Businesses more than ever today need to be able to make quick, cost effective and pragmatic decisions. Legal rights and wrongs under contracts written with suppliers, customers, business partners are important BUT if you/they can’t pay or won’t or either party fears they can’t perform or can’t make milestones, legal rights are somewhat academic today. In 1 or 2 years’ time when your case gets to court you may be right but your business may not survive the delay or the legal fees and you may be chasing an opponent already insolvent.
Judges urge parties to Mediate. So today is the day to act. Have the difficult discussions in a “safe” environment with the assistance of a trained business neutral. Be able to suggest and agree with your business partners a plan that may be a compromise for you both but which gives both your businesses a chance to survive and possibly thrive post lockdown. Mediation isn’t just for existing disputes. It is an opportunity at a fixed fee to have just those essential business discussions now and without making any legal concessions or commitments until you reach a deal you both can live with.
As a business owner, it’s extremely important to familiarize yourself with dispute resolution and the processes you need to take depending on the severity of a case. Whether this is for your own protection, for example if you are offered poor advice or a service, or if you are facing a legal case with one of your clients. For the purpose of this article, we will explore the following example and apply it to the mediation, arbitration and litigation process:
Dispute resolution can be a long and meticulous process, however in order to get the right outcome, it’s important to follow protocol. Many contracts, especially in the design and construction industry have a clause, which states that before escalating to arbitration or litigation, you must first go through the mediation process. In this article, we will break down the three steps of dispute resolution and apply this to the aforementioned scenario.
Mediation is an informal and confidential way for parties to resolve their disputes with the assistance of a third party who is entirely neutral to the party. For example a dispute resolution mediator who has no previous affiliation with either sides. Choosing a neutral mediator is extremely important as this avoids bias from coming into place.
The mediator doesn’t decide who is right or wrong but instead is trained to help parties to discuss their differences and helps the individual parties to find a resolution on their own. If there is no resolution from the mediation session, then you can seek recourse through arbitration or litigation.
In many instances, an issue can be resolved during the mediation process, as many companies will want to maintain a good reputation. By failing to agree to a deal or compromise, the defendants could in fact damage their own business reputation and lose customers as a result of this.
If you’ve gone through mediation and have failed to come to a resolution, then arbitration is often the next step. This is a settlement process that is exercised outside of the court in order to settle a dispute. Typically, arbitration is a voluntary process but in some instances this is a legal requirement.
The arbitrator is essentially the decision maker in this ruling and if both parties agree to be bound by the arbitrator’s decision, then this becomes a binding arbitration. Unlike mediation, arbitration and litigation are both binding forms of dispute resolution where evidence is provided to either the arbitrator or the judge to make a ruling.
The arbitration process is favored by those who work in specialist industries, such as construction,financial services, insurance and business owners. This is because they are able to select a panel of arbitrators who are knowledgeable of their industry, which can greatly work in their favor. In some instances, a dispute resolution is too complex for arbitration, in which instance, individuals opt for litigation.
Litigation is reserved for more severe and complex dispute resolution cases, in which a judge or jury decides the outcome. As a business owner and plaintiff, it’s your responsibility to prove that a case is valid. So, for example, if you have paid for building work to be completed on your office, but this has been left incomplete and to an extremely poor standard, then you must bring evidence to support your claims.
Although litigation and arbitration cases are similar in many ways, it’s important to note that if you’re not satisfied with the outcome of a litigation case, then you can appeal the decision, but the decision of an arbitrator cannot.
As the world continues on its third month of social distancing and travel restrictions, COVID-19-related lawsuits have begun to spread, with parties variously portraying the pandemic to suit their respective positions, dissecting the often clumsy prose of force majeure clauses or, absence of such provisions, dusting off common law doctrines of impossibility, impracticability and frustration of purpose to excuse contractual performance.
Businesses are going to be claiming Force Majeure but the truth is that a Force Majeure certificate in itself is not sufficient as it may be contested in Court as to whether or not it was sufficient reason for contract failure. While judicial notice may be given to the pandemic, whether or not it affected your business or your inability to meet the terms of the contract is a different issue entirely and if the claim of COVID-19 is contested you will have to prove its impact on your ability to perform the contract terms.
The COVID-19 ADR INITIATIVE, ”CADRI” will be a most welcome development to basically assist the small and medium enterprises cadre of the economy who maybe faced with challenges and disputes arising from or in connection with the lockdown and interruption of their operations due to the COVID -19 pandemic. The provision of assistance in choosing and accessing appropriate, timeous and enforceable resolution of such disputes will in no small measure help to support economical and financial well-being as we restart our activities after the lifting of lockdowns put in place in accordance with the WHO advisory to all countries. It is be most pragmatic to explore this initiative should the need arise for any business owner.
Adeyemi Agbelusi ASCMA, FICMC, FCIArb