Additional Dispute Resolution – the power of four

Commercial disputes come in all shapes and sizes, each with their own unique features whether legal, commercial, or economic. No "one size fits all" approach exists for resolving disputes, and careful choice of dispute resolution method is one key strategic choice parties make, whether in their contracts or by agreement post dispute.

Formal court litigation remains one of the most used methods in the UK, but as inherent cost and delay grows, clients are increasingly looking to alternative methods to better resolve disputes. Many of these options are complimentary so additional (rather than alternative) dispute resolution more accurately describes what we see in the market.

Drawing on the collective experience of our four Aberdeen Office dispute resolution partners, we outline some benefits of four resolution options: arbitration, adjudication, mediation, and expert determination.

Arbitration

Arbitration is a legally binding process where an independent third party is appointed to resolve the issues between parties. The process is flexible and enables the selection of a decision-maker with genuine expertise in the subject matter of the dispute. The process is entirely confidential and, crucially, arbitral awards are enforced more readily around the world than court judgments. It is therefore particularly attractive to businesses in the Energy sector, where cross border transacting is often the norm.

Ken MacDonald, the partner who leads Brodies' international arbitration offering, said "Arbitration should be given serious consideration in circumstances where you would otherwise find yourself in the national courts of a jurisdiction with which you are unfamiliar or uncomfortable. In that situation, arbitration offers a way to level the playing field in a way that court litigation just does not allow.".

Adjudication

Adjudication is the most common method of dispute resolution in the construction industry. It involves parties appointing an adjudicator, typically a skilled construction professional, to determine the dispute usually within 28 days of it being referred to the adjudicator. That decision is binding unless and until a final determination of the dispute is reached in court or arbitration, but most decisions are not subject to further escalation. Although adjudication can be used for any kind of construction dispute, it is principally used to resolve payment disputes quickly, on an interim basis, to maintain cash flow and progress on construction projects.

Chris Duff, contentious construction partner, sees speed and flexibility as the main advantages: "Flexibility is a real asset of adjudication. You can refer a discrete dispute to adjudication, which can be resolved quickly, and this often helps to unlock the wider issues on projects. Being able to have separate adjudications to deal with legal, technical issues and quantification means you can have the right decision maker for the right dispute.".

Mediation

Mediation involves parties appointing a neutral independent mediator to assist resolution. A mediator is not appointed to decide the outcome but rather to facilitate a negotiated resolution. Entirely confidential and conducted on a without prejudice basis – meaning that nothing said, or conceded, during negotiations can be referred to in any other process, mediation only becomes binding when parties achieve resolution and sign a settlement agreement. Mediation can be, and often is, used alongside formal proceedings. It gives parties a valuable opportunity to explore settlement before costly final hearings.

Malcolm Gunnyeon, partner, and accredited mediator said "For me the real advantage of mediation is that nothing is off the table in terms of finding a resolution. The resolution can be whatever the parties can agree on. That allows a great deal of creativity in finding solutions and often allows parties to preserve their commercial relationship in a way that is much harder to do at the end of adversarial court proceedings.".

Expert Determination

Expert determination involves parties selecting an expert who uses their own professional expertise to decide the dispute. It is particularly useful in determining technical or valuation issues such as the cause or quantification of loss arising from an unexpected incident. The process can allow parties to quickly determine all or a key part of their dispute. Parties place great reliance on the expert, whose decision is binding with very limited scope to challenge.

Malcolm Mackay, partner, and marine dispute specialist said, "Speed, cost and finality are the main advantages of expert determination, with complex technical issues being capable of resolution in a matter of months and within a timeframe that is simply not possible for a court to achieve.".

Commenting on ADR and continued growth in the partner led dispute resolution offering at Brodies in Aberdeen, Stephen Goldie, Head of Litigation said, " We remain committed to best serving our clients in Aberdeen and the North-East by finding solutions quickly to address their needs. Additional dispute resolution methods are key components of that approach. The return of Chris Duff to Aberdeen with his significant contentious construction expertise further bolsters our offering and places Brodies in a unique place in the Aberdeen market with four experienced dispute resolution partners.".

This article originally appeared in the Press and Journal, August 2023.