If a dispute cannot be resolved by direct negotiation, a common assumption is that court action is the only, or even the obvious, option for the parties involved. While there is certainly a time and a place for court action, another method of resolution may be more likely to result in a compromise, or a more suitable final decision.
This article provides an overview of the most common methods of dispute resolution, the circumstances under which they might be appropriate, and a comparison of their relevant features.
Unlike court actions, the alternative dispute resolution methods explored below are voluntary, in that parties must mutually agree to resolve (or attempt to resolve) their dispute by that method. However, it is quite common for a commercial contract to mandate that parties must refer any dispute to an alternative forum. In this regard, they can be considered mandatory.
Arbitration
Arbitration is often considered ‘private court’. The matter is referred to a privately appointed judge or decision maker. The arbitrator is responsible for deciding on how the case should progress. Their decision is binding. In general, their decision can only be appealed where they have derogated from the terms of their instruction. A major benefit of arbitration is that the procedure (and decision, should the parties so choose) can be confidential. The wide discretion given to the arbitrator and resulting potential for speedy resolution means that arbitration is popular for commercial disputes. There is also scope for parties to select a decision maker with expertise in the relevant industry or technology concerned. However, due to the lack of formality (compared with a court action) and increased flexibility in remedies which can be ordered, it can also be appropriate for certain family actions. Under the New York Convention, formal arbitral awards can be enforced in all signatory countries, including the US.
Mediation
Mediation can be a stand-alone procedure, or may be used as part of another dispute resolution procedure. The parties will appoint an independent mediator as a go-between, in an attempt to find a resolution. The mediation process is usually confidential and on a without prejudice basis, allowing parties to speak (relatively) freely. They can negotiate without fear of any offers made being weaponised as concessions on the substance of the dispute. The skilled mediator will often seek to structure the discussion in such a way as to allow each party to have their say and put the best- and worst-case outcomes for each into perspective. The mediator cannot usually make a decision, though it is possible for parties to agree that the mediator issue a non-binding opinion where settlement cannot be achieved. A mediation can be fixed within a number of weeks or even days.
Expert determination
Similar to arbitration, the parties will refer the dispute to a third party. In this case, the decision maker is an expert in a particular field. Accordingly, this procedure is usually reserved for disputes which are technical in nature. Like an arbitrator, the expert’s decision will be binding. The expert is also given wide discretion to fix procedure. Unlike arbitration and court action which (in the UK at least) tend to be adversarial in nature, the approach of the expert can often be more inquisitorial. That is, the expert will seek to gather their own evidence rather than base their decision solely on the respective submissions of the parties.
| ARBITRATION | MEDIATION | EXPERT DETERMINATION | COURT ACTION | |
| Decision maker | The parties appoint their own ‘arbitrator’ – a private judge, usually but not always an experienced solicitor, advocate or retired judge. | The parties appoint their own ‘mediator’. | A suitably qualified expert, jointly agreed by the parties or appointed by an external body. | A judge or sheriff. |
| Degree of involvement of lawyers | The procedure and preparation are very similar to court action and so is usually conducted by solicitors and possibly counsel. | Clients have an opportunity to take more of a front seat in discussions. Solicitors are generally present and still involved to a large degree. | Compliance with procedure and preparation usually undertaken mainly by solicitors, but parties may appoint their own independent expert. | Compliance with procedure and preparation usually managed and directed with the advice of solicitors. Counsel may be involved with cases of significant complexity. |
| Publicity | The procedure takes place in private, and the details tend to remain confidential. | The procedure takes place in private. Discussions are confidential and usually on a ‘without prejudice’ basis. | The procedure often takes place in private, but, where the matter has been referred to expert determination by the court, the final order may be public. | The court hearings and documents lodged as part of the action are all public. |
| Procedure | More flexible than the ‘conveyor belt’ of a court action. The arbitrator should fix procedure to try and get to a decision or settlement as quickly as possible. | The mediation will often take the form of a day-long meeting between the parties, where the mediator will try and facilitate settlement discussions. | Fixed by the expert. Will usually involve submissions made on behalf of each party, in some cases by their own independent experts. The expert is also likely to order their own investigations. | Fixed by the court, according to the court rules. This would be a commercial action in the court, which does have more flexible procedure than a standard court action. Click here to read our flowchart of the Court of Session Commercial procedure. |
| Power to bind parties | Arbitrator can issue a final and binding decision, which can only be appealed in the courts on very limited grounds. The decision can be enforced via the courts if it is not complied with. | The mediator does not usually make any decision or give any view on the merits of the case (though they can be asked to issue their opinion if settlement can’t be reached). However, the objective of the process is that parties will enter a binding settlement agreement, which can be enforced in the courts. | The expert is appointed by terms of a contract agreed between the parties. Their decision is usually final and binding. As such, any review of their decision would be in relation to a perceived breach of contract. There is limited scope for appeal. | The court’s decision is binding, subject to appeal to a superior court. |
| Cost and length of procedure | Arbitration can be more efficient and cost effective than court action. However, this will depend on the conduct of the arbitrator and the parties. The requirement to pay the arbitrator often means that this procedure can be just as expensive as a court action. If the arbitrator is not carefully selected, there is a risk of delay. Likewise, a party seeking to obstruct the process may find this easier with a more passive arbitrator. | Cost effective if a deal is reached. The parties will usually split the mediator’s fees. Each party bears the cost of their own advisors. | This can be cost effective, provided the terms of the agreement for appointment of the expert is sufficient clear and robust in its terms. Like arbitration, the identity of the expert will have a significant influence on the progression and cost of proceedings. The parties will tend to split the costs of the expert, at least until any other award is made. There is often a “loser pays” agreement made at instruction. | For a standard contract case in the Commercial Court of the Court of Session, for example, one might expect a decision in an action within 12-18 months of it being raised. Costs will depend on jurisdiction, very roughly the costs of litigating in Scotland are half of those in England & Wales. |
| Recoverability of Expenses | Arbitrator has power to grant an order for expenses. | There is always an option to try and claim expenses from other side as part of any settlement. | The expert may grant expenses if they are granted the power to do so under contract. | Court grants expenses to the successful party – usually around 25-50% of actual legal spend. |
Our market leading Disputes Group brings together experts in contentious matters from the firm’s commercial litigation, health and safety, corporate crime, employment and immigration, construction and projects, planning and environment, and family law teams. If you have any queries or require support for any matter, please contact our team.
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- One of the largest disputes teams in Scotland
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