Online dispute resolution platform for SMEs - Feasibility study

Late payments and the lack of an efficient way of recovering debts are a longstanding problem facing the vast majority of SMEs. We sought at LawtechUK to evaluate and demonstrate how technology could address this problem.

Late payments have a crippling impact on business owners, their employees and wider communities, and cost the UK economy £2.5bn each year. SME late payment debt has risen to £23.4bn and collecting money owed costs SMEs £4.4bn annually, taking up hours of administration time. Resolving late payment disputes in traditional courts takes too long, is disproportionately expensive, and can jeopardise ongoing business relationships.

To address this, we worked with a consortium of legal, technology and alternative dispute resolution experts to establish a feasibility study and proof of concept - which we now publish - for an ‘SME online dispute resolution platform’ to provide an affordable, easy to use environment for SMEs to recover unpaid debts, as an optional alternative to the courts.

Download the study

Jenifer Swallow, Director of LawtechUK at Tech Nation, comments: “Small businesses are critical to our communities and economy. Late payments are a huge problem and the legal system should be there when they need it. It should not be slow, adversarial and hard to access. Our 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.”

The platform enables disputes to be resolved within six to eight weeks, significantly faster than through the court process, deploys a non-adversarial methodology to enable business relationships to be preserved and provides a digital self-service experience, innovating on how disputes can be resolved. The service would sit alongside existing court infrastructure, so businesses would elect to resolve their disputes within the platform instead of starting legal proceedings in court. Any resolutions achieved through the platform would be legally binding. Enforcement of such resolutions could be facilitated through court where needed, embodying the vision for civil justice reform now laid out by the new Master of the Rolls, Sir Geoffrey Vos, and bringing the potential to maximise the best of public and private offerings to achieve optimal user outcomes.

Helen Dodds and Mark Beer, co-chairs of the project comment: “It’s been a great pleasure to work on this project alongside our talented consortium. The system we have come up with aims to do more than merely move adversarial proceedings online. It creates an asynchronous and resolution focused process that delivers ease of use within a constructive environment.”

The study shows how the platform could be established and become financially self-sustaining within a short period, and provides detailed analysis, as well as insight on the development of the platform, taking account of the user and jurisdictional context and available technologies. It also lays out a business case for aspiring providers, estimating the platform could empower UK businesses to resolve +200,000 disputes over a five-year period, accounting for £3.4bn in debt value.

Richard Susskind, LawtechUK Panel member comments: “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.”

The opportunity is two fold - to solve a pressing business problem, and to bring forward an innovative, empowering and less adversarial approach to dispute resolution.

Jenifer Swallow, Director of LawtechUK at Tech Nation, comments: “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, and seize the moment to help recovery, growth, and innovation UK-wide.”

While LawtechUK is not funding or developing the platform itself, in publishing the study we aim to:

• Encourage innovative developers to build and finance the technology, which is recommended to come from a combination of public and private funding.

• Encourage government support, as a critical enabler of the platform in its initial stages.

• Raise awareness within the legal and tech community on the opportunity and methodology it presents.

Whether a dispute resolution and technology expert, policymaker or other interested party, if you would like to contribute, or provide feedback or ideas, to help enable this type of platform to be built, we would welcome hearing from you. You can get in touch here.

Jenifer Swallow, Director of LawtechUK

Sources

Federation of Small Businesses, ‘Stop late payments, save 50,000 small businesses’ (November 2016).

Pay.UK, ‘UK SMEs face debt burden of £23.4 billion’ (November 2019); Financial Times, ‘UK businesses face fines for late payment of suppliers’ (September 2020).

Master of the Rolls, ‘London International Disputes Week 2021: Keynote Speech’ (May 2021).