Implementing an effective dispute resolution strategy
October 2016 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION
Financier Worldwide Magazine
Disputes arise within and between businesses and individuals all the time for many different reasons. The one thing all disputes share is that ultimately they involve people and people involve relationships. The key to effective dispute resolution, from the perspective of business, is to have a broad, flexible approach which offers an outcome-focused resolution to the dispute.
By that we mean that it is important that contracts, terms, policies and training are designed to complement each other so as to focus on an outcome that is in everyone’s best interests – but is cost effective and also ensures a degree of protection to reputation.
There are currently a wide range of models to resolve disputes in the UK. The courts remain available for matters which, for whatever reason, cannot be resolved elsewhere, but there is a strong emphasis on the parties to try to resolve matters before going to court. Mediation, arbitration and negotiation offer a more cost-effective as well as independent approach.
Approaching dispute resolution effectively can reduce resource and overhead but if it is approached in the wrong way it can have the opposite effect. One of the dangers is that dispute resolution that is process based rather than outcome-focused, could mutate into a private judicial system that looks and costs the same as litigation. As alternative methods to litigation developed in the late 1980s and through the 1990s, many procedures typically included what one may consider today to be ‘excess baggage’ in the form of requirements, briefs, discovery, depositions, judges, lawyers, court reporters, expert witnesses, publicity and damage awards which seemed unreasonable and outside the limits of contract.
Getting it right means more than just having a clause drafted by a lawyer inserted into a contract. Getting it right is more about the organisation and its mindset than anything else – and the bigger the organisation, the harder it is to have uniformity across all the layers and departments.
In essence, any company’s view of arbitration and mediation and litigation boils down to whether or not top management insists on winning at all costs – that is to say, it is down to the people running the company and their mindset first. If you can get it right at the top, then you can get it right, but getting it wrong can mean huge losses (or rather, huge gains for the lawyers).
Because different companies have different people at different levels, the adoption of a strategy that ‘suits’ a particular organisation (and its people) ensures continuity and efficiency. Disputes with customers can be handled under a customer-focused complaints process (or in certain regulated industries, a prescribed one). Disputes with employees require effective HR management and policies. Disputes between businesses require a mindset that is outcome-focused, which benefits both parties.
For larger organisations, commercial contracts should include a clause specifying the first, preferred method of settlement should a disagreement arise, but this should be part of a wider dispute avoidance and resolution process.
Where disputes arise, those trained in problem solving, dispute avoidance, negotiation and dispute resolution should have initial oversight of any dispute and be able to record and monitor all claims by or against the company. Larger organisations inevitably attract more disputes because of their nature and activity, but investing in a strategy that allows trained professionals to manage and report on various disputes could save resource, finance and reputation from more substantial damage, particularly where each case is reviewed to ascertain whether it should be arbitrated or litigated.
Each case should be properly analysed at the outset so as to assess (as objectively as possible) the financial exposure posed by the dispute. Disputes involving an ultracrepidarian can be quickly identified along with nuisance complaints or disputes that can be very easily rectified. Having an effective vetting and analysis of disputes and complaints ensures a more proactive and outcome-focused approach – far better than a reactive defensive approach which increases the risk of escalating matters.
Ideally, the analysis of disputes and complaints should include a recommended alternative dispute resolution (ADR) plan and suggestions on how to strengthen the relationship with the other party. That is ultimately what makes or breaks dispute resolution – the relationship, the personal. An outcome-focused strategy that can effectively assess and recommend a particular dispute be handled through ADR at or below the calculated risk-exposure level means there is a route to resolution without litigation – the outcome being to resolve the contention efficiently with little expenditure of time and money.
Having a clear outcome to focus the strategy on also helps to avoid being caught up in process, which can even happen in arbitration. If arbitration costs as much as, or more than, litigation and takes just as long, it probably is not ‘real’ arbitration. One of the dangers of getting a strategy wrong would be to develop arbitration to disguise both costs and unnecessary procedures.
Instead, it would be much better to establish guidelines to deal with this problem. Arbitration looks like, feels like and works like arbitration when the parties are prepared to pursue a streamlining of the process, limit the necessity for lengthy disclosures and statements, participate in pre-hearing exchanges, agree to limit damages and use experts sparingly. Remember, it is meant to be an alternative to formal litigation, an alternative that gives the parties, both parties, an opportunity to mitigate costs and to reach a conclusion quickly that they are both happy with.
There are many standard ADR clauses that ensure that arbitration will really be arbitration and not disguised litigation, but it is not just a question of putting a clause in a contract and hoping for the best – it is very much a mindset that needs to be adopted to implement an outcome-focused strategy.
Over the years, there have been many studies of alternative dispute resolution and there are many models. In 2014, Queen Margaret University completed its report to Legal Ombudsman ‘Models of Alternative Dispute Resolution’. This was a consumer-focused analysis of different models adopted for consumers in different jurisdictions. Some of the analysis and findings offer important insight into approaches which are relevant and worth considering for commercial dispute resolution.
For example: “The Ontario Ombudsman is one of Canada’s provincial public service ombudsman schemes. Of the 50 members of staff involved in frontline case handling, 27 work in the Early Resolution teams; there are three teams, each with one manager and all led by a Head of Early Resolution. In 2013-2014, 72 percent of complaints were dealt with within two weeks, and the Early Resolution teams were responsible for handling the bulk of the 26,999 complaints received.”
Large organisations with many customers looking for an effective consumer dispute resolution strategy would welcome an approach that delivers fast, flexible and efficient results akin to the Ontario Ombudsman. The report also highlighted the growth of online resolution models.
For example: “There is significant potential for ombudsman schemes to develop in this area. The case study of eBay shows how disputes between buyers and sellers can be resolved by a semi-automated system which is able to resolve the vast majority of cases by providing options for settlement and encouraging parties to reach a view for themselves. One of the benefits of ODR platforms, such as that used by eBay, may be their accessibility and transparency, as well as being able to provide trusted information which enables parties to reach their own conclusions. A fascinating area of future development involves ‘crowdsourcing’ decisions, where a panel of experienced buyers and sellers determine the outcome of a case.”
The use of technology as part of a strategy, especially where we can see it working in an existing environment, provides further options to developing a comprehensive strategy, although there have been instances where technology has not quite been up to the job, but advances in technology more recently has led to the Lord Justice Briggs Civil Courts Structure Review, one of the terms of reference being “To make recommendations for structural change including, in particular, the structures by which the fruits of the Reform Programme may best be integrated into the present structure of the Civil Courts” – and there is a significant focus on technology, efficiency and providing alternative models of dispute resolution.
For example: “The emergence of pre-issue Portals, and the generally high level of recourse to private sources of ADR before the issue of proceedings where the parties have access to affordable legal advice, does not seem to me to disclose a need for significant structural change. Nor does the 2013 ADR Directive, which requires member states to ensure that businesses provide consumers with information about ADR for the resolution of contractual disputes.
“If there is an area of concern that ADR is not attempted enough before issue of proceedings, it arises in relation mainly to claims of the value and type which I would favour placing within the jurisdiction of the OC. This is planned to have its own stage of culturally normal, but not compulsory, conciliation built into it. It has been suggested that some adaptation of the MIAM should be added to civil procedure for the benefit of LIPs, based on the Family Court model. There is a similar requirement to approach ACAS for advice about conciliation, in the procedure of the ET. I agree that these are worth considering further.”
One may even conclude that as alternatives to the courts and litigation become more available and more desirable to business as well as consumers that the review of the Civil Courts is a response to a changing and developing landscape which seeks to re-position the courts by enabling them to provide a flexible, cost effective outcome-focused model of alternative litigation. Whatever models, solutions and strategies develop over the next 10 years, litigation will still have a place, but resolving disputes in a flexible, cost effective and outcome-focused way will remain the goal for many medium and large organisations for the foreseeable future.
Whether its commercial, internal, consumer or intra-group, disputes will arise and will need resolving, so having the right approach and the right mindset will go a long way to ensuring financial and reputational considerations can be delivered.
Martin N. Callan is president of the Chartered Institute of Legal Executives (CILEx). He can be contacted on +44 (0)1234 844 354 or by email: email@example.com.
© Financier Worldwide
Martin N. Callan
Chartered Institute of Legal Executives (CILEx)