Dispute resolution is the process of resolving a dispute or conflict between different parties. Crucially, dispute resolution can be a way of solving a conflict without having to go to court.
As a business owner, it's important to be familiar with dispute resolution methods to effectively handle any conflicts that may occur within your business or with external parties.
Quickly jump to a section:
- What is alternative dispute resolution?
- What is the purpose of alternative dispute resolution?
- What are the five types of alternative dispute resolution?
- What are the advantages and disadvantages of alternative dispute resolution?
- What is a dispute resolution clause?
- Why should you use dispute resolution?
- How long does dispute resolution take?
- What is litigation, and how is it used in court?
- What methods of dispute resolution are available?
- What is a dispute resolution appointment?
- Is alternative dispute resolution legally binding?
The process of dispute resolution is also known as alternative dispute resolution, appropriate dispute resolution or ADR. The process can be used to attempt the resolution of most business disputes without parties needing to attend court.
Alternative dispute resolution is a way of resolving a conflict or dispute, often without needing to go to court. The cost of litigation can be very high, especially if a decision is appealed. Although there are payment options such as litigation funding available, the risk of bringing a claim in the courts for small businesses is too high.
If you lose your case, the court will likely make a costs order against you, meaning you'll have to pay the other side's legal costs. Alternative dispute resolution is much cheaper than litigation, and if you use methods such as negotiation or mediation, you will only be liable for your own legal costs.
There are five main types of dispute resoltuion, the first four being alternative dispute resolution methods:
A starting point with dispute resolution can be negotiation. Both sides seek to find common ground in a dispute. This could be internal grievances around employment or director responsibilities or disputes with third parties, such as trading partners and investors. Considering the view taken by the opposing party is key, but sometimes the differences are too broad, and the negotiation process fails. This leads to other dispute resolution remedies being considered.
Mediation is a process by which the parties involved in a dispute come together. Still, with an independent party present, the mediator, who tries to help the disputing parties come to a resolution that both sides can live with. The mediator is impartial, and it isn’t their role to come to a decision but rather to help both sides agree to a resolution. Mediation is more formal than the arbitration and litigation processes, so it’s usually much cheaper. In mediation, a settlement agreement is drafted after a resolution detailing what both sides have agreed to comply with.
Arbitration is a more formal legal process. This uses an independent arbitrator to make a decision about the dispute. All parties provide evidence, and the arbitrator uses this information to come to a conclusion, seeking to resolve the dispute. This form of dispute resolution allows all parties to influence the process. As there are no court-imposed deadlines, it can be more flexible. It’s also generally cheaper than litigation. Arbitration decisions are legally binding, and they can generally be enforced similarly to court judgments, so taking legal advice is highly recommended.
If the more informal dispute resolution methods fail, then the only option remaining may be going to court.
Adjudication is used to resolve disputes between parties to a construction contract. There is a statutory right to adjudication, meaning neither party can contract out of the process. It’s often described as a ‘pay first, argue later’ method as it‘s designed to be a quick (it’s usually a 28-day process) and inexpensive resolution method to resolve disputes around interim payments, completion delays, work defects, and settling the final account.
Litigation is when a dispute resolution solicitor is enlisted to help resolve the dispute, giving expert advice on the best approach. Dispute resolution solicitors will deal with court proceedings and manage all the documentation. Litigation is usually the most expensive form of dispute resolution. If it goes to court, it’s likely that the other side will have also taken expert legal advice.
The advantages of alternative dispute resolution are:
- ADR methods, such as mediation or arbitration, can be significantly less expensive than traditional litigation. Parties can save on court fees, legal representation costs, and other expenses associated with formal court proceedings.
- ADR processes are typically faster than court litigation. Court cases can take months or even years to reach a resolution due to congested court dockets. In contrast, ADR allows parties to schedule sessions conveniently, resulting in quicker resolutions.
- Parties have more control over the process and outcome of their dispute. Unlike court proceedings, where decisions are made by judges or juries, in ADR, parties can actively participate in negotiations and collaborate towards finding a mutually agreeable solution.
- Being less confrontational than litigation, ADR allows for observing commercial relationships. Parties can communicate directly and work towards a resolution in a less contentious environment. This can help preserve relationships, particularly in business or personal disputes where ongoing relationships may be valuable.
- ADR processes offer a high degree of confidentiality. Confidentiality provisions can protect sensitive information, trade secrets, and personal details from becoming public records, which may be especially important in commercial disputes.
- In some ADR methods, such as arbitration, parties can select a neutral third-party arbitrator with specialised knowledge or experience in the subject matter of the dispute. This allows for a more informed decision-making process and can lead to more technically accurate and positive outcomes.
- ADR can improve access to justice by offering a more accessible and user-friendly alternative to the formal court system. It allows businesses to resolve their disputes in a less intimidating and more affordable manner.
The disadvantages of alternative dispute resolution are:
- Unlike court proceedings, some ADR methods, such as mediation, aren’t legally binding. Parties must instruct their Solicitors to draw up a legally binding agreement; in some cases, this needs to be approved by the Court before it can bind the parties.
- While the decisions reached through ADR methods like mediation or negotiation are generally enforceable, the enforcement process can be more challenging than court judgments. Suppose a party refuses to comply with the agreed-upon resolution. In that case, the affected party may need to resort to court proceedings to enforce the outcome, which can nullify the benefits of ADR.
- ADR processes may only sometimes ensure a level playing field between parties. One party may have more resources, expertise, or bargaining power, which could lead to an unfair outcome.
- ADR processes often have more relaxed evidence and disclosure rules than court proceedings. While this may expedite the resolution process, it can also limit the opportunity for parties to present their case or gather relevant evidence fully. This can potentially lead to an incomplete or biased decision.
- Some ADR methods, such as mediation or negotiation, may only be suitable for some types of disputes. Complex legal issues, cases involving multiple parties, or disputes with a public interest element may require the expertise and authority of a court to ensure a fair and just resolution.
A dispute resolution clause is typically a written agreement between you and the other party. It specifies what should happen in the event of a disagreement that may arise in the future. Dispute resolution clauses can be a separate agreement or included in a commercial contract. For example, most construction contracts include a dispute resolution clause that covers the rights and obligations of both parties if a dispute is referred to adjudication.
The clause may lay out the process should a dispute arise, such as mediation, arbitration or litigation. For example, it can state how a mediator or adjudicator will be chosen and what legal jurisdiction will apply. A dispute resolution clause can cover contractual and non-contractual disputes between parties.
Businesses should use a dispute resolution process because of cost-related factors. In particular, mediation, which is much less expensive than other legal processes. They can also be much quicker as the parties don’t need to get involved in lengthy and time-consuming court proceedings. With more participation from each individual involved in the dispute, they can have more significant influence as there are no court-imposed rules, regulations or deadlines. Dispute resolution is also much less formal and more flexible than going to court.
ADR methods, such as mediation and adjudication, are designed to resolve disputes quickly. For example, most disputes are resolved following one to three mediation sessions. Adjudication and litigation are more drawn out as both can involve witnesses and expert opinion.
Litigation refers to the process of resolving legal disputes through courts. It’s the formal legal proceeding in which parties present their case before a judge, who then makes a binding decision based on the facts and applicable laws.
The litigation process begins when one party, known as the claimant, files a claim against another party, known as the defendant. The claimant outlines their legal arguments and seeks a remedy or relief from the court.
Once a claim is filed, the court sets a schedule for various stages of the litigation process, including exchanging documents, witness statements, and legal arguments. The parties may engage in pre-trial procedures such as disclosure, where relevant evidence is disclosed to the opposing side.
The court hearing is the central part of litigation, where the parties present their cases before a judge. Each party gives evidence, calls witnesses, and makes legal arguments to support their position. The judge then evaluates the evidence and arguments before reaching a decision.
After considering the evidence and legal submissions, the judge delivers a judgment. The judgment determines which party succeeds in their claim and outlines the legal rights and obligations of the parties involved. The judgment is enforceable by law; however, if a party disagrees with the judgment, they may have the right to appeal to a higher court.
The appellate court reviews the legal issues and the manner in which the case was decided at the lower court. The appellate court may affirm, reverse, or modify the lower court's decision.
Finally, the court may order the losing party to pay the successful party's legal costs.
Some methods of dispute resolution that are available are adjudicative processes and consensual processes.
Adjudication (see above) is when a neutral third party reviews the details of the dispute and the case that each party puts forward and decides on the dispute, which will be enforced. The process is begun by any party involved in the dispute issuing a Notice of Adjudication, which details any information about the dispute and the resolution the referring party wants. That party will then appoint an Adjudicator or arrange to appoint one.
Consensual dispute resolution is a settlement where the parties involved consent to a resolution rather than getting an independent party to resolve the matter. This is a cheaper and quicker method of dispute resolution than adjudication, as only the disputing parties are involved. The parties on each side of the dispute must get their side across in a way that allows the other party to understand their position, come to a decision and subsequently agree on a settlement together.
Expert determination is the fastest and cheapest form of dispute resolution in cases where both parties agree on the facts of the dispute but require an expert to determine a disagreement regarding technical or valuation matters. As it’s non-adversarial and confidential, this ADR method protects commercial relationships and confidential information.
A dispute resolution appointment refers to a scheduled meeting or session as part of a dispute resolution process. It sets out a specific time and place where parties involved in a dispute come together, either voluntarily or as required by a contractual agreement, to discuss and attempt to resolve.
A First Hearing and Dispute Resolution Appointment (FHDRA) is the first court hearing after an application has been made to the court in private family law. It’s held to assist the court in identifying issues between the parties at an early stage and to see if the parties can reach an agreement.
Agreements reached in mediation aren’t legally binding unless the parties sign a statement agreeing to be bound to the agreement in law.
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