8.1 Options for Dispute Resolution

Question 1

What is the definition of litigation?

Answer 1

The formal process for dealing with civil disputes in the courts of England and Wales. The party asserting the claim (claimant) issues a claim with the court against the party or parties against (defendant) whom it seeks some court-ordered remedy.
LEGALLY BINDING

Question 2

What are the advantages of litigation?

Answer 2

1. Wide court powers to make orders and enforce them
2. Connected individuals or businesses can be added as additional parties to the proceedings
3. Court resources and experience - can deal with very large and complex cases

Question 3

What are the disadvantages of litigation?

Answer 3

1. Parties cannot choose the Judge - they are appointed by the court
2. Appointed Judge may not have experience in the specific subject matter of the dispute
3. Court proceedings are not private - they are a matter of public record. Could be difficult where sensitive matters are involved or if businesses or reputations could be negatively impacted
4. Progression of cases through to trial and judgment is rarely quick
5. Legal costs - can come to ££££££ or millions
6. Parties have little or no control over what happens once proceedings have commenced

Question 4

What is the definition of arbitration?

Answer 4

Formal process that leads to a legally binding outcome. Private process. One or more arbitrator(s) appointed by the parties themselves or under a mechanism they have agreed. Arbitration award is granted.

Question 5

When are parties more likely to opt for arbitration?

Answer 5

When they are concerned about confidentiality and foreign enforcement

Question 6

What is a binding arbitration clause?

Answer 6

Inserted into a contract, gives parties no choice but to go to arbitration. Must be in writing or evidenced in writing (s5).

Must refer present and future ‘disputes’ to arbitration (s6).

Question 7

What are the advantages of arbitration?

Answer 7

1. Process is private - like ‘private litigation’
2. Parties may be able to choose the arbitrator(s)
3. Arbitrators are often experts in the relevant field or profession
4. There may be some flexibility in terms of choosing the procedure - e.g. setting a limit to appeals
5. Issues, including technical and legal issues, will be examined more thoroughly than in a mediation

Question 8

What are the disadvantages of arbitration?

Answer 8

1. Arbitrator’s powers are not as wide as the court - e.g arbitrator cannot grant freezing orders
2. It is still a contentious process - arbitration will not necessarily preserve a commercial relationship between the parties any more than litigation. One party wins and one party loses
3. Detailed arbitration rules and processes to follow - process can be as lengthy as litigation
4. It can be even more expensive than litigation. Arbitrators and venues must be paid for privately (not the case for judges and courts)
5. Third parties cannot be added as parties to the proceedings at a later stage

Question 9

What is an arbitration seat?

Answer 9

The place the parties have agreed is its legal location. Determines the legal jurisdiction that has authority over the arbitration procedure. Often neutral to the parties.

Question 10

When would you want to enforce an arbitration clause?

Answer 10

If you are a defendant, you may wish to dispute the court’s jurisdiction to deal with the dispute

Question 11

What is the process for enforcing an arbitration clause?

Answer 11

Step 1: Must be a relevant, valid and binding arbitration clause
Step 2: Within 14 days of deemed service of the particulars of claim, defendant must file acknowledgment of service to state that they will contest the jurisdiction.
Step 3: Defendant must file an application notice seeking a stay of legal proceedings under the Arbitration Act

Question 12

What are the grounds of challenge to appealing an arbitrator’s decision?

Answer 12

1) A challenge to the substantive jurisdiction
2) Serious irregularity - irregularity in the proceedings which have caused, or will cause, them substantial injustice
3) Appeal on a point of law

Question 13

What is Alternative Dispute Resolution (ADR)?

Answer 13

Must be considered by parties at an early stage of disputes and should be kept under review throughout.

Available to parties at any stage of a dispute and can be conducted on a without prejudice basis.

Question 14

What is the time limit for appealing an arbitrator’s decision?

Answer 14

28 days from the date of the award

Question 15

What is the definition of mediation?

Answer 15

Voluntary process where a neutral person is appointed to act, almost as a negotiator between the parties.

Private process. Can be quick and reasonably inexpensive, but results are not guaranteed as the mediator does not have any power to make a decision - they can only facilitate negotiations.

The parties to a mediation must agree who will act as mediator.

Question 16

What are the advantages of mediation?

Answer 16

1. Without prejudice discussion
2. Commercial relationship may be maintained between the parties if they negotiate a settlement of their dispute
3. Agreed solution may take any form (e.g apology, not just damages)
4. Confidentiality
5. Flexibility with process
6. Speed - may take just a day or two
7. Reaching a solution together, rather than risking going to court, may be better for the parties

Question 17

What are the disadvantages of mediation?

Answer 17

1. Uncertainty - not certain if parties will reach an agreement. Any result may only be a compromise at best
2. Other party may not have a genuine desire to settle. May just be using the mediation as a delaying tactic or to look good to the court later
3. Mediation might not be suitable for complex legal or technical issues

Question 18

What is meant by ‘early neutral evaluation’?

Answer 18

An independent expert (or judicial evaluator) is appointed to meet with the parties and give a non-binding and confidential assessment of the dispute.

NOT LEGALLY BINDING

Question 19

What is meant by ‘expert determination’?

Answer 19

An independent expert is chosen by the parties who will set out the expert’s powers in a new contract.

Decision is binding if that is what the parties elect.

More suitable for complex and technical issues (e.g. determining value of assets) but not for full hearings with witnesses where credibility needs to be tested or there are complex legal issues in dispute.

LEGALLY BINDING

Question 20

What is meant by a ‘mini trial’?

Answer 20

Appointed neutral person presides over a panel consisting of representatives from each side (often business executives in commercial matters). Hears representations from both sides and attempts to reach a negotiated settlement.

NOT LEGALLY BINDING

Question 21

Negotations

What is meant by ‘without prejudice’ discussions?

Answer 21

Negotiations between the parties to enable a dispute to be settled. Anything said in a without prejudice discussion cannot be used against a party if the dispute goes to court (without prejudice privilege).