bfa mediation and arbitration scheme
Even though the bfa has neither the power nor the right to intervene in a dispute between franchisor and franchisee, it can nonetheless make a positive contribution in respect of dispute resolution by supporting the re-establishment of positive communication between the parties with the aim of bringing about a resolution.
In the first instance the bfa seeks to facilitate an informal conciliation by allowing each party to represent their case and reconsider their positions to work towards an agreement. The franchisee is invited to complete and return a Notification of Dispute form. Assuming the franchisee has already pursued all reasonable avenues to resolve the dispute, the bfa will then become involved by seeking a response from its member franchisor. Often this is sufficient to re-establish constructive dialogue.
The bfa will not make any comment or judgement in respect of either party’s actions. The bfa does, however, reserve the right to act independently in total confidentiality, to address issues of underlying ethical principles with our member franchisors.
If this informal conciliation process does not achieve resolution, the bfa has an independent mediation service which is open to both parties, to allow an amicable resolution of disputes. This is a completely voluntary process which involves independent, qualified mediators with recognised expertise in the franchise sector. Details of this service are set out below. Beyond mediation, the bfa also offers an arbitration service (details below).
The differences between Mediation and Arbitration
From time to time the bfa is asked to explain the difference between mediation and arbitration. Mediation is growing in popularity in the legal and commercial world as a cost-effective way of resolving disputes. Far less costly than arbitration or litigation, mediation has the benefits of informality and confidentiality. In practice it is a process of structured negotiation between the parties. By contrast, arbitration is very costly - a lot more costly than mediation, and much the same cost as conventional litigation. A ruling in arbitration is binding for both parties.
Mediation is a process of structured negotiation between the parties. The mediator is an independent third party whose role isto facilitate negotiations between the parties. The negotiations are on a ‘without prejudice’ basis and the parties are not bound to settle their dispute. The mediator does not give an award or make a decision but any settlement reached by the parties will be recorded in writing and will be final and binding. The settlement can be enforced but not in the same way as an arbitrator’s award. The parties can walk away from the mediation at any stage.
Mediation is intended to be a quicker and cheaper option than arbitration (or litigation). It can be used prior to or at any stage during arbitration or litigation. The following is an extract from a quote from a member following use of the bfa’s mediation scheme. ‘A belated e-mail to let you know that this issue was settled at mediation on Tuesday. XXX did an excellent job for us and I believe we reached a fair outcome …..we spent £12k in legal fees over 14 months, when the mediation cost us about £1600 all in and was done in less than a day! Thanks for facilitating.’ Details of the bfa’s Mediation Scheme are available on the website.
The bfa always recommends that you seek independent legal advice from an experienced franchise lawyer. Details of the Association’s Affiliated Lawyers are available on the bfa website.
This is very similar in many respects to litigation. The parties to a dispute having requested the use of the bfa Arbitration Scheme will have an arbitrator (an individual like a judge) appointed by the bfa to decide the issues between them. The arbitrator will conduct the arbitration in accordance with the Arbitration Scheme’s Rules (see website) and the Arbitration Act provisions.
An arbitration is quite formal in terms of the procedure followed and the manner in which it is conducted and therefore is very much like litigation. The arbitrator will make an award (a decision or judgement) that is final and binding on the parties (there are or may be limited rights of appeal) and this award is enforceable. The arbitrator will charge fees for undertaking the arbitration and costs can be awarded against the parties as determined by the arbitrator.
Arbitration is expensive. It is a lot more expensive than mediation and quite often is more expensive than straight litigation.