The primary objective of parties who become involved in a commercial dispute is usually to resolve matters in a timely and cost-effective manner.
Ideally, this will involve an agreement being negotiated between the parties themselves, allowing them to get on with running their businesses, although this will not always be possible. The amounts in dispute can be business critical and commercial disputes will often be brought to the Commercial Court in the Court of Session for resolution. However, litigation is not the only option.
The following is a brief overview of the main types of alternative dispute resolution where businesses wish to avoid court:
Mediation
Mediation is a process whereby parties in dispute consent to enter into a negotiation process with the assistance of an independent mediator, who will facilitate without prejudice discussions and assist the parties and legal advisers to listen to each other's positions, with a view resolving matters in a confidential manner, without the need for a third-party decision maker.
In England, exploring mediation at an early stage is encouraged, and indeed expected, by the courts and a party to a court action may be penalised if they are considered to have unreasonably refused to engage in mediation.
The Scottish courts have taken a different view to date and though mediation is often encouraged, the failure to participate has no consequence in expenses. In practice, however, legal advisers are likely to explore with their clients whether mediation would be the right choice – either before court proceedings are raised, or at an appropriate point in the action, when the battle lines have been drawn.
Arbitration
Arbitration usually takes place where parties have agreed within the contract itself to have any dispute arising in relation to the contract determined by an independent arbitrator (or panel of arbitrators) instead of through the court. It is also possible to agree to arbitration where a dispute arises after the contract has been signed. The arbitrator(s) will be suitably qualified, usually with expertise in the sector/industry, nominated and agreed by the parties themselves to determine their dispute. The process can be quicker and more flexible than even commercial court proceedings and will remain entirely confidential unless parties specifically agree otherwise.
The appointment of an arbitrator can be organised through a particular trade or professional organisation and the reference may be agreed by the parties to be limited to specific types of disputes within the contract. The arbitration provision in the contract will usually also determine whether there is a right of appeal or that the arbitrator's decision is final and binding on both parties.
Expert Determination
Expert determination involves the appointment by the parties of an independent expert in a particular field to decide the matter in dispute. It will often be used in disputes of a technical nature, where the parties agree to rely on the expert to use their own knowledge and experience to undertake an independent review and make a binding determination.
Expert determination is generally a quick and relatively informal process and, again, it will usually be agreed by the parties, as part of the appointment process, that details of the dispute and the outcome of the expert determination will remain private.
Adjudication
Adjudication is primarily used in the construction industry and involves a person with specialist knowledge of the particular subject matter being appointed to determine certain disputes in a quick and binding manner.
The future
Over the last eighteen months, the necessity of using videoconferencing and other virtual tools to communicate has dramatically changed the way in which commercial disputes have been resolved, with both the court process and alternative dispute resolution processes taking place almost entirely online.
It is not yet clear to what extent these enforced changes will continue to be adopted by agreement in the future. However, there is little doubt that alternative dispute resolution will continue to play a key role in the determination of commercial disputes.
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Senior Associate
