The Law Society is warning against the ‘unintended effects’ of government proposals to help small businesses settle disputes without the need to go to court.
Responding to a consultation on the government’s plan to set up a special commissioner to tackle disputes, Chancery Lane said although it welcomed the idea it has concerns that the changes could retrospectively remove contractual rights.
Under the plan small businesses would be able to get help resolving contractual disputes through a small-business commissioner.
With the help of the commissioner, businesses would be offered voluntary mediation to help resolve any issues without having to take legal action.
But the Law Society warned that businesses should still be able to retain their right to independent legal advice through any mediation process.
It also cautioned against government plans to highlight when a party has failed to participate in mediation. Under the plans any failure to participate in mediation would be considered in court proceedings in awarding costs.
Kathleen O’Reilly, a member of the Law Society’s company law committee, said: ‘Praising and shaming parties’ positions in disputes may risk disclosure of commercial confidentialities as well as interfere with the right to exercise freedom of choice and enforcement of contractual rights.’
On plans to introduce a complaints service, which would allow small businesses to issue a complaint about a medium or large business with which it has a contractual relationship, the Society advised that an appeals process is needed if sanctions are proposed.
O’Reilly stressed that further consideration is needed before the proposals are put into practice.
‘A small-business commissioner would provide real value with a new service for small businesses that assists with securing advice and encourages alternative affordable debt recovery,’ she said.
‘However, when tackling contractual supply-chain issues, the objective of changing business culture risks undermining established contractual law principles.’