Written by Rosa Huang.

 

 

England has been plunged into its second lockdown for a four-week period beginning from last week, but work of the courts and tribunals will continue to be exempted from lockdown measures. The exemption will help to avoid any substantial delays from the lockdown, given that the backlog of cases has already increased significantly in the past six months.

 

The ongoing COVID-19 pandemic has brought great challenges to the business entities. In response to this, there should be careful consideration of how the substantive law applies in this novel situation.

 

In April 2020, the British Institute of International and Comparative Law (“BIICL”) hosted a meeting attended by academics and senior judges, including Lord Neuberger, the former President of the UK Supreme Court. The “Breathing Space” guidelines arose out of this meeting.

 

The “Breathing Space” guidelines

 

The guidelines comprises of a series of concept notes examining the effect of the COVID-19 on commercial contracts. It provides guidelines on how the legal and business communities shall respond to the pandemic in order to foster economic recovery.

 

Concept Note 1 expressed a concern that strict reliance by parties on their legal rights in response to this pandemic may lead to a “deluge of litigation and arbitration” which would overwhelm the courts, disrupt supply chains and potentially stunt economic recovery.  It suggested that the solution may lie partly at a private law level.

 

Concept Note 2 looked more closely at the private law response to the pandemic, specifically in the context of contractual disputes, and how existing legal principles may be applied in the context of COVID-19 related disputes, as well as how existing dispute resolution mechanisms may effectively be used to achieve negotiated solutions.

 

The recently published Concept Note 3 proposes a set of practical guidelines (“the Guidelines”) which might be adopted by parties to contractual disputes to encourage a more conciliatory approach, without prejudicing or altering their legal rights.

 

 

The Guidelines

 

The Guidelines comprises three sections:

 

  1. Interactions between contractual parties – it encourages all parties to:

 

  • act fairly and responsibly to maintain contractual performance;

 

  • adopt a mutual, without prejudice and confidential ‘cards on the table’ approach to information sharing relevant to the continued performance under the contract;

 

  • discuss possible solutions for problems. The solutions can be extensions or reductions of time for performance and/or payment, non-contractual remedies, increases or reductions in the scope of the contract and re-negotiation (including with the involvement of a third-party facilitator);

 

  • explore ways to balance the impact between all parties, where extensions or reductions of time and/or changes in scope and/or price are sought; and

 

  • where an early resolution cannot be achieved, explore whether the dispute can be ring-fenced to allow contractual performance to otherwise be maintained.

 

 

  1. Dispute Resolution – it encourages all parties to:

 

  • before resorting to proceedings, and where resources are available, appoint the most appropriate party representatives on all sides to encourage an objective assessment of the dispute and bring different perspectives to its resolution;

 

  • agree extensions to contractual or statutory limitation periods where to do otherwise would likely result in proceedings having to be issued;

 

  • avoid adopting tactical practices intended to place other parties under unreasonable financial or time pressure; and

 

  • where a party seeks funding in relation to proceedings, invite any litigation funder to follow the Guidelines.

 

 

  1. Alternative Dispute Resolution (ADR) and Legal Proceedings – it encourages all parties to:

 

  • use various ADR techniques to with a view to avoiding legal proceedings or narrowing the issues in dispute (whilst recognising that emergency interim relief may be necessary as a last resort before pre-action ADR has been exhausted); and

 

  • where legal proceedings s are unavoidable, work together to adopt litigation/arbitration procedures and timetables aimed at managing the proceedings in an efficient and time-appropriate manner;

 

  • use ADR techniques alongside the proceedings with a continued view to resolving or narrowing the issues in dispute; and

 

  • consider whether issues arising in the dispute are of wider significance or commonly occurring, such that a court or tribunal may make determinations of wider application through available procedural mechanisms, including a stay in proceedings pending the determination of other cases involving common issues of fact or law, consolidation with other proceedings, or determination of specific issues of precedent value to the parties.

 

 

Comment

 

The Guidelines, although not mandatory, serve as helpful recommendations on the behaviour of the contractual parities, and the steps parties should be taking before embarking on formal legal proceedings. In particular, ADR is further encouraged.

 

By using ADR techniques to avoid legal proceedings or narrow the issues in dispute, the parties are likely to save time and money as they are likely to be able to obtain a resolution much quicker than they would by going through the Courts.

 

Under the UK law, the courts also have duties to further the overriding objective by encouraging the parties to co-operate with each other in the conduct of the proceedings and to use ADR procedure if the court considers that appropriate, and facilitating the use of such procedure.

 

The courts encourage exploration of ADR through reminding, staying proceedings and orders for costs.  Where appropriate, courts also provide access to ‘early neutral evaluation’, or ENE. In Lomax v. Lomax, [2019], the English Court of Appeal has held that a judge can refer the parties to ADR even in absence of one or both parties’ consent.

 

In light of the above, before issuing proceedings, we would suggest the following:

 

The starting point is to review contract documentation to check the relevant requirements. Where the contracts contain provisions that disputes must be referred to a particular form of ADR, the parties certainly should follow these provisions; where there are no such provisions in the contract, all parties should engage in at least one form of ADR, as required under the Guidelines.

 

Have questions? We are here for you!

 

If you are encountering difficulties with your contractual relationships and would like advice on your legal position, or guidance on formulating an effective strategy for disputes, please feel free to contact us by phone on 020 7928 0276, or email into info@lisaslaw.co.uk.

 

Or, why not download our free app today? You can launch a new enquiry, scan over documents and much more.

 

If you have an iPhone, follow this link to download.

 

If you use an Android phone, follow this link to download. 

 

Find the link here if you need some further instructions on how to use our new app!

 

Leave a comment

Your email address will not be published. Required fields are marked *