With all the many issues that your business faces in the pursuit of success, however you may define it, the last thing your business needs is to find itself facing a dispute, with its associated drain on management time and perhaps engagement of expensive external professionals such as lawyers and expert witnesses.
In a worst case scenario costs can be staggering, to the point of even insolvency. Personal stress and trauma will accompany the financial fall-out also.
Negotiating a compromise settlement is almost always the better option than intransigence and heading down the slippery slope of litigation but sometimes, unfortunately, you are left with little alternative.
Commercial litigation is a demonstration of parties' inability to resolve their differences. It is fraught with uncertainty, and judges do not always get it right, as they are actually human beings, believe it or not - fallible like the rest of us! If they did (always get it right) then higher courts would never overturn the judgements of lower courts would they?
Even if you win (and on all issues if there is more than one) you will never recover all your costs.
Despite the general principle that the loser pays the winner's costs, in reality 50% recovery of your costs is not bad at all.
To add to the elusiveness of justice (whatever you perceive that to be) through the courts, to most of us that are concerned with costs, is the considerable hike in the cost of simply issuing proceedings that took place earlier in 2015, before the process even kicks in.
However, there are alternatives to litigation, carrying equally binding weight, including arbitration.
Many people think of ACAS, the Advisory, Conciliation and Arbitration service, when arbitration is mentioned, and industrial relations.
However, this is, largely, a misconception.
Arbitration, as a form of disputes’ resolution has been around for centuries. In its full-blown form on larger disputes modern arbitration mimics high court procedure.
There are differences though, at the centre of which is its private nature and its flexibility in that the parties can decide on the rules, timing, location, choice of arbitrator, etc.
It can be also on a documents-only basis, appropriate for a great many smaller disputes where testimony by the parties and witnesses, e.g. experts, is unnecessary.
A Simplified Form…
The Chartered Institute of Arbitrators has recently introduced a Business Arbitration Scheme (BAS) which is designed explicitly for smaller disputes, which the Institute defines as those where the sum in dispute (the claim) does not exceed £100,000.
The process may be invoked by virtue of an agreement within the contract between the parties to refer future disputes to CIArb’s Business Arbitration Scheme, or, by agreement of the parties after the dispute has arisen.
The cost of this process is £1,250 + VAT per party. In the ‘award’ (the judgement) this can be re-allocated by the arbitrator when the costs of the arbitration to be paid by the parties is decided on. Legal and other costs are restricted to £1,000.
The documentation submitted to the arbitrator is restricted to one lever arch file per party. If a half-day hearing is requested by the parties there would be a further cost, as there would be with any necessary 'site' visit.
The process is also speedy, - 89 days from the appointment to the issue of the arbitrator’s award.
The arbitrator is the servant of the parties. If there are technical issues the selected arbitrator may be chosen because he has some relevant technical qualification, in addition to a legal one.
The parties can decide on how they want the process to proceed. Outwith agreement of the Parties the arbitrator's powers are governed by the Arbitration Act 1996.
The BAS is far less ‘painful’ than litigation, it is speedier, and will ‘finally’ resolve the dispute.
But, if possible, I cannot advise too strongly that you… talk, negotiate, compromise, perhaps via mediation! Almost always the better option.
Michael Hawkyard B.Sc.(Hons.) FRICS, FCIOB, FCIArb has over 50 years’ experience in construction, in building, civil engineering, marine/offshore engineering, oil/gas (upstream and downstream) and power.
A chartered quantity surveyor by primary profession, he is also a CEDR-accredited mediator and RICS registered adjudicator and expert witness. Michael has overseas experience in Europe, Algeria, Nigeria, South Africa, Angola, Qatar, UAE, India and Malaysia.
(This article was originally written for a local Chamber of Commerce communication and is reproduced with the permission of the author)