Commercial dispute resolution
Guide to business dispute resolution options including mediation, arbitration, adjudication and litigation and the advantages and disadvantages of each.
A business dispute happens when two or more enterprises disagree about the supply of goods or services. These disputes may relate to quality, conformance, performance, delay or pricing. There are different ways to solve these disputes.
This guide explains the most common methods of resolving a commercial dispute in Northern Ireland including mediation, arbitration, adjudication and, lastly, litigation.
Going to court is usually the final resort when all other methods fail. The best way to solve a dispute depends on factors like time, privacy, cost, and how the decision will be enforced.
Commercial dispute resolution: mediation
Mediation as an option for resolving commercial disputes, the benefits of confidentiality and the mediation process in Northern Ireland.
Mediation is a voluntary and confidential dispute resolution method. Those involved voluntarily agree to enter mediation in an attempt to resolve the dispute. Mediation is intended to be quicker and less expensive than a court process. It should allow for a more dynamic resolution than a court may be able to offer.
A neutral third party (the mediator) will facilitate the parties coming to an agreement themselves. It is not the mediator's role to make a judgement on the arguments put forward.
Mediation is suitable for a wide range of commercial disputes, including small claims or cost disputes, high value claims and boardroom conflicts.
Confidentiality
Mediation usually requires the parties to treat all discussions as confidential. This is because nothing discussed can be used in any later court proceedings. This makes mediation especially appealing for businesses looking to avoid the publicity of a court case. Courts in Northern Ireland often encourage mediation and can adjourn proceedings to allow mediation to take place.
The mediation process
The parties will attend and participate in the mediation, and their lawyers may accompany them. Usually, both parties will present their dispute to each other. Then, they will meet privately with the mediator to discuss it. After that, they will return to discuss the dispute further. This process can be repeated several times until a resolution is found.
The confidentiality of the process allows the parties to better understand the other party's position. It also facilitates open discussion with a view to finding a resolution that prevents further damage to the relationship.
The parties may decide to document the resolution in a binding written agreement.
Mediation in Northern Ireland
Some of the mediation services available in Northern Ireland are:
Commercial dispute resolution: arbitration
Arbitration as an option for resolving commercial disputes, organising an arbitration, setting rules and choosing and arbitrator.
Arbitration is a way to resolve disputes. The parties agree to let an impartial, independent third party (the arbitrator) decide the outcome based on the issues presented. The arbitrator's decision is final and binding.
Organising an arbitration
The disputing parties can choose where to hold the arbitration. They can also choose the arbitration panel's members and the procedure to follow. Arbitrations are normally confidential, and this may be attractive to parties wishing to avoid the negative publicity that open court proceedings might risk.
When the parties decide to use arbitration, the rules of arbitration will also be agreed. Those rules will include:
- the conduct of the arbitration, including the documents to be shared between the parties
- the procedure for the appointment of an arbitrator
- the procedure for the arbitration itself (including statements of claim and defence)
- the time limits
Arbitration is suitable for disputes across different countries because the decisions are internationally binding.
Choosing an arbitrator
Arbitration is a good option when the dispute arises from technical or operational issues because the parties will be able to choose arbitrators with expertise in that particular field.
No legal qualifications are needed to be an arbitrator, so the parties could choose a member of a regulated professional body (for example, a chartered accountant or a chartered surveyor).
Further information
The provides further information.
Commercial dispute resolution: adjudication
Adjudication is a popular method of commercial dispute resolution, often used in the construction industry.
The courts actively encourage adjudication, as they do with other forms of alternative dispute resolution. It is commonly used in the construction industry.
Parties to construction contracts have rights under the law to refer a dispute arising under a construction contract to adjudication. Neither party can exclude the right to refer a dispute, under certain contracts, to adjudication.
A qualified adjudicator will hear the case and decide within 28 days. That decision is binding temporarily, but either party may then refer the dispute for determination by arbitration or litigation.
To enforce an adjudicator's judgment, the claimant must apply to the High Court to recover and enforce the award. The adjudicator has a duty to act impartially, adopt fair procedures and give proper and balanced consideration to both parties. The only grounds available to contest the High Court's enforcement of an adjudicator's decision will be to challenge the jurisdiction of the adjudicator or the manner in which the adjudication was conducted.
The parties will respectively pay their own costs, and the adjudicator will decide which party should pay its fees and expenses.
The provides further information.
Commercial dispute resolution: litigation
When alternative dispute resolution methods fail, court-based litigation can be used to come to a decision.
Litigation is a formal court-based resolution process where the claimant must prove, with over 50 per cent probability, that its version of events is true. The process of litigation is governed by a set of rules and procedures which parties must follow.
Public information
Generally, all information from the litigation process, including at trial, becomes public.. Unless restricted, the public and media can attend and report hearings. The judgment will be a matter of public record which anyone may access.
Resorting to litigation
More than 90 per cent of litigation cases settle before reaching court. The pre-action protocol for commercial actions requires parties to meet and consider whether other means of dispute resolution are possible. This is to encourage the resolution of issues as quickly as possible. However, courts cannot compel the parties to settle by other means.
Litigation process
In a breach of contract case, most claims must be issued within six years of the date of the event giving rise to the claim. An action for defamation must begin within one year, and in cases involving deeds or recovery of land, the action must begin within 12 years.
Judges make decisions, and depending on the circumstances, may be appealed to a higher court by either party.
Litigation will usually involve both a solicitor (who typically prepares the case) and a barrister (who presents the case before the court). The case will be decided on the law and on the strength of the arguments presented. It may involve the production of evidence and the calling of relevant witnesses. The party being sued (the defendant) may carry insurance against certain risks, so an insurer may be involved, and may have sole authority to settle a case.
In terms of remedy, the successful claimant can expect to be put back in the position that it would have been in had the event giving rise to the claim not occurred. For example, a judge will normally award compensatory damages, however, if appropriate, the judge may require or prohibit certain action on the part of the other party.
Litigation in Northern Ireland
The courts in Northern Ireland operate a system which is known as 'The Commercial List'. Commercial cases are transferred into the list and benefit from being actively managed by the Commercial Judge. The aim of this system is to process commercial cases through the courts of Northern Ireland more quickly than non-commercial cases.
Further information about the court process can be found at:
Commercial dispute resolution: common contractual clauses
Examples of common contractual clauses that may be included between businesses.
Parties are usually free to vary the terms of a contract during its term and can jointly decide on a different method of dispute resolution. However, by the time decisions are made, the relationship may already be damaged. Meaningful communication may not be possible. It is important to consider what laws and procedures should apply when drafting a contract.
Factors such as time, relationships, enforceability, sensitivity and cost must all be considered in deciding which dispute resolution method to use. Parties may choose one or more dispute resolution methods in a hierarchy. For example, the parties will submit to mediation before arbitration or litigation.
Businesses that sell to many customers may require that arbitration is used for contractual disputes. This is to ensure that the grounds of dispute, and the terms of the settlement, are kept confidential.
A business may prefer to mediate a contractual dispute with a client to seek a resolution to a particular dispute without damaging the overall relationship with that client.
The contract will have a detailed dispute resolution clause. It will usually include:
- Dispute resolution method and hierarchy - if not resolved directly between the parties, then the dispute resolution methods to be followed and the hierarchy between those dispute resolution methods, if applicable - for example, mediation followed by arbitration or litigation.
- Governing law (whether housed in the same or separate clause) - the law governing the contract - for example, the laws of Northern Ireland or of England and Wales (based on convenience, a litigant will typically want home law and courts apply to a dispute).
- Procedure - the procedure for invoking any one or more of the chosen dispute resolution methods - for example, by written notice.
- Rules - the rules governing any one or more of the chosen dispute resolution methods - for example, one mediator, sitting in Belfast and following the rules and procedures of the mediation service offered by Mediators NI Dispute Resolution Service.
- Parties may also specify which language to use in proceedings.
Contract clause examples
Below are some examples of clauses that companies can use in commercial contracts to determine the dispute resolution method:
- Mediation - If the parties do not resolve the dispute directly, they will follow the dispute resolution methods and the hierarchy between those methods, if applicable. For example, they may use mediation followed by arbitration or litigation.
- Arbitration - This contract is governed by the laws of Northern Ireland. Arbitration will settle any dispute arising from it, following the UNCITRAL Arbitration Rules. There shall be three arbitrators. The place of the arbitration will be in Belfast, Northern Ireland, and the language to be used in the arbitration proceedings shall be English.
- Adjudication - If a dispute or difference arises under this contract which either party wishes to refer to adjudication, the agreed adjudication scheme shall apply, under which the adjudicator shall be an individual with appropriate expertise and experience in the specialist area or discipline relevant to the instruction or issue in dispute.
- Litigation (Northern Ireland laws and courts) - This contract is governed by and shall be construed following the laws of Northern Ireland and any litigation arising from it will be conducted under the exclusive jurisdiction of the courts of Northern Ireland.