In my post dated 3 November, 2020 titled “Operating a Small Enterprise? – do not let this destroy your operations” I wrote that “[a]s a small enterprise operator you should take steps to avoid settling conflicts in court, avoid litigation. While litigation is a legitimate means of resolving conflicts it has some disadvantages that are not suitable for small enterprises. You are probably fully aware that litigation can be costly and time consuming. If you are operating a small enterprise to create additional sources of income then it is likely that you do not have a budget for litigation nor do you have time to dedicate to attending court. Litigation should be avoided and you should employ alternate forms of dispute resolution. I am referring particularly to Arbitration, Mediation and Negotiation.” – (Source: Smith, K. A. (2020, November 3). Kean Smith. Kean Smith. https://www.smithkas.com/?p=439)
In this post, I wish to take a deeper dive and focus on small businesses using arbitration to resolve their contractual disputes instead of litigation in national courts. For the purpose of this article, let us agree that a small business has 50 or less employees (generally the same number of employees used in the UK and the USA). This category will include business owners from various sectors of the economy including Construction, Professional, Retail, and Transport.
As part of managing your commercial risk you should consider using arbitration. This can be done in a way to avoid costly and time consuming hearings. This will definitely decrease your cost and allow you to resume your regular business more quickly than waiting years for a trial date in the national courts.
I have heard stories of multiple contractors operating small construction companies complain about their final stage payment worth tens of thousands of dollars being withheld because of a dispute which is being litigated. Issues like this can be resolve faster through arbitration rather than commencing litigation through the national courts.
The most effective way to have access to this arbitration option is to include it as a term of the contract. So in short, seek advice about including an arbitration clause in your contracts. I believe this will go a long way in mitigating the risk of protracted and costly disputes.
Please feel free to direct any questions or comments to Kean Smith at kean@smithkas.com or Kean’s Linkedin profile