Less dispute, more resolution: the shift to Alternative Dispute Resolution (ADR)

Commercial disputes are an inevitable feature of corporate life. Yet how organisations choose to resolve them is changing rapidly.

New figures show that the number of commercial claims filed in the High Court fell to the lowest level in six years in 2024.

Whilst litigation remains central to the legal landscape, businesses are increasingly gravitating towards Alternative Dispute Resolution (“ADR”).

This is not just a statistical quirk. It reflects structural shifts in cost pressures, reforms to arbitration and growing corporate appetite for confidentiality and speed.

This trend is encouraging many businesses to reconsider their attitude and policies towards dispute resolution: is our strategy still fit for purpose? Are we equipped to manage disputes in a world where public litigation is no longer the default?

Why is litigation declining?

Cost pressure

Litigation is inherently expensive. From the outset, legal teams must provide detailed advice on the merits of a case, conduct cost-benefit analyses and align legal strategy with broader business objectives. This is before court proceedings even begin.

Once a claim is issued, parties face a cascade of complex and costly issues, such as unpredictable disclosure battles, multiple interim hearings and a trial that may span weeks.

The process typically involves solicitors, barristers, experts, cost lawyers and other third-party professionals – each adding to the financial burden.

Even if successful at trial, a party may only recover a fraction of its legal spend and enforcement of costs orders can introduce further delays and expense. In an environment where businesses are focused on cost discipline, litigation is increasingly viewed as a last resort.

Delays and backlogs

While the High Court generally handles cases efficiently, complex commercial disputes can still take years to reach judgment. This delay can be commercially damaging, particularly where time-sensitive issues are involved.

In contrast, ADR providers are actively competing to streamline dispute resolution timelines, offering a more agile alternative.

Court encouragement of Alternative Dispute Resolution

Following the case of Churchill v Merthyr Tydfil County Borough Council [2023], the courts are now empowered to order parties to engage in Alternative Dispute Resolution. Parties may be sanctioned for failing to do so and the judiciary is increasingly compelling early ADR engagement.

While mechanisms such as Part 36 offers have long encouraged settlement (with mandatory cost consequences for unreasonable refusals) the Churchill decision marks a shift towards more formal intervention. Courts can now require parties to participate in ADR, which, while potentially effective, also introduce significant costs.

This judicial stance reinforces ADR as a central feature of modern dispute resolution.

Arbitration Act 2025 reforms

The Arbitration Act 2025 marks the first major overhaul of UK arbitration law in nearly three decades.

It has reinforced London’s position as a global arbitration hub. Key reforms (such as provisions for summary disposal, expanded court support and clearer disclosure duties) have improved efficiency and predictability. These changes make arbitration more attractive to businesses seeking quicker and more confidential outcomes.

A practical comparison of common ADR mechanisms

Arbitration

Arbitration is a private dispute resolution process where parties agree to submit their dispute to one or more arbitrators, rather than a court. It is governed by the terms of an arbitration agreement entered into by the parties and relevant institutional rules. The proceedings may be tailored to accommodate the specific requirements of each party involved.

Arbitration offers confidentiality, which is particularly valuable in sectors where reputation, trade secrets, or sensitive commercial arrangements are at stake. Awards are sometimes enforceable internationally, making arbitration ideal for cross-border disputes.

Parties can appoint arbitrators with specific industry expertise, enhancing the relevance and quality of decisions. The Arbitration Act 2025 has further improved efficiency and predictability, addressing previous concerns around cost and delay.

Nonetheless, arbitration can be expensive if not properly managed. Its procedural flexibility, while often beneficial, can lead to inefficiencies if parties fail to agree on streamlined processes.

Appeal rights are limited, which may be a concern in high-value or precedent-setting disputes. Still, for many businesses, the benefits of confidentiality, enforceability and speed make arbitration a compelling choice.

Mediation

Mediation is a voluntary and confidential process where a neutral third party (the mediator) facilitates negotiations between disputing parties. Unlike a judge or arbitrator, the mediator does not impose a decision but helps parties explore mutually acceptable solutions.

Mediation is fast, cost-effective and relationship-preserving. It allows parties to craft creative settlements beyond the scope of legal remedies, such as revised commercial terms, future collaboration, or reputational safeguards. The informal and non-adversarial nature of mediation can help de-escalate tensions and preserve valuable business relationships.

Its main limitation is that outcomes are non-binding unless formalised in a settlement agreement. Success depends heavily on the willingness of parties to compromise. Where one party is entrenched or strategic interests diverge significantly, mediation may not yield resolution. However, even unsuccessful mediations can clarify issues and narrow the scope of future court proceedings.

Negotiation and offers

In many cases, an early exchange of settlement offers can resolve disputes swiftly and efficiently. Offers can be made on a formal basis under Part 36 of the CPR, or informally, with or without legal representation. When successful, this approach can be the quickest and most cost-effective way to resolve a dispute.

Offers made with legal advice and strategic foresight can protect a party’s position and trigger cost consequences at the conclusion of court proceedings if unreasonably rejected.

However, offers made without legal input, or on an open basis, may inadvertently weaken a party’s case or negotiating position. They may be dismissed as unserious or poorly timed, particularly if not supported by a clear rationale or evidence.

Looking ahead

The steady decline in litigation marks more than a passing phase. It reflects a rebalancing in how businesses approach dispute resolution, where flexibility, confidentiality and speed increasingly outweigh the benefits of traditional litigation.

This shift presents an opportunity to treat dispute resolution not as a reactive necessity, but as a strategic business function. That means reviewing internal processes, ensuring contracts include well-drafted Alternative Dispute Resolution clauses and investing in the skills and relationships needed to navigate disputes effectively.

Building capability in Alternative Dispute Resolution (whether through training, proactive risk management, or partnerships with experienced advisors) can reduce costs, mitigate risk, preserve commercial relationships and brand reputation.

The numbers from the Commercial Court tell a clear story: businesses are voting with their feet. ADR is no longer an “alternative” – it is becoming the mainstream.

Organisations that embrace this evolution will be better equipped to manage disputes in an increasingly complex and fast-moving commercial landscape.

How Morr & Co can help?

If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Dispute Resolution team on 0333 038 9100 or email info@morrlaw.com and a member of our expert team will get back to you.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.