The recent Bricks & Minifigs controversy has become one of the internet’s most widely discussed commercial disputes. Whilst this is a dispute in the US, there are takeaways for any business watching on. It is a useful reminder of how quickly a dispute can escalate and that trying to resolve matters outside of Court may be in the best interests of all involved. It can often be the case that when disputes become personal, or even come to the public’s attention, positions can harden, reputations can be affected and the costs of resolving the issue can increase significantly.
Why disputes escalate
Commercial disputes often start with a missed payment, a disagreement over contractual obligations, a breakdown in service, an issue with ownership of goods or a misunderstanding about what was agreed.
At the early stage, the parties may still be able to preserve their business relationship and resolve matters cost-effectively. However, if the issue is ignored or handled poorly, the dispute can quickly become more entrenched.
This is particularly true where there are strong emotions, reputational concerns or a sense that one party has not been heard. In those circumstances, correspondence can become more aggressive, allegations can escalate and both sides may begin preparing for litigation before exploring whether the matter can be resolved commercially.
Litigation is sometimes necessary. There are cases where urgent court action is required, particularly where assets need to be protected, injunctions are needed or one party refuses to engage. However, court proceedings can also be expensive, time-consuming and uncertain. Even a successful outcome can come at a significant financial and commercial cost.
That is why mediation or other forms of alternative dispute resolution are often valuable tools and why parties to any litigation are actively encouraged by the Courts to engage in settlement discussions. In fact, a party unreasonably refusing to engage can face cost sanctions later on by the Court.
What is mediation?
Mediation is a form of alternative dispute resolution in which an independent third party, the mediator, helps the parties explore whether a settlement can be reached.
The mediator does not act as a judge and does not impose a decision. Instead, their role is to facilitate discussion, test the strengths and weaknesses of each side’s position and help the parties identify practical options for resolution.
Mediation can take several forms. It may involve all parties meeting in the same room, or it may be conducted with each side in separate rooms, with the mediator moving between them. It can take place in person, remotely by video call or through a hybrid arrangement.
A commercial mediation will often include:
- preparation with each party and their legal advisers;
- an opening discussion to outline the key issues;
- private meetings between the mediator and each side;
- negotiation of possible settlement terms; and
- the recording of any agreement reached.
The process is usually confidential and conducted on a “without prejudice” basis. This means that discussions aimed at settlement cannot generally be referred to in court if the mediation does not result in an agreement.
The importance of communication
Poor communication can make a dispute harder to resolve.
Where correspondence becomes adversarial too early, the focus can shift from solving the problem to proving who is right. Each matter needs to be considered on its own facts as to the approach to any correspondence. It may be that more aggressive correspondence is necessary in some situations whereas in others this may not be the best approach to achieve the aim of the litigation. Speaking to your lawyer early is key before matters may become too entrenched and opportunities to resolve them at an early stage are missed.
Mediation gives the parties a structured opportunity to communicate. It allows each side to explain what they need, what they are concerned about and what they may be prepared to accept. It also allows legal advisers to help their clients consider the risks of continuing the dispute.
That outside perspective can be crucial. A solicitor can assess the legal merits of the case, but they can also help a client look at the commercial reality. Is the likely outcome worth the cost? Could a negotiated settlement protect cash flow? Would resolving the matter privately avoid reputational damage? Is there a solution that a court may not be able to order, but which works commercially for both sides?
Mediation requires cooperation and compromise
Mediation is not a magic solution. It requires preparation, a willingness to engage and, in most cases, a degree of compromise from both sides.
A party does not need to abandon its position or accept an unfair outcome. However, effective mediation does require each side to consider the dispute realistically. That means understanding the evidence, recognising litigation risk and being open to solutions that may not deliver everything originally sought.
In commercial disputes, a mediated settlement might involve:
- payment of an agreed sum;
- a repayment plan;
- the return of goods or property;
- revised contractual terms;
- an apology or agreed statement;
- a confidentiality clause;
- future trading arrangements; or
- a clean break between the parties.
The benefit is control. In court, the outcome is decided by a judge. In mediation, the parties retain ownership of the resolution.
Avoiding costly mistakes
When a dispute becomes contentious, it can be tempting to act quickly and forcefully. However, decisions made in the heat of the moment can create further problems.
Public comments, aggressive correspondence, which may not be appropriate for the facts of a particular matter, refusal to engage, failure to preserve evidence or taking steps without legal advice can all weaken a party’s position. They may also increase costs and make settlement more difficult.
Working with an experienced dispute resolution team at an early stage can help you avoid these mistakes. Your legal advisers can review the contractual position, assess the evidence, advise on strategy and consider whether mediation or another form of alternative dispute resolution is appropriate.
The earlier this advice is taken, the more options are usually available.
How DTM Legal can help
At DTM Legal, our Dispute Resolution team works with businesses and individuals to resolve commercial disputes efficiently and strategically.
We can advise on the strength of your position, correspond with the other party, prepare you for mediation and represent your interests throughout the negotiation process. Where litigation is unavoidable, we can also guide you through the court process and help protect your commercial interests.
If you are facing a commercial dispute, early advice can make a significant difference. Contact our team by calling 0151 321 0000 / 01244 354 800 or email dispute@dtmlegal.com.
