Negotiation Skills
An advocate should always have in mind, as part of their strategy, how they will bring the case to a conclusion. For example, when would it be appropriate to settle a civil case? Should a defendant in a criminal case change their plea to guilty to obtain the benefit of a discount to their sentence?
2.7.1 Negotiated Settlements
To achieve the possible outcome for the client and to reduce costs, an advocate should always consider whether a negotiated settlement would be preferable to a trial.
The aim of negotiation is to explore and find solutions that are acceptable to both parties; this usually means a compromise will be necessary.The civil courts are keen to encourage alternative means of resolution wherever possible and encourage the use of Alternative Dispute Resolution (‘ADR’) at an early stage in pre-action protocols. In addition, in civil cases once proceedings have been issued a party can make an offer to settle at any point and this is known as a ‘Part 36 offer’. Failure to accept such an offer may have cost consequences for the other party. We will explore both pre-action protocols and Part 36 offers later in this section at 2.7.2.
A good negotiator will aim to maintain good relationships between the parties whilst seeking solutions that mutually benefit both parties. Avoiding conflict and argument by coming to the negotiating table to explore solutions, will inevitably mean that the client’s case can be resolved much quicker and at a reduced cost. It will also ensure that it removes future barriers to communication between the parties.
What is always required is to do the best for the client working with the available evidence and within the confines of the court procedural rules, particularly the overriding objective. An advocate must ensure that litigation never becomes personalised between the lawyers whilst at the same time matching courtesy with firmness.
When entering any negotiation, an advocate should be mindful of the ‘position’ adopted by the opposing party and explore what is behind their position, this can be termed their ‘interests’. For example, Let’s take the following case:
You act for Office Magic Ltd who have signed a £20 million contract to have Build- as-u-like Ltd build a new office complex for them. The work on Phase I has started and completion is due in eight months’ time.
The contract has an arbitration clause that requires any dispute to be settled through arbitration. The contract also includes a penalty clause of £5000for each day of delay to the build. It is estimated that the build will not now be completed until ten months at the earliest. This is because Build-as-u-like Ltd use timber imported from a warehouse in Indonesia. The warehouse has recently caught fire leading to the loss of a substantial amount of timber. This has affected all timber imports from the country.
Position of Office Magic Ltd
The contract terms are clear, Build-as-u-like Ltd must pay the penalty or the matter will be referred for arbitration.
Position of Build-as-u-like Ltd
The delays were not foreseeable and are beyond their control and there should be some flexibility given in the contract terms.
Interests of Office Magic Ltd
They have already entered a contract to lease the first office block in eight months’ time, and this contract is worth £80,000 in the first year.
Interests of Build-as-u-like Ltd
They have already begun enquiries to source timber from an alternative destination and although this will cost them an extra £50,000 they think they will be able to complete the contract in nine months’ time.
By getting each party to reveal the interests that are impacting the positions that they have adopted, a negotiator can start to see some possible solutions and compromises. One solution might be for Office Magic to reduce the total penalty due by £50,000 as a gesture of goodwill to enable Build-as-u-like to source alternative timber and complete the project one month earlier than currently estimated.
Another solution might be found in limiting the penalty to be paid by Build-as-u-like to £80,000 plus any legal costs to reflect any lost revenue if Office Magic are unable to honour the lease contract. Yet another solution might be to allow a one-month penalty free period to allow Build-as-u-like time to source timber from an alternative location and then place the burden on Build-as-u-like to reduce any future penalty payments themselves by accelerating the build time.A negotiator will always have more than one possible offer on the table but will start with the lowest offer and then be prepared to negotiate upwards to come closer to the opponent’s position.
However, the best outcome for a client might not be a negotiated settlement or deal and so a good negotiator must also know when to stand their ground but also when to walk away. Fisher and Ury (1981) argue that a negotiator should always be aware of their ‘Best Alternative to a Negotiated Agreement’ (‘BATNA’). This is essentially the ‘litmus test' as to whether any negotiated agreement is a good one. If the agreement is less advantageous than the expected outcome (for example, if the matter were to proceed to arbitration) then it should not be accepted and the negotiator should be prepared to either reopen the negotiations, or if this is not possible, to walk away. A BATNA is therefore a known alternative to the current settlement and will have been identified by the negotiator in advance.
We will continue to work with the skills of preparation, legal research and case planning in the detailed case studies in Parts B and C of this textbook.
2.7.2 Making Offers and Concessions
Most cases in the criminal and civil courts settle before reaching trial and therefore knowing when to concede or reach a compromise is an important part of a case strategy.
In civil proceedings, a party can make an offer to settle a claim by making what is known as a ‘Part 36 offer' (see CPR Part 36).
These offers will have cost consequences if refused and the other party fails to better the offer in terms of what they receive in a final court judgment. Part 36 offers can relate to a payment of a sum of money or settling an issue in the trial. The offers can be made by either a claimant or a defendant at any point before or during trial (including before proceedings are commenced).However, to attract cost consequences, a Part 36 offer must follow the requirements of Part 36.5. The requirements are that the Part 36 offer is:
1. Made in writing.
2. States that it is made under Part 36 (which is regarded as a self-contained procedural rule).
3. Specify a period of time (not less than 21 days) when the offer can be accepted after which the party (if they are the defendant) will be liable for the claimant's costs.
4. State whether the Part 36 offer relates to the whole claim or part of a claim or to a particular issue in the case.
5. State whether it takes account of any counterclaim.
Certain claims require the Part 36 offer to contain additional information. For example, see the additional requirements for personal injury claims for future pecuniary loss (CPR Part 36.18).
If the offer relates to only part of the claim, then that part of the claim will be ‘stayed' if the offer is accepted and only the remaining parts of the claim will proceed to trial. This may therefore be a useful way to narrow issues and achieve a compromise on areas where the evidence is weaker and the risks of losing are greater.
If the Part 36 offer relates to an issue, it must be clear what that issue is. As indicated in the civil case of Seabrook and Adam [2021] EWCA 382 it cannot necessarily be assumed that liability and causation will be regarded as separate issues or even the same issue. This will depend on the facts of each case and so it is important that the Part 36 offer clarifies which aspect is to be settled, for example, is breach of duty to be admitted or does the offer require admission of particular damage or loss?
A defendant who wishes to make a Part 36 offer to settle the claim must offer payment of a single sum to be paid within 14 days of the claimant accepting the Part 36 offer (see CPR Part 36.6).
The costs consequences are dealt with under CPR Parts 36.13, 36.17 and 36.20 and relate to both accepting and rejecting an offer. For example, if a claimant rejects the defendant’s Part 36 offer and at trial the claimant receives judgment against the defendant which is ‘at least as advantageous’ as the offer that was made in the defendant’s Part 36 offer, then the claimant will be entitled to interest on the whole sum claimed at a rate not exceeding 10% above the base rate from the date the defendant would have been liable to pay the claimant’s costs if they had accepted the offer (‘the relevant period’). In addition, the claimant is entitled to costs on an ‘indemnity basis’ (see discussion below) from the date of the ‘relevant period’ as well as interest on those costs not exceeding 10% above base rate (see CPR Part 36.17(4)).
Where a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer the defendant will be entitled to their costs and interest on those costs (see CPR Part 36.17(3)).
An advocate will need to consider when and if a Part 36 offer should be made in civil proceedings to obtain the available costs consequences or whether negotiating without formal offers would be a better strategy.