No matter the size of your company or the industry you operate in, disputes can be inevitable for many business owners. However, you still have control over how disputes are handled or the potential outcomes. Read on for guidance on resolving business disputes properly.
Summary
- Finding the Causes of Disputes
- What are the Alternatives to Court?
- Advantages of ADR
- Key Factors to Consider
- Preparing and Initiating the Resolution Process
- How to Prepare for a Dispute Before It Arises
- Benefits of Early Dispute Resolution
- ADR Schemes for Small Businesses
- FAQ
Finding the Causes of Disputes
Understandably, business disputes can be pretty overwhelming and challenging to navigate. However, the first step to resolving a business dispute is to establish why it occurred in the first palace. Generally, the root cause of disputes is a breakdown in communication between parties. Misunderstandings are also common causes of disputes and may relate to project expectations, contract terms or even personal conflicts.
Not to mention, it is not uncommon for disputes to occur due to misalignment in values, goals and perspectives. Fraud, misrepresentation and breach of contract are other common causes.
Establishing the cause allows you to not only find an effective solution but also reduce the risk of disputes occurring in the future.
What are the Alternatives to Court?
When a dispute arises, going to court is not the only option to resolve it. Alternative Dispute Resolution (ADR) refers to a range of methods to resolve disputes without litigation. This usually involves the help of a neutral third party.
ADR is the preferred method of dispute resolution for many businesses due to the fact that the court system can be inflexible, time-consuming and costly. It is also worth noting that, in some cases, the court may penalise those who unreasonably refuse to consider it.
Mediation and arbitration are the most popular ADR methods and can be used to resolve various disputes, including employee issues, intellectual property theft and shareholder disputes. Although both methods are confidential, faster and less costly than going to court, there are important distinctions.
Mediation Process Explained
Mediation is where a neutral third party helps the disputing parties reach a mutually beneficial agreement. While this non-confrontational method can help to preserve business relationships, the agreement reached is not legally binding unless the parties agree to formalise it.
Settling Disputes With Arbitration
Arbitration, on the other hand, involves a three-member Tribunal or one arbitrator evaluating the evidence and making a legally binding decision. This is usually the preferred method of ADR as the decision is made by someone who is an expert in the area of the dispute. This means that the disputing parties decide who the decision maker is and how the process should be conducted. Plus, agreements reached can be enforced in multiple jurisdictions.
Small Claims Track
If you need to go to court, the court will allocate your case to one of 4 tracks. The first is the small claims track which is usually for non-complex claims under £10,000. Although the process is relatively fast and inexpensive, only court fees are awarded to the successful party unless the other party's conduct is unreasonable.
Fast Track and the Intermediate Track
The fast track is used for claims between £10,000 and £25,000. This procedure is more expensive and complicated than the small claims track and it can take around a year to reach trial. However, hearings are usually concluded within a few days and you can recover fixed legal costs.
The intermediate track was recently introduced (October 2023) to handle civil claims where the value of the claim exceeds £25,000 but not £100,000. Its purpose is to deal with cases that are too complex for the fast track but not complex enough for the multi-track. Like the fast track, you can only recover fixed legal costs within this track.
Multi-Track
If you have a claim that is over £100,000, this will usually be allocated to the multi-track. In most cases, your claim will be heard by a senior Judge but there is no standard procedure for these cases. Depending on the complexity of your case it can take up to two years to reach a hearing.
Advantages of ADR
The benefits of ADR go beyond saving time and money, as well as avoiding the formalities and complexity of litigation. Resolving business disputes through ADR helps to reduce hostility and preserve important business relationships if both parties are willing to work together in good faith to reach an agreement. Instead of getting wrapped in their version of the case, a third party can help both parties understand the realities of the dispute.
In particular, arbitration allows for the use of an expert who has a deep understanding of your line of enterprise. This means that critical issues are decided by someone who can really grasp the nuances of the dispute. Bodies such as the Chartered Institute of Arbitration, The Centre for Effective Dispute Resolution, and the London Court of International Arbitration can help you find an arbitrator or mediator who is an expert in your field.
Key Factors to Consider
When choosing a dispute resolution method, you need to establish the nature of the dispute, as well as the underlying issues that caused it. For instance, arbitration or even traditional litigation may be a better path if you are dealing with a more complex factual dispute like a breach of contract. Whereas, mediation may be more appropriate in instances where a definitive determination of what happened is not as important as reaching a settlement and agreement as to what should happen next.
On top of this, the cost and time involved also need to be taken into account, as well as whether the decision will be legally binding. Additionally, the potential impact on the reputation of your company and relationships with key stakeholders needs to be considered.
Preparing and Initiating the Resolution Process
Careful planning is crucial when initiating the dispute resolution process. Here are some key steps to take:
- Determine the nature of the dispute and the best dispute resolution method
- Gather relevant evidence, including emails and documents
- Seek legal advice on how to prepare for the procedure
- Establish who will be involved in the procedure, including the disputing parties, legal advisers and third-party mediators
- Begin the process by notifying the involved parties, detailing the dispute and the desired resolution
- Stay open-minded and ready to compromise to achieve a mutually agreeable outcome
How to Prepare for a Dispute Before It Arises
Businesses need to take a proactive approach and not only think about using ADR once a dispute has already arisen. If the parties have not agreed to use ADR when entering into a contract, this may make it difficult to obtain a written agreement to use ADR once a dispute has started and emotions are high.
It is wise to seek the expertise of a legal professional who can help you implement clauses that allow you to bring the dispute to mediation or arbitration in the event that one arises later down the line.
Benefits of Early Dispute Resolution
The advantages of resolving business disputes early include:
- Avoiding expensive and lengthy litigation
- Preserving business relationships
- Avoiding damage to the reputation of your company
- Ensuring that goodwill is sustained between the parties
- Sustaining employee confidence and productivity
ADR Schemes for Small Businesses
To ensure that small businesses are not priced out of accessing justice through litigation, schemes tailored to small businesses have been developed, including the Business Arbitration Scheme (BAS). Developed by the Chartered Institute of Arbitrators, this scheme is available for claims between £5,000 and £10,000. It offers arbitration at a fixed rate, guaranteeing a legally binding resolution within three months of appointing the sole arbitrator. The simplicity of the scheme means that parties can even represent themselves if they wish.
The CEDR offers a similar scheme offering a CEDR Panel Mediator for a set price, covering up to four hours of preparation and seven hours of mediation for two-party disputes involving monetary claims. Costs vary based on the total claim value, and additional hours are charged at a set hourly rate. This service includes pre-mediation preparation and administrative support but excludes venue costs and mediator travel expenses for in-person mediations.
In addition, the Government has introduced a Small Business Commissioner, allowing small businesses to name and shame larger suppliers for bullying and late payment.
We understand that resolving a business dispute can be pretty frustrating and time-consuming. Thankfully, our commercial litigation and dispute resolution solicitors excel at helping businesses avoid the court system where possible and reach a satisfactory agreement, ultimately saving you time and money. Call our team today to get legal advice on a business dispute.
FAQ
How do you solve business disputes?
Our specialist business dispute lawyers excel at resolving complex disputes through effective forms of alternative dispute resolution, including arbitration and mediation.
What three steps should you take to resolve disputes?
To resolve a dispute quickly and swiftly you need to:
- Determine the cause and nature of the dispute
- Identify the most appropriate form of dispute resolution
- Seek legal advice
What is dispute resolution in business?
In simple terms, dispute resolution involves finding a resolution to a disagreement between parties, such as late payment, breach of contract and conflicts of interest.
What are the most common methods of alternative dispute resolution?
The five most common types of alternative dispute resolution are:
- Arbitration
- Conciliation
- Mediation
- Negotiation
- Transaction
