The challenge of managing complex disputes

Each business dispute may be different but following best practices can help to make a
litigation or arbitration run more efficiently, says Ignacio Díez-Picazo, dispute resolution
partner at Herbert Smith in Madrid

‘It is often the case that a complex
dispute will throw up issues that
neither a company legal department
nor the Board of Directors may have
previously encountered. This
inevitably causes tension and
concern, the challenge therefore is
how best to manage the dispute, to
determine the strategy and goals,
and define the lawyers roles.’
When a complex dispute emerges,
the senior executives and the general
counsel will inevitably be anxious.

But it is they who have the best
understanding of the issues at stake,
he emphasises. While external
corporate or finance lawyers may
have a track record of advising the
client, invariably external litigation
lawyers will not. It is vital therefore
to ensure they fully understand the
background to the matters in
dispute.

‘I always say, first of all tell me
about the company. What is the
corporate strategy, what has been its
evolution and where are we now. To
understand the context of the case it
is vital to understand the business,
the governance structure and
decision-making processes.’

Such insight can also help external
lawyers better understand the
company’s strategic position as well
as form a framework for negotiations
and any potential settlement that
might be agreed. But the goals
always need to be defined, for
example, to recover a specific
monetary amount, protect the
reputation of the company, or
indeed, both.

What is also vital is for the inhouse
legal department and external
legal team to adopt a common and
collaborative approach. But from
experience, he says, what may seem
an obvious desire may not always be
so easy to achieve.

‘Each legal department is
different, in the way it operates and
the nature of the work it takes
onboard, and so too are external law
firms. What is essential is to adopt
common work processes and define
roles. Disputes may last several
months or even years and from the
outset it is necessary to understand
the nature of the team that is being
built.’

There are technical issues to be
clarified also. It is important
particularly for multinational
businesses to understand the
substantive and procedural
differences that exist between the
Spanish judicial system and other
jurisdictions, emphasises Dí­ez-
Picazo.

‘In terms of managing
expectations and timescales, it is
important that not only do the
General Counsel of a company
understand that the continental
approach to litigation is very
different to that in the Anglo-Saxon
legal world, but so too do the senior
executives of a company:’

There may be no discovery in the
Spanish judicial system, but fact
finding is an important element of
the process, he says. An external
legal team’s understanding of the
details is therefore very much in the
hands of the in-house team, both in
the way information is collected and
transmitted.

Negotiations must also be
considered in the light of what is
being gained rather than lost, he
insists. ‘It can be difficult to
persuade people not to look at
settlements in terms of what would
have achieved had the contract been
fulfilled. The objective is no longer
the fulfilment of the deal but to end
the dispute.’

A certain scale of dispute will
inevitably demand the attention of
the Board and often also require their
input, but sophisticated businesses
inevitably ensure that it is the legal
department that remains the conduit
for any communication. It is they
who will have an understanding of
the ‘big picture’ throughout each
stage.

In any event, what a business most
usually wants is to cure the problem
as quickly as possible and then move
on, but in complex disputes there is
no ‘one-size fits all’ approach. What
is essential therefore is that the
potential for conflicts should be
foreseen in all agreements, believes
Dí­ez-Picazo.

‘When negotiating contracts, inhouse
lawyers must draw on their
unique knowledge of the business to
minimise risks. To imagine the
scenarios in which disputes may
arise: what may be the issues of
contention, when might they occur in
the life cycle of the agreement; and
who will be the claimant or
defendant?’