Major study proposes ODR to handle small business debt cases

Swallow: Technology can address this problem

An online dispute resolution (ODR) platform would help solve the problem of late payment debt by providing SMEs with a quick and cheap alternative to traditional lawyer-based solutions, the body charged with promoting legal tech has concluded.

It would involve a three-tier resolution system, starting with advice and triage, followed by facilitated negotiation – with “suitable computer-assisted support to maximise the opportunities for success” – and then if necessary access to an ‘ADR marketplace’ to find an appropriate way to conclude the dispute.

Outcomes through the platform would be contractually binding on the parties, while a model dispute resolution clause would be promoted to direct contracting parties to the scheme.

LawtechUK, an initiative delivered through a collaboration between growth platform Tech Nation, the lawyer-led Lawtech Delivery Panel and the Ministry of Justice, conducted a detailed feasibility study into the idea, which was first mooted a year ago.

A consortium of legal, technology and ODR experts – from Oxford University, Oxford Computing Consultants, Resolve Disputes Online and blockchain-based dispute resolution platform Jur – found recovering debts cost SMEs a total of £4.4bn a year.

An ODR platform would quickly pay for itself, resolve more than 200,000 disputes and help recover nearly £3.5bn of debt within five years, it said.

Under the design, a digital self-service experience could be brought to market in just nine months, sitting alongside, and reducing the burden on, the traditional courts. The feasibility study provided a jurisdictional review, a solution design and a business case for that design.

The study acknowledged the existence of current ADR providers, industry schemes and online portals such as the government’s Money Claims Online, but said the market was “fragmented”.

While the new platform should not “reinvent the wheel”, it could nevertheless provide “a superior solution in terms of time, cost, clarity, and enforcement of outcomes”.

Each stage of dispute resolution using the platform should be subject to a “tight” timeframe of, for example, two to three weeks, with an average dispute lasting just six to eight weeks.

A statutory regime would best support a fast-track enforcement route in the civil courts, it urged, applying the principle of ‘pay first, argue later’.

Just a £3.5m initial public investment was required, which could come either from public money private equity, or a mixture of both.

LawtechUK will not be building or funding the development of the platform itself.

“Funding for the platform is not currently planned, but government backing would be a critical enabler in its initial stages, lending all important support, credibility and profile with the business community,” it said.

Professor Richard Susskind, a member of the LawtechUK panel, said: “This study offers a roadmap for the future of legal dispute resolution – an inexpensive, straightforward, online alternative to a traditional hearing but connected to the courts in case a formal judicial determination is needed.

“The proposed system offers SMEs an easier and more affordable solution to sorting out their late payment problems. The result: greatly increased access to justice for small businesses.”

Jenifer Swallow, director of LawtechUK at Tech Nation, said the legal system should be there when small businesses needed it.

“It should not be slow, adversarial and hard to access. [The] LawtechUK study shows that technology can address this problem. Disputes can be resolved quickly and easily, and in a way that maintains business relationships.

“Delivering this online platform can help make the pain around late payments a thing of the past for SMEs.

“Our consultation on the study has been met with support in terms of the capability and approach of the platform. This is an opportunity to deliver business and justice outcomes through technology.”

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