Last reviewed 29 August 2026
A commercial dispute consumes management time, damages relationships and creates uncertainty long before it produces a result. For a smaller business, the disruption is frequently more costly than the sum in issue.
England and Wales offers several routes to resolution, each with different cost, speed, formality and confidentiality profiles. The right choice depends on the amount at stake, the relationship, the evidence, what your contract says and whether you need a precedent or simply an outcome.
This guide compares the options and sets out how to position a dispute well from the first letter.
Negotiation and early commercial resolution
The cheapest resolution is a commercial one reached quickly. Before positions harden, a clear letter setting out the facts, the contractual basis and a realistic proposal resolves a substantial proportion of disputes.
Preparation makes negotiation effective: assemble the contract, the correspondence trail, evidence of loss and a clear-eyed view of the weaknesses in your own case. Consider whether a without-prejudice offer, or an offer under Part 36 of the Civil Procedure Rules once litigation is in contemplation, will apply useful costs pressure.
Mediation and the pre-action expectation
Mediation is a confidential, without-prejudice process in which a neutral mediator helps the parties reach a settlement. It is voluntary in outcome but increasingly expected as a step: pre-action protocols require parties to consider alternative dispute resolution, and courts can penalise unreasonable refusal in costs. Following the Court of Appeal's decision in Churchill v Merthyr Tydfil, courts can also order parties to engage in ADR.
Most mediations are a single day and settle a majority of the cases that reach them. They work particularly well where a commercial relationship needs preserving or where a creative outcome — revised terms, phased payment, future work — beats a damages award.
Arbitration and expert determination
Arbitration is a private, binding process governed by the Arbitration Act 1996, usually available only where the contract provides for it. It offers confidentiality, choice of a specialist tribunal and international enforceability under the New York Convention, but it is not necessarily cheaper or faster than court.
Expert determination suits narrow technical or valuation issues — a completion accounts dispute, a rent valuation, a software acceptance question. An agreed expert decides the point, usually finally and with very limited grounds of challenge. It is quick and inexpensive, provided the question is precisely defined.
Litigation: courts, tracks and costs
Court claims in England and Wales are allocated by value and complexity. Small claims (generally up to £10,000) are designed for parties without representation and recoverable costs are minimal. The fast track and intermediate track handle mid-value claims with costs controls, and the multi-track deals with higher-value and more complex disputes.
Litigation is public, and the general rule is that the losing party pays a proportion of the winner's costs — commonly around 60-70% of what was actually spent on assessment. Budget accordingly, and remember that even a winning claim ties up management time for many months.
Debt recovery and statutory demands
Where the debt is genuinely undisputed, the route differs. A letter before action complying with the pre-action protocol, followed by a county court claim, is standard. Interest and compensation may be recoverable under the Late Payment of Commercial Debts (Interest) Act 1998.
A statutory demand can be effective pressure against a solvent debtor, but it must not be used where the debt is genuinely disputed on substantial grounds — doing so risks an injunction and an adverse costs order. Take advice before issuing one.
Practical steps when a dispute is brewing
Preserve documents immediately, including emails, messaging platforms and system logs, and suspend routine deletion. Stop commenting on the matter internally in anything other than measured terms, and route legal discussion through your adviser so privilege is preserved where possible.
Check the contract for dispute resolution clauses, notice requirements, time bars and jurisdiction, and check limitation: generally six years for contract and tort claims in England and Wales. Then decide your commercial objective — payment, performance, exit or a preserved relationship — because the process should be chosen to deliver that objective, not to win an argument.
Key points
- Most disputes settle; the choice of process drives the cost of getting there.
- Courts expect parties to consider ADR and can order engagement with it.
- Expert determination is fast and cheap for narrow technical or valuation issues.
- Losing at trial typically means paying a large share of the other side's costs.
- Do not use a statutory demand where the debt is genuinely disputed.
- Preserve documents and check limitation and contractual notice requirements early.
Frequently asked questions
- How long does a commercial dispute take?
- Mediation can resolve a dispute within weeks. Expert determination usually takes a few months. A multi-track court claim commonly takes 18 months to two years to reach trial, sometimes longer.
- What is a without-prejudice letter?
- Correspondence written in a genuine attempt to settle a dispute, which generally cannot be shown to the court on the question of liability. It allows parties to make concessions in negotiation without damaging their case.
- Can I recover my legal costs?
- In court proceedings above the small claims track, the general rule is that the unsuccessful party pays the successful party's costs, but recovery is usually partial and subject to assessment and any costs budget.
- Does our contract's arbitration clause bind us?
- Generally yes. If a valid arbitration agreement covers the dispute, the court will normally stay court proceedings so the matter proceeds to arbitration, so check the clause before issuing a claim.