Alternatives to litigation: The impact of COVID-19 on litigation

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13 August, 2020

Stephen McArdle
Partner, Head of Commercial Litigation

Alternatives to litigation: The impact of COVID-19 on litigation

There have been a significant number of changes happening within the legal sector as a result of the COVID-19 pandemic and the future has never been so uncertain. This pandemic has caused even greater uncertainty to the conduct of litigation with many hearings being postponed, vacated or managed virtually. Access to justice is more difficult in the current climate and relying on judicial input to resolve a dispute may now take longer.

Added to this, businesses have never been under more pressure to improve cashflow and ensure parties that they are dealing with are observing their contractual obligations. Many businesses are turning to litigation as a way to recall old debts. However, litigation may not always be the best option at this time, and businesses may want to consider alternative ways to settle their disputes.

Here are our top-tips to consider what alternatives there are to resolving disputes other than through litigation.

1 - Contractual Disputes

As a result of the financial strain now placed on businesses, many parties are now struggling to meet obligations imposed on them by contract. This has led to a spike in contractual disputes surrounding force majeure events and frustration.

Force majeure and frustration are remedies which can be used by parties to vary, extend performance deadlines or even prematurely terminate a contract. These remedies are only used in extreme and/or prescribed circumstances, where contractual performance becomes increasingly difficult or impossible due to incidents outside of the control of the parties to the contract.

Parties are increasingly seeking to rely on force majeure clauses and frustration to excuse non-performance of their obligations under a contract.

If you think Covid-19 has affected your ability to perform your obligations under a contract, get legal advice without delay to assess what options are available both within pre-existing contract terms or otherwise.

Remember: to be able to rely on a force majeure provision, you must have a specific clause in your contract dealing with this. Whereas the doctrine of frustration is a common law provision which does not rely on the existence of a particular contractual clause.

2 - Effect on the Courts

Due to the lockdown and various staff being furloughed as businesses try to save on their financial outgoings, businesses are not able to run at full capacity. The same, of course, is true of the court system.

As staffing levels are reduced and many people are working from home, the courts have taken to adjourning trials and pushing back key deadlines in the litigation process. In addition to this, the lack of capacity within the court system means that key documents may now take longer to process, including orders and trial dates.

This means that parties are unable to enforce judgments or obtain interim relief for non-compliance due to the pandemic as quickly as was the case previously.

Parties who could afford to litigate at the outset of the claim are now finding it increasingly difficult to justify applying reduced budgets to litigation and are instead looking to resolve their disputes as quickly as possible to save on the costs associated with litigation.

The need to focus on alternatives to litigation and other dispute resolution methods is critical at this time.

3 - Alternative Dispute Resolution

In contrast to litigation, ADR aims to resolve matters quickly and efficiently, at a fraction of the cost. The most commonly used forms of ADR are as follows:

1. Mediation - Mediation is often more productive than litigation as it can help parties to understand each other's situation and leaves parties less aggravated at each other.

Mediation is a form of assisted settlement which takes place on a given day, where an independent third party (the mediator) acts as an intermediary between the parties meaning that each party can outline their case and reach a settlement without the need for direct communication.

Mediation is a highly effective alternative to litigation and can even help to maintain a commercial relationship following the dispute.

Face-to-face interaction is not necessary in order to conduct a mediation, and the mediator can even conduct the mediation via telephone or video conference.

2. Arbitration - Arbitration is a more formal process than mediation and can help the parties to obtain a binding decision to their dispute.

It is a contract based process which sets out a mechanism for arbitration in the event of a dispute.

An arbitrator is impartial adjudicator who has the ability to preside over a dispute and even make an award of damages.

Arbitration proceedings are flexible, and can even be conducted on paper, limiting the need for face-to-face, video or telephone hearings.

3. Expert determination - Expert determination is similar to arbitration but is not always a binding resolution to the dispute.

An expert is usually instructed by both parties to the dispute to reach a conclusion on a matter which involves highly technical evidence and is contingent on the view of an expert. The parties can agree to accept the decision of the expert and should one party default then that party can be sued for breach of contract.

With the need for social distancing, expert determination can take place by video or by telephone and can bring a quick resolution to a highly technical dispute, such as a dispute requiring a valuation or containing highly technical evidence.

In such desperate times, the court is perhaps not always the best forum to resolve disputes. Therefore, parties should be encouraged to look at alternative ways which will help to bring a conclusion to their claims in a quick and cost-effective manner. This is where ADR is important.

For more information contact Stephen McArdle in our Business Dispute Resolution department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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