Dispute resolution: Instead of courting disaster, try something more agreeable

Litigation is not always the best way for businesses to reach a financial settlement. Daniel Djanogly explains some alternatives

May 11, 2011

Business-related financial disputes happen. Most will be settled by negotiation. However, should matters escalate to litigation, resolution can become particularly costly and time-consuming, and can divert attention away from the management of the business itself, where it may be most needed.

In the current economic climate, unsurprisingly interest is increasing in cost- and time-saving alternatives to litigation. In this article outlines some of the possible options known as "alternative dispute resolution" (adr).

Disputes involving joint ventures, partnerships, boardroom management and shareholder interests, company sales or mergers, trusts and inheritance, and divorce, among others, are all capable of resolution by some form of adr process. As adr methods differ, suitability should be considered and legal advice taken. In certain circumstances, court litigation may be the only route to resolution. The focus of this article is on adr processes known as arbitration, expert determination and mediation.

Arbitration and expert determination both offer disputing parties:

● Flexibility and control over the process. This can enable an outcome which is quicker and less costly to obtain than litigation.

● The ability to choose their tribunal. This may be one possessing expertise in the technical matters in dispute which can also assist in achieving this outcome.

● Privacy and confidentiality, as opposed to public exposure in court. This may help ring-fence the problem and preserve working relationships.

Arbitration involves a neutral third party deciding the dispute and the parties agreeing to be bound by the decision. Its scope is similar to litigation and a range of enforceable court-like remedies are available. The Arbitration Act 1996 provides the parties with procedural autonomy and states that: "… the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay and expense…"

Expert determination is a contractually-based process and usually less formal than arbitration. It is commonly used when a valuation is required or an expert opinion is needed on a technical matter. Although there are significant differences, as in arbitration the parties agree to be bound by the decision of the expert.

Mediation offers similar attributes, but is otherwise entirely different. The role of the mediator is to assist the parties in reaching their own settlement. The mediator makes no decision.

Existing contractual arrangements may already contain an agreed dispute resolution mechanism based on one or more adr methods. Furthermore, court litigation procedure may require the parties to engage in mediation. Whatever the circumstances, adr options do exist and disputing parties may wish to explore them.

Daniel Djanogly is a chartered arbitrator and forensic accountant and provides expert services in the resolution of business-related financial disputes.

dd@danieldjanogly.com, www.ddresolution.co.uk

Last updated: 4:57pm, May 11 2011