Post-COVID commercial claims need conciliatory conclusions

One of the unfortunate and inevitable consequences of economic disruption is the long-tail impact of the numerous commercial disputes that arise. The pandemic is the greatest disruptor for generations; the emerging disputes will be as significant. For businesses, and those of us in the disputes world, there is much to consider.

Moving more towards mediation

Remedying disputes through arbitration has traditionally been adversarial. ‘Aggressive’ characteristics and postures have dominated. If we want better outcomes with broader benefits across business and society, we need systemic change.

In UK litigation, the Woolf reforms which led to 1998’s Civil Procedure Rules, and the subsequent Jackson Reforms, attempted to address many of the systemic issues in resolving civil claims including the rising costs. There was improvement, but not enough. Although the last two decades have seen a significant increase in the number of trained mediators in the UK, the uptake of mediation has not risen proportionally.

This has been a missed opportunity. Embracing negotiation and mediation creates more positive outcomes, preserves reputations and maintains business relationships.

It is good to see from the London Chamber of Arbitration and Mediation (LCAM) and Herbert Smith Freehills' recent survey that many mediations are now taking place, and that the majority are at a very early stage in the arbitration process, before significant costs and management distraction have been suffered.  As the survey shows, what is needed for mediation is a sufficiently clear understanding of the strengths and weaknesses of both parties’ positions and of the appropriate range for any settlement. 

So maybe now is the turning point. The sheer volume of claims and the need for greater levels of empathy throughout business and society due to the pandemic make change essential. Few of us have experienced a crisis as far-reaching and with such significant consequences. Everyone has been affected by the pandemic – some more heavily and tragically than others. Should this not lead to a more conciliatory approach to resolving our differences – commercial or otherwise?

Mutually beneficial outcomes

Covid-19 will create complex and emotional commercial disagreements. For many – typically those in weaker positions – this will be an existential matter. The burden of disputes, the time they take, their cost and the impact of unfavourable outcomes in arbitration or litigation will hit some businesses much harder than others.

Someone will win. Someone will lose. There will be no mutually beneficial outcomes because the systems are not designed to achieve them. Pre-crisis this was tolerable; not because it was right but because the impact was manageable. Post-crisis the number of zero-sum games heading to courts is one that threatens a disproportionate level of impact. This will be exacerbated by the erosion of business relationships, significant management distraction, the cost and the protracted time it will all take. We risk tearing our economy to pieces to resolve commercial disputes. It is the law of unintended consequences .

If we favour mediation, based on negotiation and collaboration, we will achieve better outcomes. Empathy and understanding become more prominent in the conversation. Clear and purposeful communication are critical. There is more opportunity to reflect the interests of a wider group of stakeholders. In short, unintended consequences will be more easily avoided.

It is clear from the survey that some very significant claims are already being settled through mediation, but even parties involved in much lower value disputes can benefit from fast, low-cost mediation, such as that provided by the LCAM.

Building back better

‘Building back better’ will require a different approach to numerous situations if we are to prosper both commercially and as a society.  If we want systemic change, then collectively we need to adopt the attitudes and practices that will create that change at scale.

In the disputes space we’ve started to see some welcome developments. I would recommend the British Institute of International and Comparative Law’s ‘Breathing Space’ guidelines as an excellent example of some progressive thinking on the post-COVID disputes world.

You can hear more about the current profile of mediation in arbitration by joining the LCAM webinar on 18 March 2021, where Craig Tevendale, Chris Parker and Rebecca Warder of Herbert Smith Freehills will be joining Jonathan Wood and me to discuss the survey results. To register for this webinar please click here.