MANAGING THE COST OF A BUSINESS DISPUTE
Parties in dispute, have several options available. From litigation to alternative dispute resolution (ADR), parties must determine the best course of action, taking into consideration factors such as business interruption, maintaining the relationship, enforceability challenges and, crucially, cost. Dispute resolution can be a complex and time-consuming process, with high costs arising from discovery, fees and other expenses.
Choosing a process to settle the dispute is one of the most important decisions parties will make. The method will influence the duration and financial cost of a dispute. Historically, litigation was the ‘go-to’ form of dispute resolution, however the growing popularity of arbitration and other forms of ADR has changed the paradigm. The direct costs of commercial claims resolved through litigation, for example, are estimated at approximately $870bn globally, according to the US Chamber of Commerce, whereas arbitration is considered a cost effective alternative. The flexibility and enforceability offered by arbitration are further advantages.
Certainly, the choice of dispute resolution method has a bearing on cost management. Early efforts at ADR can help resolve business disputes quickly and efficiently. “There is a caveat to this general rule, however, in that the parties must have enough information to make an informed decision about settlement,” points out Jonathan Sablone, a partner at DLA Piper. “If the parties could have simply resolved the dispute among themselves, they would have done it prior to initiating dispute resolution. Having some limited discovery and arguments from the parties can often help the litigants assess the strengths of their respective claims and defences. Armed with this information, it is more likely that early efforts at mediation or settlement will be fruitful.”
Jan-Mar 2020 issue
Richard Summerfield