UK: Clash Of The Titans – Does Litigation Have To Be Inevitable?

Last Updated: 24 April 2007
Article by Sara Payne

The increasingly bitter battle between Virgin Media and BSkyB is due to reach a head after Easter. Richard Branson has threatened to commence proceedings against Rupert Murdoch if their dispute over Virgin Media carrying the key Sky channels is not resolved this week. This debacle has a familiar feel. Parties to a commercial dispute often use proceedings as an ultimatum. However, if the other side refuses to back down, they are suddenly faced with the prospect of a court resolved case that can be expensive, lengthy and disruptive.

The English courts encourage the resolution of commercial cases by means other than full-blown litigation. This is reflected in the Civil Procedure Rules (CPR) that contain sections whereby proceedings can temporarily be put on ice to allow for Alternative Dispute Resolution (ADR)1 and in some areas of practice (such as defamation and professional negligence) Pre-Action Protocols that oblige the parties to consider ADR. There are also potential costs penalties for successful parties that are shown to have been unwilling to pursue reasonable proposals to mediate or carry out another form of ADR2 In addition, from 6 April 2007 changes to CPR Part 36 (providing a means of promoting early settlement through offers and/or payments into Court) are due to come into force which will simplify the Part 36 procedure and further encourage parties to settle proceedings early3.

In light of this, does litigation between Virgin and Sky have to be inevitable, and how could ADR be used to best effect to resolve the dispute?

It may be that Virgin and Sky have considered and dismissed ADR (it is a confidential process) preferring the adrenaline fuelled thrill of a court showdown, whatever the cost. This is a well-reported spat and both sides may have decided that the publicity, whatever that may bring, is better advertising than they ever would have paid for. Or they may feel that the scale of the battle is such that there is little that can be resolved by sitting down and talking. There are two heavyweight personalities at the heart of the row and many would say that their pride would get in the way of trying to resolve it in any other way than by confrontation. There are certainly instances when it is understandable that a party prefers litigation over another dispute resolution method. For example, a party may be seeking an injunction or a precedent that only a court can provide. There are also instances when an appealable decision is required. However, in circumstances where the issues are more ones of money and commercial terms, attempting ADR should always be an option.

ADR is often a very successful means of resolving even the bitterest of disputes. This is a real example of a fracas that goes way beyond the confines of the current issues. Amongst other things, Virgin’s failed attempt to buy a stake in ITV, Sky’s position as a rival broadband provider and Ofcom’s announcement that it is going to investigate the whole pay-TV market, all lurk behind this current battle between the media titans. Any court imposed decision in this Sky channels dispute would be limited in its scope to those specific contracts in dispute rather than any of these wider commercial issues at stake. On the other hand an ADR settlement could at least attempt to resolve some of these other commercial aggravations and achieve an outcome that no court decision could.

It would seem to be in both parties’ interest to resolve this dispute early on, without a lengthy run-up to trial. There has been much mud-slinging from each side, with aggressive marketing in the press and in advertisements. Each may be riding high at the moment, convinced that they are winning the publicity battle, but who knows what may happen if this has to be kept going on for many months. Resolving the matter early via ADR could provide damage limitation for Virgin in relation to their 3.3 million customers who have now lost Sky channels and could well switch to Sky, and for both sides in avoiding the potentially negative press that could surround a very public battle. There is also the question of confidentiality. Do these parties really want to risk the minutiae of their corporate dealings coming into the open as they almost certainly would if proceedings are commenced? Changes to the CPR late last autumn provided that non-parties can now obtain copies of statements of case filed in proceedings4. Even if the litigation did not proceed to a full trial, some of the terms of their contracts would be there in the filed claim and any following statements of case for all and sundry to see. Finally, it may not be palatable to either side, but it looks quite possible that Virgin and Sky will remain in an on-going business relationship after the dispute is over. It’s not hard to imagine what that might be like if that relationship follows a bitter court case.

There may still be time for ADR - it’s a process than can take place alongside litigation without the judge knowing at this stage that it’s taking place. Given what seems to be at stake for both parties as regards the industry and with the interests of the consumer in mind, maybe it’s still worth a go.

Footnotes

1. The CPR provisions include the following:

Part 1.4(e) : Overriding Objective – court’s duty to encourage parties to use ADR, if appropriate, and to facilitate it.

Parts 3 & 26: Court’s general power to stay proceedings to allow ADR and provision for the parties to request (once the statements of case have been filed) a one month stay to attempt to settle the claim through ADR.

2. CPR Part 44.3 and Dunnett v Railtrack plc [2002] 1 WLR 2434

3. See Bristows article "No need to Part 36 with your Cash" dated 19 January 2007.

( http://www.bristows.com/articles/detail.asp?frmAreaID=7&frmarticleid=926&frmpdtid=2)

4. The Civil Procedure (Amendment) Rules 2006 came into force on 2 October 2006. The new Rule 5.4C allows non-parties to obtain copies of any statements of case on the court file (or judgments or orders given or made in public) without the court’s permission. Statements of case include, in addition to the claim form, particulars of claim, defence (and any additional claims brought by the defendant), reply and replies to requests for further information. The new rule does however exclude access to any documents filed with, attached to, or intended to be filed or served with such statements of case unless the court gives permission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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