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Alternatives to Litigation During the Covid-19 Pandemic?

Thursday April 23, 2020

Businesses could not have anticipated the current commercial pressures arising because of the coronavirus outbreak. Inevitably, this has led (or will lead) to unfulfilled obligations in commercial contracts, without a clear contractual solution for how to proceed. The non-breaching party could bring a claim for breach of contract through the Courts but at this time this may not be the most effective way forward. Particularly where the breach is clearly a temporary one and the relationship between the parties is (everyone hopes) expected to return to normal once the global emergency is over.

 

There are some general shortcomings of litigation (it can be costly and time consuming). Business should also consider the following factors which hare pertinent right now:

• No interim relief: You are unlikely to be able to get interim relief from the Court, especially where the other party is unable to perform its obligations. If the breach is also having an immediate impact on cash-flow, which it likely will, filing a claim will not relieve this pressure.
• Uncertainty as to the final outcome: Arguments relating to the doctrine of frustration or interpretation of Force Majeure clauses can be complex and are highly fact dependent. How the Court will ultimately deal with those arguments in each case is therefore somewhat uncertain.
• Backlog: The UK Courts have quickly sought to ensure that cases can be dealt with remotely (through video-link hearings where possible), there is and will be a backlog resulting from adjourned hearings and other limitations on the Courts at this time. Further, the predicted rise in claims due to COVID-19 will place further strain on the Court system.
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What therefore can be done to try and avoid these difficulties? We would advise that businesses consider and assess whether commercial discussions could lead to an effective solution by agreement. If the parties cannot come to an agreement on their own, alternative resolution mechanisms should be considered.

 

There are many possible alternative resolution mechanisms

 

Mediation

A negotiation process where an independent third party (usually an experienced Solicitor or Barrister) acts as a “mediator”.

 

The mediator does not decide. Rather they assist parties to identify issues, assess their options and (hopefully) negotiate an agreement to resolve the dispute.

 

Mediation can be particularly useful for those seeking to find an interim solution, with a view to preserving the longer-term commercial relationship.

 

In normal circumstances, mediation is a face to face undertaking, however, video-conferencing can easily be utilised at this time, and successfully so.

Early Neutral Evaluation (“ENE”)

An independent evaluator (usually an expert within the relevant business sector, former Judge or Barrister) is appointed to give the parties an assessment of the merits of their case and express a view on what the outcome would be if the matter proceeded to Court.

 

The evaluator does not resolve the dispute, but the intention is that the parties use the final evaluation as a basis for negotiation following the ENE.

 

The ENE process is usually a paper-based exercise, so would be suitable in the present lockdown measures.

 

Expert determination

Expert determination is a binding dispute resolution process that can offer a relatively quick means of determining disputes of a specialist or technical nature (where legal and factual issues are limited).

 

Commonly used in either: (1) where a form of valuation is required; or (2) where an expert scientific or professional opinion is central to the dispute.

 

Depending on the preference of the parties, the determination can be made on solely upon a review of the papers or there could be an oral hearing (undertaken in the present environment via a video-conference).

 

Summary

In the present commercial environment there can be several disadvantages to proceeding down the path of litigation. If you are finding yourself involved with, or likely to be involved with a coronavirus related dispute, we would strongly recommend seeking legal advice as to whether another resolution mechanism would be more effective at this time; particularly where the parties see the current position as temporary and wish to preserve the commercial relationship.

 

If, however there is no relationship to maintain (for whatever reason), businesses may wish to adopt the strategy of pursuing one of the above alternative resolutions in conjunction with litigation through the Courts.

 

Email disputeresolution@afglaw.co.uk to discuss your own matter in confidence.