Implementing an effective dispute resolution strategy

June 2022  |  SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

June 2022 Issue

Companies have a range of tools to resolve disputes at their disposal, from more informal methods of communicating and negotiating with the other party by way of dialogue and correspondence, to more formal methods of mediation, arbitration and the use of court proceedings.

Implementing the right tool at the right time – and indeed providing for that ability in dispute resolution clauses – is central to resolving disputes in the most effective and cost-efficient way. In navigating any dispute resolution process or strategy, however, some key themes warrant consideration, particularly when considering larger, more complex disputes.

First, consider the other party to the dispute: who is involved and how do they perceive the dispute? What is the underlying motivation and objective? Have internal and/or external legal counsel been involved? And if the dispute is with a company, who has decision-making authority? To put it simply, who holds the keys to resolution? Even if intelligence regarding these decision makers is limited, some assessment of these factors can be informed, in part, from an assessment of the dispute.

If a claim is particularly weak, one might ask: is this an opportunistic lawsuit? Is it being used as leverage against another issue? These questions are important because they inform the nature of the dispute, the stage it has reached, and the resolution strategy that should be undertaken. For early stage disputes where the relationship between the parties remains good, valuable goodwill may be undermined by escalating matters in contentious solicitor-led correspondence or by fighting a war of words. Rather, more informal and pragmatic business solutions may be more suitable.

Conversely, if both parties have already become entrenched in their respective positions, mediation – and the more formal path to settlement it offers – may be more effective. In most cases, however, approaching a dispute with knowledge of all available options (including litigation, albeit as a last resort) facilitates the ability of parties to make early informed decisions. It is a rare case where some kind of alternative dispute resolution (ADR), such as negotiation or mediation, will be not appropriate at some point in the lifecycle of a dispute, and so having that in mind from the outset can be valuable.

Second, it is helpful to consider who are the relevant individuals and stakeholders who can best execute any dispute resolution strategy. In particular, who has the decision making ability to settle the dispute, or authorise a pragmatic business solution to take the relationship forward with the other party? And how can they be placed in the best possible position to execute that role? Involving the relevant individuals early in the dispute resolution process means that strategic decisions can be taken consciously on the basis of all the relevant information and in circumstances where the decision makers are alive to the relevant upsides and risks.

In relation to technical disputes, for example, this might mean identifying who has intimate knowledge of the relevant technical issues and making them available to provide briefing or comment, where appropriate. Conversely, given that disputes have a habit of polarising issues (and people), it is often helpful to ensure that there are voices in the mix that can provide challenge and objectivity – be that from a law firm, from internal legal counsel, or some other role. Again, in all cases, what is important is that the right team is assembled around key decision makers so that sound strategic decisions can be made.

Third, an early assessment of the strengths, weaknesses and other implications of the relevant dispute is key. This can be a complex exercise. Beyond understanding the specific legal strengths and weaknesses of the dispute (including prospects of success) and the inherent risk of an adverse finding if the dispute were to progress to arbitral or court proceedings, it also means understanding the issues that are likely to arise from documents and correspondence that would have to be disclosed as part of any formal dispute resolution process.

These issues include the identity and likely performance of the witnesses who would likely have to give evidence, the cost and other strategic implications of the dispute and the possibilities (or difficulties) in relation to enforcing any favourable judgment. In short, it is an analysis of all possible outcomes should the dispute proceed to trial: questions such as, based on the forum for trial, the performance of factual and expert witnesses, and the strengths of the legal case, is a favourable judgment likely, and would such a judgment be enforceable against the other party? Does the other party have assets in the jurisdiction against which enforcement action could be taken, or would further enforcement proceedings need to be taken thereafter (with the associated costs that would entail)? And what would be the financial exposure, the time spent by company management, the reputational damage and the damage to business relationships, depending on all potential outcomes of proceedings? These together represent both the ‘known knowns’ as well as the ‘known unknowns’. They are crucial reference points that can be used by a party to weigh the extent to which a given compromise may be reasonable, and whether a given dispute resolution strategy strikes the right balance between risk and reward.

In some circumstances it may be useful to undertake, under the protection of legal privilege, preliminary interviews with potential witnesses and some kind of document review to feed into this process, thus enabling a party to identify particularly problematic or sensitive documents that might mitigate against proceeding with the matter publicly or via court proceedings, or equally to reveal documents that show a particularly robust case that can be leveraged to help reach settlement.

In any case, having an understanding of the key issues in relation to the dispute – including the key areas of risk – is crucial to ensuring that settlement is reached earlier rather than later in the dispute resolution process. It avoids a situation where, for example, upon finding unhelpful documents during a party’s disclosure exercise, settlement is only reached at the doors of the court once considerable costs have already been incurred.

Last, but by no means least, an understanding of the dispute resolution mechanisms is essential. Are any forms of ADR provided for by the terms of the contract and, if so, are they mandated? Are there any applicable local court procedural rules or expectations that the parties should engage in ADR and, if so, what form might that take? Such provisions will naturally guide the path that parties take.

Equally, where escalation to more formal methods of dispute resolution proves necessary, consideration of relevant forums and jurisdictions and, whether more than one such process should be put in motion (e.g., proceedings in parallel jurisdictions, court proceedings related to or in support of arbitration and enforcement proceedings) is necessary.

Everything comes back to an early assessment and – from that – the ability to implement the right strategy at the right time. In the words of an ancient military strategist: “Tactics without strategy is the noise before defeat.”

 

Sarah Walker is a partner and Louisa Salmon is an associate at King & Spalding. Ms Walker can be contacted on +44 (0)20 7551 2132 or by email: swalker@kslaw.com. Ms Salmon can be contacted on +44 (0)20 7551 7582 or by email: lsalmon@kslaw.com.

© Financier Worldwide

BY

Sarah Walker and Louisa Salmon

King & Spalding

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