Disputes are inevitable for most businesses, but a well thought out approach to managing disputes not only reduces risks but also ensures that your business can continue to grow even in challenging circumstances. One of the most important tasks you will need to carry out in your first year as general counsel is to develop an effective dispute resolution strategy.
By staying ahead of potential issues and managing your relationships with third parties, you will save resources, reduce risk and clearly demonstrate to the leadership team how integral your work is to the business's success. Read the article below to learn about the practical steps you can take to create and implement an effective dispute resolution strategy.
If you are reading this guide because you want to take control of how your business manages disputes, or you need expert support on a tricky issue, our team of experienced business dispute solicitors can help. We’ll work as your trusted advisor, helping you develop practical, commercially focused dispute strategies, assess risks, and decide when to settle and when to stand firm. We’ll also support you in setting up clear internal processes, reviewing your current disputes, and identifying potential issues before they escalate.
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Are all the business’s relationships with external parties documented?
Prevention is better than cure when it comes to dispute resolution and ensuring the business’s relationships with external parties are clearly documented significantly reduces the likelihood of a dispute.
You should familiarise yourself with the businesses contracts, which might include supply agreements, distribution agreements, and intellectual property agreements. If the business uses contract management software, that’s a good place to start, but you’ll also need to speak to each department within the business to check for any other agreements you should be aware of.
When reviewing the contracts, some key points you should consider include:
- Are the terms clear, and do they allow both parties to understand their roles and responsibilities?
- Does the contract have a dispute resolution clause? Dispute resolution clauses aren’t a legal requirement, but they provide certainty for the parties on how to resolve a dispute between two parties.
- Does the contract contain a choice of law and jurisdiction clauses? Ideally, English law should apply, and the English courts should have jurisdiction. If a contract does not include a jurisdiction clause, the court tasked with resolving any dispute that arises will likely have to decide which law applies to the agreement. This can cause delays and significantly increase legal costs, particularly if the contract has an international element.
It's important to remember that contracts can be formed orally and through conduct, as well as in writing. These types of contracts can be incredibly problematic. Either party may deny that an enforceable contract exists, and proving otherwise in a bid to hold them to an agreement can be an uphill battle. Even if both parties accept that they entered into a contract, establishing its terms can be incredibly difficult. Putting written agreements in place to document the business’s relationship with all third parties should be a priority.
Strategic priorities
- Put contracts in place if there is no evidence of the relationship. Before drafting a contract, identify the important terms of your agreement. This includes what services or products will be provided, payment terms, timelines, and responsibilities of each party. Make sure the contract is easy to understand and try to limit the use of acronyms and technical jargon.
- Document relationships that could pose a risk to your business. If you’re involved in a contract that could potentially cause problems later, make sure to keep detailed records of everything that happens. For example, if you’re working with a client who has a history of late payments or changing terms frequently, document every email, phone call, and meeting. This creates a clear record of your interactions and helps protect your business if issues arise.
Does the business have a process for dealing with disputes?
Without a structured approach to handling disputes, they can quickly spiral. A clear dispute resolution process helps ensure that everyone involved in the business handles disputes consistently and reduces the risk of individuals doing or saying something that harms the business’s legal position.
A dispute resolution process outlines the steps the business should take if a dispute arises. The process should ensure disputes are resolved swiftly and cost-efficiently, and that any negative reputational impact is minimised. It should reflect your business’s culture and encourage a uniform approach to dispute resolution, but it must also be flexible enough to facilitate a change in direction where necessary.
What your dispute resolution process looks like will depend on several factors, including the size of the business and the nature of its commercial operations. Examples of some of the issues you may need to consider when developing the process include:
- Who is responsible for dealing with disputes? The types of disputes that can arise in business are vast, ranging from non-payment of invoices to complex intellectual property disputes. The policy should state who is responsible for dealing with different issues and the stage at which those individuals should escalate the matter to you.
- Do you have a large enough budget to deal with a dispute if it ends up in court? Litigation is expensive, so you should establish what funds are available to address the dispute. The business’s budget will have a significant impact on your dispute resolution strategy.
- What types of disputes can be dealt with internally and when will you need to seek external advice? Your organisation might encounter specific types of disputes regularly and be well-equipped to deal with them in-house. Where the issue is novel or complex, or the sums involved are particularly high, you may need to seek external support from specialist dispute resolution solicitors.
- When will you litigate and what are the thresholds? You will be alive to the court’s expectation that you will explore alternative dispute resolution methods before resorting to litigation. You should consider the types of cases in which it might be appropriate for the business to litigate, taking into account its commercial priorities and budget.
Strategic priorities
- Have a clear process in place for dealing with disputes. The process will be documented and shared internally with your key stakeholders. When you share the document with your stakeholder, you need to clearly explain what the process is and the importance of abiding by it.
- Seek legal advice early on in a dispute. Expert advice from business dispute solicitors on complex, novel or high-value matters can save you time and money in the long run.
What disputes is the business currently involved in?
You need to be aware of all ongoing disputes involving your business and understand the nature and extent of the risk involved. You should undertake a review of all current disputes that the business is involved in.
The main purpose of your review will be to assess the level of risk posed by each dispute and devise strategies that minimise the business’s potential exposure.
Examples of the types of issues you should consider during your review include:
- What is the nature of the dispute, and what level of risk does it pose to the business? These fundamental factors will dictate how you address the issue, including whether to deal with it in-house or seek external help from business dispute solicitors.
- What is the status of the dispute? For example, is the issue still being discussed between key personnel or has the other party involved solicitors? Have proceedings been issued, or are the parties exploring alternative dispute resolution methods?
- If the business has already sought external legal advice, what was their advice on the merits of the case and the likelihood of a positive outcome? If external support hasn’t yet been sought, should you do it now?
- Does the business have an agreed plan for dealing with the dispute? If so, has that plan been followed so far? Is the plan still viable, or has the nature of the dispute evolved to such an extent that an updated plan is required? If no plan has been agreed on, you should consider how best to address the issue and advise the leadership team.
- Does the business have procedures in place for handling any post-resolution matters that may arise from the dispute? For example, if the case will likely result in the business being prevented from doing certain acts, as is common in intellectual property matters, how will you ensure compliance?
Strategic priorities
- Identify what disputes the business is currently involved in. You should liaise with each department within the business to gather information regarding any actual or potential disputes and assess the extent of the business’s exposure in each one.
- Determine the strength of the business’s legal position in each matter, taking external advice from business dispute solicitors where necessary. Even if the business has a strong case, you should weigh the financial, reputational, and relationship costs of pursuing the issue against the potential benefits. You should then advise stakeholders on the pros and cons of each option.
- Attempt to resolve the dispute out of court. You should reiterate to the leadership team the uncertainty and expense inherent in litigation and the potential financial and reputational implications of not settling the issue.
- Create a central repository to document the outcome of each case and any ongoing obligations, including any documentation that relates to the claim or settlement for easy reference.
Summary
Disputes are part and parcel of business and managing them effectively is important to a business’s success. While your role necessitates a thorough understanding of the law applicable to any dispute, your involvement extends far beyond merely giving legal advice. You are responsible for actively pre-empting issues, managing risk, and mitigating the negative effects of any dispute on your business.
By devising creative dispute resolution strategies that reflect the business’s priorities you can bring significant value to your business. If you need help with formulating or executing your strategies, our business dispute solicitors are here to help. We offer commercially focused, straightforward legal advice to resolve disputes quickly and cost-effectively, maintain important commercial relationships, and protect your business’s reputation.
