There is no doubt that there are many thrilling moments for small businesses, but what do you do when these thrills are of the wrong kind?
The road to establishing a successful small business can be long and winding, with many bumps along the way. Preparing for those bumps can make the difference between a strong and viable business or financial failure. Where legal disputes are concerned, small businesses are particularly vulnerable, lacking an in-house power team of lawyers and the financial resources that bigger corporations rely on in times of legal turmoil. Late payments from clients, employee conflicts and supplier disputes are some of the more prevalent legal disputes that small businesses can expect to encounter.
For many, taking these disputes to court seems like the go-to answer. But with the recent increase in court fees, coupled with a potentially drawn-out process and unwanted publicity, businesses are now beginning to look for other solutions.
How then can you best prepare for legal woes, and resolve your disputes effectively away from the courts? This is where ‘Alternative Dispute Resolution’ comes into play and truly excels.
What is ADR?
‘Alternative Dispute Resolution’ (ADR) is a catch-all phrase that encompasses a range of techniques and procedures used to resolve disputes independent of the court, usually with the assistance of a neutral third-party. ADR’s popularity has heightened in recent years within the business sector, particularly because it is more likely to preserve any existing relationship between the parties.
Working in tandem with the court system, ADR comes with its own set of benefits: overall it results in less costly, more efficient and timelier proceedings. Furthermore, small businesses are less likely to suffer reputational costs as the entire process is performed under strict confidential conditions. It is worth keeping in mind that the third-party neutral can also be chosen jointly by the parties, resulting in a dispute resolver that has specialist knowledge in the field of their dispute.
A Snapshot of ADR
There are numerous forms of ADR, but the two most common that small businesses are likely to encounter are arbitration and mediation. In brief, arbitration involves a sole arbitrator or a three-member Tribunal assessing the evidence and reaching a legally binding decision. On the other hand, mediation is its non-legally binding cousin in which a mediator merely facilitates the parties’ discussions, and it is the parties themselves that decide the terms of any resolution.
Now you that you have an idea of what ADR is, how do you go about making the most of this powerful tool? It is important to understand that in order to use any method of ADR there must be an agreement between the parties to do so – unlike its combative litigation counterpart. This is where it pays to be proactive and include an ADR clause in your contracts that sets out what will ensue in the event of a dispute. For example, when drafting a contract or terms and conditions, you can include a provision to negotiate, mediate, arbitrate, or all three (dubbed a multi-tier dispute resolution clause).
ADR At Your Fingertips
Due to its relative lack of publicity in the SME legal world, ADR may seem like a foreign entity to small business owners. However, there have been several legislations and schemes developed with small businesses in mind. For example, the Government has recently introduced a Small Business Commissioner to handle late payment complaints and supply-chain bullying, and to direct parties in dispute to established ADR providers like CIArb.
In addition, some institutions have begun to tailor ADR schemes to meet the needs of small businesses. CIArb’s Business Arbitration Scheme (BAS) (www.ciarb.org/bas) is an example of such a scheme. It is simple enough for the layperson to understand, so parties have the option of representing themselves. It also gives small businesses certainty as to the costs and time frame involved, as the costs of the arbitration are fixed, and the parties receive a binding award within 90 days from the appointment of a sole arbitrator.
ADR should no longer be a confusing or frightening proposition for small businesses. Take control of your dispute management strategy and ensure that you are equipped to deal with disputes – the alternative way.
See guidance notes and Business Arbitration Scheme (BAS) rules booklet for further information, or please contact Keisha Williams, Head of CIArb’s Dispute Appointment Service, on +44 (0)207 421 7455, or email firstname.lastname@example.org with the following form: bas-arbitrator-appointment-form