© Fox Williams LLP 2006

We supply clothing and accessories to numerous retailers in London. We are having a dispute with one of them about our latest seasonal consignment and they have told us that they are now going to consult their lawyers. While I feel strongly that we are not at fault in any way, and there is a lot of money at stake, I do not want to spend a lot of time and money on court proceedings. Also, I would like to keep this particular client if the matter can be sorted out. I am also worried about our other clients finding out about this dispute. What kinds of legal procedure could we use?
 If negotiations break down completely then there are a number of alternatives to court proceedings which you and the other party should consider, such as Mediation or Arbitration.

Mediation
Mediation is an increasingly popular way of resolving disputes and is encouraged by the courts. It is usually far quicker and cheaper than court proceedings, with a success rate of around 80%.

Mediations are private and confidential. They operate on a “without prejudice” basis which means that if the dispute is not resolved then any admissions which one party makes during the mediation cannot be relied upon by the other party later if the dispute goes to court.

However, mediation is not suitable for every dispute. Anyone using mediation should be prepared to compromise to some extent. The emphasis is on conciliation rather than conflict and heated exchanges are usually avoided. Mediation is particularly useful if you want privacy and a quick result, and the parties hope to maintain their business relationship.

Arbitration
Arbitration is like court proceedings except it is conducted privately. This means the dispute, and any sensitive information that it involves, is kept away from the public eye. It is often quicker and cheaper than using the courts because the parties can agree to cut out any unnecessary procedures. Also, the parties can choose arbitrators who have specialist knowledge of the issues in dispute.

However, arbitration is not always quicker and cheaper than the courts. The arbitrator's fees – which the parties have to pay – can be substantial, and occasionally it is necessary to obtain assistance from the courts which can mean delays and further costs.

We are a medium high street clothing retailer. Most of our branded goods are received from a few of the large clothing manufacturers. Due to our relatively weak bargaining position with them, we are often forced to accept terms and conditions which we do not like, including high interest rates on late payment. I am sometimes unable to pay for goods immediately due to cash flow problems and the exorbitant interest charges I then have to pay only aggravate the problem. I do not want to change suppliers but cannot afford the interest payments. What options are available to me?
 New laws have been introduced which deal with interest rates on commercial debts. These laws cover contracts for the supply and sale of goods and services (but not consumer credit agreements) entered into on or after 7 August 2002. In certain circumstances it allows a creditor or a debtor to rely on a set interest rate. This is set at 8% above the base rate, which currently means a rate of 11.5% per annum.

How does this benefit a creditor?
Where someone delays payment without good reason and there is no prior agreement about interest, provided certain conditions are met, the creditor can claim interest at the prescribed rate (currently 11.5%).

There is evidence to suggest that the right to claim this higher rate of interest is not widely known. This suggests that merely notifying a debtor that you intend to claim this interest will be enough to ensure that your debt is given priority.

How does this benefit a debtor?
Debtors who, due to their weak bargaining positions with larger retailers or manufacturers, have been forced to agree high interest rates on late payments, may be able to avoid these high interest rates because, when deciding what rate of interest should apply, a court may ignore the high rate of interest and instead apply the rate of 8% above base rate.