It is a common view that lawyers should only be instructed in the context of a commercial dispute when the parties’ positions are so divergent and entrenched that Court proceedings are inevitable.

This view is likely held because, historically, the common way of resolving commercial disputes was to issue Court proceedings however, this position has changed dramatically in recent years.

Effective Dispute Resolution lawyers, if engaged at an early stage when the cracks between parties are beginning to appear, can actually enable businesses to quickly and successfully navigate disputes so as to avoid Court proceedings which can be expensive, protracted and an unwanted distraction.

Effective Dispute Resolution lawyers will not simply spearhead Court proceedings, rather they will provide advisory services, actively listening to clients to discover what their commercial objectives are, assessing the strengths and weaknesses of their position and from that devise an effective strategy to assist clients in navigating the dispute at an early stage. They will actively work to try to avoid a party having to resort to issuing Court proceedings.

Dispute Resolutions Lawyers may deploy one (or a combination) of the following alternative dispute resolution mechanisms (referred to collectively as “ADR”):

• Negotiation – the parties negotiate settlement terms on a without prejudice basis (often confidential).
• Mediation – a flexible and confidential process whereby a neutral third party, acting as the mediator, actively helps the parties work towards a negotiated settlement of their dispute, with parties retaining control of the decision on whether or not to settle and on what terms. This is one of the most used forms of ADR in Northern Ireland.
• Arbitration – a private process in which an independent arbitrator makes an award, acting in a judicial fashion, to finalise the dispute. The outcome (the award) is final and binding on the parties. The arbitrator focuses on the issues (fact or law) presented by the parties.
• Adjudication – a speedy, private and relatively cost effective procedure which has been used for dispute resolution in the construction industry for decades. An adjudicator usually provides a decision on disputes as they arise during the course of a contract (for example determining interim payment applications). Typically, the decision of an adjudicator has interim binding effect; that is, the decision is binding pending agreement of the parties altering its effect or a reference of a dispute to arbitration or litigation for final determination.
• Early neutral evaluation (ENE) – a relatively low cost and fast procedure under which the parties appoint an independent person to provide a non-binding opinion on the merits which evaluates the facts, evidence and law relating to a particular issue, or the whole case. The rationale is that once armed with the opinion, the parties will be able to negotiate an outcome, with or without the assistance of a third party. Alternatively, the parties are free to settle the dispute based on the evaluation provided or to agree in advance that they will do so. In the latter case, the ENE will become a binding form of ADR.

It is recognised that in some cases Court proceedings may be necessary but litigation should not be the first port of call.

Even in circumstances where Court proceedings are issued, the Courts in Northern Ireland are encouraging parties to engage in ADR to such an extent that these processes are no longer considered so alternative.

Upon a review of the recent case law in this area, it is clear that the Courts are not only encouraging but are strongly encouraging the parties to engage in mediation and if they fail to do so, there will be potentially draconian cost consequences.

In the case of Wales v. CBRE & Aviva [2020] EWHC 1050 (Comm) the Court imposed costs sanctions for a party unreasonably refusing to participate in mediation.  As appears from the judgment of the Chancery Court in Northern Ireland in Clarity Telecom Limited v. Megahey & Barclay Telecom Limited [2022] Ch (Scoffield J), when considering an unreasonable refusal to participate in mediation without the imposition of certain preconditions, the Court observed:

“it is now beyond dispute that a party’s attitude to engagement in alternative dispute resolution mechanisms in commercial litigation is a factor which may be relevant to costs determinations and may even result in costs penalties”

If you are experiencing or anticipating a dispute with another party, please contact the Commercial Dispute Resolution Team at Millar McCall Wylie, who will be able to provide you with strategic advice on the options available.