New beginnings in dealing with business disputes?

posted by KeithDaniel

Nick Parker, a Partner at Berry Smith Lawyers, considers the ways that legal disputes are expected to be dealt with in the future

Businesses may not yet know it, but there is a significant wind of change blowing in the way in which legal disputes will be dealt with in the future.

If it comes to pass, the way in which businesses deal with each other when faced with a dispute will be changed forever. In many cases there is likely to be a mandated requirement to use methods of what up to now have been considered ‘alternative’ forms of dispute resolution - before a case can be decided by a judge in the court process.

Policy in relation to civil justice is made by a combination of the senior judge dealing with civil cases, the Master of the Rolls, together with the Ministry of Justice. In recent months the Master of the Rolls, Sir Geoffrey Voss, has made several significant speeches outlining his radical vision for future civil justice.

In parallel, the current Lord Chancellor and Justice Secretary, Robert Buckland, has given his backing to ‘the Voss vision’. There is clear momentum gathering for change.

Recently, the Civil Justice Council (the body that considers and advises the Master of the Rolls on potential changes to the civil justice system), published a report that has been welcomed by him with groundbreaking conclusions: that parties to a dispute can be forced to engage in settlement options, and that they can be penalised if they do not make such an attempt.

So, what changes are planned?

Ultimately, the Master of the Rolls envisages an online funnel as an entry point into which individuals and businesses will lodge details of their dispute. That funnel will provide different options for resolution. This will include directions to ombudsmen in relevant areas where such processes exist, Alternative Dispute Resolution (ADR) – most often mediation, and litigation. There will be one point of data collection rather than overlapping processes -and if one avenue does not provide a resolution then the case may progress into another.

A further significant change is that ADR will be at the heart of the approach to civil justice, so much so that the Master of the Rolls foresees the removal of the ‘A’ from ADR in the way that it is regarded so that its processes become central to dispute resolution strategy.

At one end of the spectrum, there would be an inclusion of processes such as regular prompts in online systems to settle a case, and the use of algorithms in lower value cases encouraging parties to ‘blind bid’ to identify possible overlap of an acceptable settlement sum. In other words, in such cases there would be no judicial decision to decide who is right or wrong, but an emphasis on each party indicating a result that it can live with.

In higher value cases parties have been encouraged to mediate their disputes for some time. Mediation involves the parties appointing an independent mediator to facilitate a settlement between the parties in a confidential and without prejudice process. Mediation often proves highly successful, with surveys consistently showing a settlement rate of around 75%. Again, such an approach invariably involves compromise if there is to be a settlement and does not involve a judge deciding the outcome.

This thinking is a central part of the Voss vision and the cultural change that will be encouraged and required of people and businesses involved in a dispute. While there will still be opportunity for cases that cannot be resolved to ultimately proceed to a decision by a judge, that will come at the end of a process where seeking mutual agreement will have been consistently encouraged and the penalty in not reaching such agreement may raise both parties’ risk substantially in an eventual outcome so as to make that choice of proceeding to an arbiter unpalatable.

Why are these fundamental changes being proposed? There are several reasons.

First, a negotiated outcome often makes good sense and limits the time and cost of dealing with disputes to parties. Those who have had experience of business disputes will know that often disputes involve ‘shades of grey’ and may not be crystal clear. Entering into a protracted dispute can be a costly decision financially and even emotionally. A negotiated outcome can be more flexible and even preserve trading relationships.

Second, the expansion of technology means that there are more modern ways to communicate and use tools to cut through previously protracted processes. The new processes envisaged are entwined with the development of the online court that has been underway for several years.

Third, while at long last there is an intention in government circles to spend money on IT to bring court systems into the modern age, this has been partly fuelled by the wish to close court buildings to cut costs. The experience of the Covid pandemic where courts and lawyers have had to engage in online hearings means that the genie is now out of the bottle and a court system with less personal attendance than before is inevitable. That is not necessarily a good thing.

For businesses now, considering the way in which a dispute can be resolved is an essential consideration from the outset. Engaging with advisers in practical problem solving means that the various methods of resolution should be considered. While the future change promises to be dramatic, the processes seen as being desirable by the senior judiciary already largely exist and can be utilised.

Please contact us if you would like more information about the issues raised in this article at 029 2034 5511 or nparker@berrysmith

Nick Parker

Partner