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What is Alternative Dispute Resolution?

View profile for Mollie Leak
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In most cases where there is a dispute between business parties, it is likely that you will be told to try and resolve matters through Alternative Dispute Resolution.  Mollie Leak, Solicitor within our Commercial Litigation and Dispute Resolution team, explains more here about what that actually means and why ADR may be more beneficial to you and your business than proceeding to Court.   

In simple terms, Alternative Dispute Resolution (ADR) utilises different techniques used to try and settle a matter without the need for a Court Hearing.

The reason why you would be encouraged to enter into ADR is because you are obliged to consider settlement at the very start of your matter. This is a rule that the Court has made under the Civil Procedure Rules, which are the guidelines that have to be followed when issuing and defending a claim. Failure to comply with this rule could affect any claim that you may make to recover your costs in the matter. 

What are the different types of Alternative Dispute Resolution?

ADR is a very broad label and the concept of these different options may seem intimidating.  Below are some of the different types of ADR explaining when they may be most effective: 

  • Negotiations – Negotiations can be conducted by your instructed solicitor, or if you do not have a solicitor, you can do this yourself. Negotiations could be conducted in writing or in a telephone conversation. This can be fast and cost effective but is not legally binding until both sides have signed an agreement.
  • Mediation - A third party carries out mediation in an attempt to resolve matters between the parties. This can either be a round table mediation or in different rooms.  While there are many benefits of mediation, it can be costly as you are paying for the third party and, like negotiations, any agreement is not binding until an agreement is signed.
  • Early Neutral Evaluation - This is a mini hearing, where the evidence is reviewed and the outcome decided there and then. Whilst this can be a more cost-effective option, it is not suitable where there is a dispute of the facts.  Again, this is a non-binding opinion and cannot be enforced until an agreement is signed.
  • Arbitration - The decision made in arbitration is final and it therefore can be cheaper and faster than traditional litigation, but this is not suitable where there are many parties involved in the litigation process.

The most appropriate ADR for you will depend on your own situation, your business and the dispute at hand.  There are other forms of ADR which we can discuss with you, and we can advise as to which would be most appropriate and reach your desired outcome to move forward. 

Why should I try Alternative Dispute Resolution?

Essentially, ADR is there to reduce time, money and stress. A usual claim will take about 12 to 18 months before the final hearing takes place and for you to receive your judgment. If instructing solicitors are to act on your behalf, while they will be acting in your best interests and aiming for a swift outcome, you may find that legal costs become more than the value of the claim itself.  

Furthermore, it may not even just be your costs that you incur; the Court can use its discretion as to awarding the winners costs to the losing party.  This means that should you lose, you will not only incur your costs, but you could also incur the other side’s costs, as well as whatever you are ordered to pay in the judgment. This could be up to 12 months’ worth of fees, which may be substantial.

Stress is, unfortunately, a big part of bringing a claim or defending a claim. Whilst instructing a solicitor will help reduce this, you will still be asked to provide a wide variety of different information, as well as instructions as to how you would like to deal with the matter.   

By trying ADR, you are also reducing the risk incurred ingoing to a hearing; at that stage you either win or you lose.  It is far more beneficial to try and resolve matters to know that whatever happens you are going away with a “win” for your business.

Finally, if you could salvage what was a good business relationship, why wouldn’t you?  Chances are it was never your intention or the other side’s intention to be in breach of the contract you agreed with them and if you can avoid breaking off a perfectly good work relationship, it will again save your company time, money and stress.

Does Alternative Dispute Resolution work?

This really depends on you and the other side.  ADR works exceptionally well where both sides are willing to try and settle a matter in a way that benefits your business as well as benefiting your opposition.

Similarly, it is important to remember that a judgment from the Court will not always give you exactly what you want.  It may be, for example, that you would rather have a working relationship where the debt or loss is “worked off” over a number of weeks, which the Court does not have the power to provide.

If you are unsure about whether ADR will work for you, we would always advise you to try it first.   The worst case scenario is that you will incur legal costs for the letter written to the other side requesting the same.  If you can demonstrate that you at least wrote the letter and started engaging fully with ADR, you are less likely to incur an unfavourable costs order against you if the matter goes to Court.  

To have your questions answered by Mollie regarding ADR and whether it could help you resolve your dispute before moving to a costly legal battle in the Courts, you can contact her today on 023 8071 7487 or email mollieleak@warnergoodman.co.uk.  This article has been published as part of the latest issue of our Commercial Brief.  To receive a copy of our Commercial Brief directly, you can complete our form to subscribe, or email events@warnergoodman.co.uk

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.