Dispute resolution - the view from in-house counsel

At the recent Dispute Resolution Forum I had the honour of chairing a panel on the question of why in-house counsel use arbitration or mediation rather than litigation to resolve their disputes. Despite a wide range of industries represented around our virtual table it soon became clear that there’s a consensus on this - which I named the 4 Cs (well, I named three at the time and have since realised there’s a fourth!)

Control

The control of risk is a significant consideration in deciding not to litigate; the risk of disproportionate costs of litigation, of unexpected and unknown outcomes and of having disputes sitting as large liabilities (or assets) on a balance sheet. Mediation or arbitration can control those risks in a way that litigation doesn’t.

Control over the process, including confidentiality and format, was seen as further reason to use arbitration or mediation. The ability to narrow the focus of the dispute - by reducing the number of experts or the amount of information being disclosed - were examples given. In addition, the ability to involve key individuals from the business in the process, in a way that isn’t as easy with litigation, was cited as an advantage – after all, they’re often the people who understand how the dispute arose and feel empowered to be part of the solution.

Costs

Unsurprisingly, the panel were united on this one. As arbitration can be as costly as litigation, the preferred mechanism for controlling costs was mediation. As Capita’s Emma Emery put it, the major projects that they’re involved in are often budgeted and costed to the penny and therefore questions are raised by internal stakeholders who struggle to understand why litigation – which is probably not anywhere near the size of those kind of projects - can’t be costed definitively.

Simon Bourn from PRS Music explained that they were looking at innovative ways of controlling costs - for example, fixed-fee arrangements or even cost-sharing arrangements with external counsel.

Commerciality

Going to litigation or arbitration in situations where contractual relations are built on long-standing relationships can be a nuclear option. Instead, mediation allows relationships to be mended, refigured or adjusted to suit the parties. It also allows parties to bring their commercial needs rather than the legal rights or wrongs to the resolution of the dispute.

Where external counsel are involved - and not everyone used external counsel every time - the panellists looked to them to help come up with commercial solutions and not just formal legal advice. The longer a dispute goes on the more money it costs the business in terms of money and relationships and it was felt that the best external counsel recognise this.

Creativity

This is about designing a process to suit the types of disputes faced by your organisation. PRS Music has a number of multi-territorial licensing disputes that can’t be resolved by the UK Copyright Tribunal so Simon has turned away from litigation and has instead devised a pre-pack arbitration process.

Even more so, mediation allows for creative solutions that neither a court nor arbitral tribunal could award. That might be, for example, the amendment of a contract to allow a future relationship or the satisfaction of needs and wants through something other than a financial settlement.

The whole discussion can be viewed below: