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Litigation can be inefficient and expensive. Why litigate?
Parties want dispute resolution processes that are less costly, less time-intensive – and more aligned to their commercial interests. Minimising the use of litigation should be a focus. However, are there vested interests standing in the way? What can be done to minimise litigation?
It’s hardly surprising that a desire among parties for more efficient dispute resolution processes is one of the key themes arising from the Global Pound Conference (GPC) – an ongoing global series of events aimed at facilitating the future development of commercial and civil dispute resolution. The need for greater efficiency and lower costs in the dispute resolution process has been a theme for disputing parties for as long as we can remember.
Yet it is still the case that most disputing parties fall back on litigation as the primary dispute resolution method. Litigation is effective – but few would characterise it as efficient or cost effective. So why is litigation the primary method for resolving disputes?
Very few litigation matters actually end up in court, with the vast majority being settled before reaching that stage. Some would claim that this is due to the litigation process, and without it settlement would not be reached. It's true that litigation flushes out the building blocks to settlement: the factual background, legal merits, financial impacts and so on. But surely we don't need litigation and all that comes with it to get to that place?
These are questions that we began exploring in our recent insights, “Collaboration is now the key to efficient dispute resolution”. In these follow up insights, we take a closer look at how to minimise the chances of litigation.
This issue is more complex than it might first appear. We suspect that one of the key value drivers of litigation is not the process itself, but rather that the threat of litigation elicits a response from an otherwise disengaged respondent. The problem is that once the "litigation button" is pressed, the matter seems to gain a life of its own. All too soon, parties find themselves escalated into a battle with the goal of "winning the case" rather than resolving the dispute.
So – unless there is a step change in the litigation process – it appears that parties wanting more efficient dispute resolution should aim to minimise the commencement of litigation. Given this, one area to explore is how to reduce the number of disputes in the first place.
Clearly, no prevention process will be completely successful – disputes will occur regardless. The key is to get both parties, particularly respondents, to engage earlier without resorting to commencing litigation. This is difficult to achieve, which is why litigation is still so prevalent. However, businesses are familiar with making commercial decisions – so, in our view, more should be done at the outset of a dispute to present the matter in commercial rather than solely legal terms.
Investment in pre-dispute processes: do vested interests stand in the way?
The delegates surveyed in the GPC are telling us that pre-dispute processes to prevent disputes should be a priority: asked how best to improve the future of commercial dispute resolution, a third of all GPC participants cite pre-dispute or pre-escalation processes as their top priority. This proportion rises to 42% among in-house legal teams, indicating that in-house teams want to see more emphasis on this area.
This positive view reflects the fact that robust pre-dispute assessment processes can deliver benefits far beyond simply reducing the number of disputes per se. In particular, they enable a party to step back and look broadly at the options open to it, and assess their relative costs and chances of success in not just legal but business terms. This type of considered analysis is clearly preferable to simply passing any matter straight to the external lawyers, yet still leaves open the option of litigation.
But despite the widespread agreement among parties that pre-dispute or pre-escalation processes should be prioritised, it remains difficult to convince firms to invest in them. Why?
One potential reason may be that the advisers who are best placed to assist firms in beefing up their pre-dispute processes are also those that currently advise on disputes. Put simply, if dispute resolution advisers’ fees are derived primarily from disputes, do they have a vested interest in maintaining the status quo?
Weighing up the next steps
As the GPC has demonstrated, parties’ desire for more efficient dispute resolution processes remains strong – and is pushing the quest to avoid litigation towards the top of their agenda. Since the threat of litigation can itself help to bring about a settlement, it’s important to have the “big stick” of litigation to hand as an option. But this doesn’t mean it has to be used – and, as we’ve highlighted, there are several ways that parties reduce the likelihood of having to actually go to court.
By focusing on the four areas we’ve set out above, parties can still use the prospect of litigation as a tool to concentrate respondents’ minds and establish the grounds for settlement, without necessarily going to the expense of navigating through the full litigation process. At some point in the future, the litigation process itself may go through a step-change in terms of efficiency and speed. But until that happens, an approach based on initiating litigation while avoiding its commencement will remain the optimal way for parties to get the best of both worlds, by striking the right balance between outcomes and cost.
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