“Let’s arbitrate, mate”: New Pandemic Dispute Resolution Service launched
July 8, 2020
2 min read
What's going on here?
Two large associations of arbitrators, the Chartered Institute of Arbitrators (CIArb) and the Centre for Effective Dispute Resolution (CEDR), are offering a new Pandemic Business Dispute Resolution Service for commercial claims worth between £5,000 and £250,000.
What does this mean?
The scheme offers parties one of three options. The first is a renegotiation of the contract so that it accommodates the difficulties faced by either party in performing what they promised. The second is a mediation, where a neutral mediator helps the parties agree to a resolution of a dispute that has arisen. If a consensual agreement cannot be found, the final option is arbitration.
The Service was created in response to various COVID-19-related disputes, including those disputes over non-payment, the non-delivery of goods, and whether the pandemic counts as a ‘material adverse change’ (a clause that usually puts an end to any further obligations under the contract). The scheme is designed to offer a cheaper, less time-consuming and less confrontational approach to resolving disputes that may have otherwise come before the courts. For example, CEDR promises that any arbitration will end within 90 days of an arbitrator being called upon to decide the case. Unlike a court judgment, all three options are private and confidential.
What's the big picture effect?
Law firms with clients in sectors that suffered a large loss in customer demand as a result of the pandemic will need to ensure that they have the staff and capacity to deal with a larger number of low-value claims that need to be resolved at fairly short notice. This may result in more junior associates and trainees assuming substantial responsibility for a single case. Firms, in turn, need to make sure that all the relevant know-how is communicated to these advisors in a timely manner.
The creation of the service may also result in law firms not receiving the expected pandemic disputes windfall. Claims through the service will generally be straightforward, with little-to-no fact-finding required. For example, the model mediation procedure expects a mediator to only require a few hours to get up to speed with the relevant documents, and summaries are to be kept to 20-25 pages at a maximum. The shorter duration of the procedure will result in few opportunities to generate billable hours through lengthy court hearings. Additionally, the “losing” party is only liable to pay up to £1,000 of the successful party’s legal costs, which incentivises both parties to control their legal spending per dispute. Finally, the parties that use this scheme will likely not have deep pockets to begin with. Law firms will, therefore, have to reassess how to carry out work when a client’s fees are outstanding or when the client seems unable to pay.
In summary, while law firms may lose lengthy court cases and billable hours as a result of the scheme, businesses will hopefully find it easier to achieve a speedy resolution of their disputes and preserve their relationships.
Report written by Darinka Lipovac
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