Litigation

Microhard could decide to sue Froogle in respect of the alleged damage to Microhard's hardware. This would involve the parties needing to follow a number of prescribed legal processes in the lead up to a trial, during which the parties would present their arguments and hope that a judge would find in their favour. This option could result in a judge ordering Froogle to pay damages (i.e. compensation) to Microhard, but there are no guarantees that Microhard would win the case. 

It is worth noting that many litigation processes do not end up proceeding to trial, with the parties instead deciding to settle the dispute outside of court (often fairly close to the scheduled court date). In this sense, initiating litigation proceedings could be a good strategic move to encourage the other patty to settle. Settling early can reduce the parties' legal fees, allow their management teams to focus on running the businesses and, perhaps most importantly, decrease the risk of the businesses incurring the reputational harm that can arise following public court hearings.

That aside, litigation can be costly, time consuming, distracting and damaging to a company’s reputation, whilst the losing party may also have to pay some of the other party's legal costs (which presents a significant financial risk). Moreover, if the contract between the parties includes a clause stipulating that they must first try one or more methods of alternative dispute resolution before they can progress any claims through the courts, then they will have no choice but to initially engage with these alternative options.

Accordingly, clients may initially prefer to pursue “alternative” dispute resolution methods such as open discussions, mediation, arbitration and expert determination, as these are private and can be more flexible, quicker and cheaper than litigation. 

Open discussions between the parties

The cheapest and simplest way to resolve a dispute is often for the parties to engage in open, collaborative discussions between themselves, with each demonstrating a willingness to try to understand the other's point of view and make concessions where appropriate. However, given that we have already been instructed to help resolve this dispute, it appears that the parties have been unable to resolve it between themselves (meaning this option likely isn't feasible).

Mediation

Mediation is a process conducted confidentially that involves the parties in dispute nominating a neutral third party (a facilitator) to actively assist them in working towards a mutually beneficial arrangement (with a view to avoiding a trial). The parties are ultimately in control of the decision to settle and the terms of the resolution. The facilitator is not a decision-maker; he/she merely helps the parties to examine the problems. 

Advantages

• Cost and time: mediation is a cheap and relatively quick method of dispute resolution.
• Preserving relationships: the informal nature of mediation and focus on cooperation means it is an efficient form of dispute resolution in terms of preserving business relationships between the parties. 
• Confidentiality: the courts are not involved in mediation, so all discussions can take place in/remain private.
• Without prejudice: discussions held throughout the mediation process are “without prejudice”, meaning they will not be admissible in court should the mediation fail and the parties proceed to trial.

Disadvantages

• No precedent: settlements/solutions resulting from mediation will not provide legal precedent for future disputes, meaning mediation does not contribute to the prevention/resolution of future disputes.
• Commitment: mediation will only be appropriate/effective if both parties genuinely intend to resolve the dispute out of court.
• Complexity: if the case involves complex legal or factual issues, mediation may not be appropriate.
• Uncertainty: there is no guarantee that the parties will find a solution, so mediation could turn out to be a waste of time and money.

The privacy afforded by mediation aligns with the parties' desire to avoid having to disclose confidential information. However, given that the dispute in question is complex, and has escalated to the point where the parties seem unable to maintain a cordial working relationship, there's a chance that the lack of an expert adjudicator and the informal nature of mediation would make it a less effective means of resolving the dispute.

Arbitration

Arbitration is another process used by parties to settle disputes. An impartial arbitrator (which may be a tribunal or panel) is nominated who may, if the parties so choose, be an expert in the field of the relevant conflict. Unlike any decision or resolutions reached during mediation, decisions reached following arbitration proceedings will be final and binding on the parties (subject to limited exceptions). This method of resolving disputes is therefore more contentious and adversarial than, for instance, mediation.

Advantages                                                                                                              

• Confidentiality: arbitration offers a more confidential dispute resolution process than litigation, as arbitration documents and hearings are private.
• Final solution: a decision made by an arbitrator is generally not subject to an appeal procedure.
• International aspect: the New York Convention ensures that decisions made by an arbitrator can be more easily enforced abroad.
• Flexibility: parties can choose their arbitrators (e.g. experts in the field) and to some extent the rules governing the procedure (parties to litigation must adhere to the Civil Procedure Rules). They can also stipulate that the arbitrator should make commercial (rather than legal) decisions.

Disadvantages

• Expensive: recent research suggests that arbitration can be more expensive than litigation, as the parties have to pay for the arbitrator and the venue (as well as legal advisers). 
• Adversarial: unlike mediation, the arbitration process is not focused on finding a compromise and may therefore strain business relationships. 
• No precedent: decisions made by an arbitrator do not provide legal precedent for future disputes. 
• Third parties: the use of arbitration derives from an agreement between two parties. Unlike litigation, there is no power to join third parties to the dispute unless they agree. 

Arbitration could be a more effective means of resolving the dispute, as the parties could nominate an expert who is able to fully understand the subject matter, and the arbitrator's decision will (generally) be binding and enforceable. However, it is unlikely that arbitration will help to restore the parties' fractured professional relationship, given its adversarial nature.

Expert determination

Expert determination involves the parties appointing an independent expert in the subject matter of the dispute to resolve the matter. Given the complexity of the dispute in question, this could provide a good option for the parties, as an expert’s knowledge and experience relating to the relevant subject matter may place them in a better position than a judge to make an informed decision on the facts. In addition, discussions can remain private, proceedings tend to be quicker and cheaper than litigation, and the parties can agree in advance to be legally bound by the expert’s decision (however, if they do not agree to be legally bound, there is no guarantee that they will resolve their dispute, meaning the procedure could be a waste of time and money).