Disputes are almost guaranteed in a commercial setting. Legal disputes can be complex, so it’s important to resolve them in your favour.
Commercial disputes occur when two or more parties involved in a commercial transaction disagree.
This guide provides an in-depth exploration of commercial dispute resolution in the UK. The content will cover the various methods for resolving disputes, the legal processes involved, and strategic advice for businesses and individuals.
We’ve written this guide for:
Business owners and managers facing commercial disputes
Entrepreneurs and startup founders
Individuals involved in business partnerships or transactions
Keep reading to be informed about your options and the importance of timely and professional legal assistance.
Contact us for efficient and cost-effective dispute resolution services.
What is commercial dispute resolution?
Commercial dispute resolution is a varied group of methods for resolving business-related conflicts.
It can take the shape of negotiation, mediation, arbitration and litigation to create an outcome or settlement that both parties are satisfied with.
Disputes can happen at any time however, they are common during economic downturns.
There are several other common scenarios that lead to commercial disputes including:
Non-payment
Breach of contract
Non-performance of contractual obligations
Quality disputes
Intellectual property rights issues
Delivery of goods and services
Types of commercial disputes
Let’s explore some of the most common types of commercial disputes.
Contractual disputes – occur when there are differing views on the terms, obligations and rights contained within a contract
Breach of contract – disputes happen when one party claims that the other has breached the agreed-on terms within a commercial contract
Misrepresentation – is a statement of fact made by a seller before a contract is signed. If this statement was relied on for entering into the contract and it isn’t true or wrong you may be able to claim compensation
Non-payment issues – can occur when there is disagreement about payment terms or amounts
Shareholder disputes and partnership disputes – may relate to disputes over business strategy or accusations of misconduct, profit sharing, management responsibilities, or breach of fiduciary duties. They can have a big impact on the operations of a business and be very complex to navigate
Intellectual property disputes – arise over the ownership, use, and infringement of rights related to IP. Disputes may involve trademarks, patents, or trade secrets
Employment disputes – between employees and employers can be resolved through ADR and tribunals
Issues related to senior executives – disputes may relate to accusations of wrongdoing
Restrictive covenants – can cause a dispute when one party believes that they are not reasonable
Professional negligence – businesses that experience losses because of incorrect advice or avoidable mistakes could make a compensation claim for professional negligence
Methods of commercial dispute resolution
As mentioned, there are two main methods of commercial dispute resolution, litigation and alternative dispute resolution (ADR).
Let’s start with ADR. It is always recommended for disputing parties to attempt ADR before resorting to a legal battle. This is because ADR has several benefits over litigation:
There are three different types of ADR.
Negotiation
Mediation
Arbitration
Negotiation
Negotiation is commonly the first step in resolving a dispute. It is a process where the parties involved in a dispute get together informally to try to reach an agreement on important issues. If necessary, they will try to reach a settlement without involving any third parties.
The process can be between the two parties separately or involve legal representatives.
In mediation, a neutral third party known as a mediator helps the disputing parties reach a voluntary agreement. A mediator facilitates face-to-face communication between both parties, helping them explore potential solutions and find areas of agreement.
Mediation is a non-binding process, which means both parties have no obligation to accept the mediator’s suggestions. If both parties agree they can choose to abandon the process and attempt another type of ADR. Alternatively, one or both parties may decide to pursue litigation.
Arbitration
Arbitration is similar to mediation. This process is overseen by a professional known as an arbitrator. However, it differs from mediation because an arbitrator makes a legally binding decision.
Parties involved in arbitration still have some say in the selection of the arbitrator and the arbitration process they’ll follow.
Litigation
If negotiation and mediation have been trialled and failed, and the parties don’t want to consider arbitration, then litigation is the next course.
Unlike arbitration, in litigation, the parties have no say in who the court appoints to oversee their case.
Litigation is a formal legal procedure that includes both sides stating their cases, providing evidence and witness statements, interim hearings, and a final trial.
The legal process in commercial disputes
There is a process that must be followed when litigation is used to resolve commercial disputes.
Pre-action considerations
Before legal action is officially launched both sides must engage in a pre-action protocol, this is set out in the Civil Procedure Rules. These rules explain what you must do if you are in dispute and considering court proceedings.
There are specific procedures you must follow. They are different depending on what sector you’re in.
The purpose of pre-action protocols include:
Encouraging each side to exchange information, so they understand each other’s position
To assist parties in agreeing on an early settlement
Ensuring court proceedings are managed efficiently when litigation goes ahead
It is essential to comply with the pre-action protocols relevant to your dispute. The court considers each party’s willingness to follow pre-action protocols.
If you fail to follow them, the court may:
Issuing proceedings
Let’s turn our attention to the steps involved in filing a claim in court.
To issue proceedings you will need to fill in a claim form and the particulars of your claim, these establish your arguments to the court. Together they can be referred to as pleadings or statements of case.
Defence and counterclaims
Defendants need to respond to the particulars of a claim quickly. After the service of the claimant’s statements of case, the recipient only has 14 days to submit a defence or file an acknowledgement.
The defendant may also choose to file a counterclaim if they have a claim they want to make against the claimant.
Case management and directions
In commercial litigation, you may have to attend a case management hearing, also known as a case management conference, early on. The purpose of this is to meet the judge along with the other party and discuss the case. It gives the court the chance to understand the issues involved in your commercial dispute.
Following case management, you and the other party involved in litigation will try to agree on case management directions.
You may discuss the following with the other party:
Whether you want to try ADR and abandon court proceedings
Disclose and inspect each other’s documents
Exchange witness statements
Exchange expert reports
Fixing or changing a trial date
Discussing the length of the trial
Trial and judgment
At a trial, a judge will preside over a dispute and decide how to resolve it. The judge’s decision is binding, and the process of litigation can be expensive and time-consuming.
Costs and funding in commercial dispute resolution
There are significant costs involved in commercial litigation, so businesses need to be prepared to foot a significant bill. This is where different funding options become important.
Legal costs and fee structures
It is important to understand the costs involved in different dispute resolution methods before going ahead.
Both sides will have to pay the costs of legal representation in the lead-up to the case and for the duration of the trial.
The losing party may also be ordered to pay the costs of the other party.
Funding options
Fortunately, there are many funding options available.
Conditional fee agreements (CFA) – often called ‘no win, no fee agreements’, under a CFA agreement you pay different amounts depending on the result of your case. If your case is successful, you will be liable for all fees and expenses, this can include any success fee, which covers the legal services you received. The success fee is calculated as a percentage of the base costs. If your case is unsuccessful, you won’t have to pay anything to your legal representative, however, you may have to pay the counsel’s fees
Damages-based agreements (DBA) – also known as a contingency fee agreement, the legal firm’s fees are paid if you obtained a financial benefit – such as compensation. This is calculated as a percentage of the financial benefit you receive
Third-party funding (TPF) – a funder with no connection to the dispute agrees to finance all or part of one party's legal costs. The funder receives a fee from the award you receive if you win. TPF can be used alongside other funding options, including CFAs and DBAs
Cost management and budgeting
Cost management and budgeting is the process the courts take to manage the steps taken in litigation and the costs both parties will incur.
Courts will inform the parties how much the case will cost them if they lose and how much they could recover in costs if they win.
Costs are agreed by both parties and the court. The court will make a Cost Management Order which allows courts to:
Record budgeted costs agreed by both parties
Record incurred costs incurred by both parties
Record elements of the budget which aren’t agreed on
Record comments about incurred costs
Costs cannot be budgeted by the court before the making of a CMO.
Risks of cost orders and adverse costs
If you lose a case and receive a costs order, you usually have only a certain period of time to pay it. It’s important not to ignore the order. If you ignore it you could risk the court seizing your assets or winding up your business.
You will also need to consider adverse costs. These are the legal fees and other costs that the losing party has to pay to the party that wins the case.
The amount of adverse costs varies depending on the merits of the claim and the circumstances of the case.
Choosing the right dispute resolution method
Which dispute resolution method you choose will depend on the circumstances of your case.
There are certain factors to consider when selecting a resolution method.
Businesses can tailor the ADR process to suit their needs, preferences and the complexity of the dispute.
You should consider whether you want a decision to be legally binding. If so, you can choose arbitration or litigation. If you prefer a resolution not to be legally binding you can choose mediation and negotiation.
You can also think about timeframes for resolution. ADR is much quicker than litigation, negotiation is probably the speediest form of resolution, with litigation being the slowest.
Cost is also an important consideration. Again, ADR is preferable if you want to save money on dispute resolution.
To avoid damaging business relationships when looking to resolve disputes, businesses should remain open and transparent in all communication. It’s also important to handle disputes efficiently to avoid business disruption.
How long does a commercial dispute resolution process typically take?
Negotiation and mediation can usually reach a solution in just a few hours or few rounds of discussion.
When cases are taken to court, they can take much longer to resolve. It can often take a few weeks to months for a court to reach a judgement. It may also take a few months for a case to reach the court after ADR has been attempted and abandoned.
Can I avoid going to court for a commercial dispute?
Yes, going to court is a last resort that can be avoided with ADR.
Why choose Lawhive for commercial dispute resolution
Our commercial dispute resolution solicitors are experts in this area of the law.
We have experts in different areas of commercial dispute resolution, including solicitors that specialise in your sector.
Using our combination of technology and legal expertise we can offer corporations a cost-effective solution.
Legal services for commercial dispute resolution
There are many different approaches to commercial dispute resolution. Which is best for your business will depend on your goals, the other party and the specific type of dispute you’re involved in.
Our solicitors can help prepare you for different forms of ADR or litigation.
Get in touch with us today to seek professional legal assistance from Lawhive. We offer a free case assessment for you to discuss your needs and learn the best option for your dispute.