar to those for mediation. In addition, parties may welcome the more pro-active approach of the third party in steering the parties towards achieving a settlement.

Arbitration

Arbitration is a formal process that is, in essence, an alternative to filing a claim at court. 

Parties will submit the dispute to formally appointed arbitrators (or just one). The arbitrator will hear evidence and issue a binding decision. 

Unlike court claims, arbitration is generally confidential. Arbitrators tend to also have more specific expertise, and therefore it is more common to see arbitration in niche industries such as shipping or energy related disputes. Arbitral awards in one jurisdiction can also be easier to enforce in another jurisdiction. 

Arbitration can be quicker than going to court, but for smaller disputes it is normally not appropriate as it can become more expensive than the equivalent court process if the sums in issue are not large. 

Advantages of Alternative Dispute Resolution

  • Saving time: Going through a court process can take months or even years. ADR can usually be arranged and undertaken on much shorter timescales, even a matter of days in some cases, and can resolve disputes cost effectively.
  • Saving costs: Resolving a dispute through ADR is likely to be cheaper than doing so through the courts, partly because of the shorter timescales involved. Undertaking ADR at any early stage can also reduce the prospect of case management sanctions being imposed down the line.
  • Flexibility, choice and control: A major advantage of ADR is that it can result in a more flexible, imaginative and practical solution than a trial. Parties are free to tailor the process to suit their needs and to reach a settlement based on their commercial interests. With some forms of ADR parties also have greater choice and control over who conducts the process.
  • Confidentiality: ADR procedures can be confidential in nature, which can give parties freedom to air sensitive commercial issues and enable full and frank negotiations. In most cases, the court procedure is public.
  • Other advantages: Even if the ADR process does not result in a settlement, it might produce other advantages for the parties. For example, it might narrow the issues in dispute, test the strength and weaknesses of each party’s case and allow parties to air their different perspectives. ADR commonly increases the prospect of settlement being reached before a claim proceeds to court.

Disadvantages of Alternative Dispute Resolution

  • Delay and increased costs: Where settlement is not reached and a court process is ultimately pursued, undertaking ADR can result in wasted time and costs for the parties.
  • Revealing too much information: Some clients fear that ADR runs the risk of exposing their cards or strategy that they will use in court if the case does not settle. For many forms of ADR however, anything said will be subject to protection from use in any future proceedings.
  • Non-binding results: Settlement terms agreed through a non-binding ADR process are not enforceable. However, it is always open to the parties to formalize any agreement reached in a written agreement. Additionally, some forms of ADR produce binding outcomes, providing greater certainty for the parties to a dispute.
  • Limitation issues: Unlike in legal proceedings, most forms of ADR do not stop the clock for limitation purposes. Parties will therefore need to keep an eye on the limitation period and consider the possibility of having to issue protective legal proceedings whilst undertaking ADR.
  • Risk of delay to trial: In cases where the possibility of undertaking ADR is raised at an advanced stage of litigation, there may be a risk that diverting the parties’ attention to ADR will get in the way of the court process, and could even delay the trial. Courts may be reluctant to suggest ADR where such a risk could arise, although it may be possible to conduct both processes at the same time.

Legally Binding Outcomes

In some cases, the outcome of a dispute resolution process may be legally binding, meaning that the parties are obligated to comply with the terms of the agreement. This can be the case in arbitration, where the arbitrator’s decision is final and binding. In mediation, the parties may reach a settlement agreement that is legally binding, but this is not always the case. It is essential to understand the terms of the dispute resolution process and the potential outcomes before engaging in ADR. ADR methods, such as expert determination, can also provide a legally binding outcome, while minimising the need for court proceedings.

The Role of Expert Advice

Expert advice can play a crucial role in the dispute resolution process, particularly in complex disputes involving technical or specialized issues. An impartial professional, such as a mediator or arbitrator, can provide expert advice and guidance to help the parties reach a mutually acceptable solution. In some cases, expert determination may be used to resolve disputes, where an independent expert makes a binding decision based on the evidence presented. The use of expert advice can help to ensure that the dispute resolution process is fair, efficient, and effective, and that the parties receive a high-quality outcome. ADR methods, such as mediation and arbitration, can be used in conjunction with expert advice to resolve disputes in a cost-effective and efficient manner.

Who pays the costs of Alternative Dispute Resolution?

At the end of a court case, the unsuccessful party is usually ordered to pay the successful party’s costs. Costs are, however, always at the discretion of the court. When it comes to assessing costs, the court will consider whether a party acted reasonably in refusing to agree to ADR. When deciding whether or not parties have acted unreasonably the court should bear in mind the advantages of ADR over the court process and have regard to all the circumstances of the particular case.

If the case settles with ADR, who should bear the costs is usually a matter for agreement between the parties. One common approach is that each party agrees to share the fees, expenses, and other costs of the ADR process with the other party.

For any questions you may have, our Alternative Dispute Resolution solicitor Sasha Bark-Jones can help.