Commercial Disputes: Should You Settle or Fight?

Corporate & CommercialLitigation & DisputesADR

9 Jun

Introduction

When commercial relationships break down, the critical question for leadership is often the same: do we settle — or do we fight? In 2025, this decision carries more complexity than ever before. Courts expect early engagement. Litigation costs are rising. And the scrutiny from investors, regulators and the media is more intense.

English courts have sent a clear message: businesses must take early steps to resolve disputes or risk being penalised. This was most clearly expressed in Churchill v Merthyr Tydfil CBC [2023] EWCA Civ 1416, where the Court of Appeal confirmed that judges may pause litigation to require parties to engage in mediation. The decision marks a shift: Alternative Dispute Resolution (ADR) is no longer seen as optional or merely encouraged, it can now be required.

Why Settle?

In many commercial disputes, settlement offers the most efficient and commercially sensible path, especially when time, relationships, and reputation are at stake.

One clear case for encouraging settlement is where a dispute blocks business progress. If a contract claim is holding up a funding round, or a shareholder issue is disrupting operations, resolving the matter, confidentially and quickly, can be more valuable than prevailing in court months (or years) later. In fast-moving sectors, the cost of distraction alone may justify early resolution.

Sometimes a business might hold leverage to encourage early settlement. For instance, preliminary analysis or disclosure might expose significant weaknesses in the opponent’s case. That creates a window to negotiate from a position of strength, before the facts become public in proceedings.

Confidentiality is another strong motivation to settle. Once proceedings are filed in court, most documents and hearings become public — often searchable online and accessible to journalists or analysts. Settlement enables non-disclosure agreements, non-disparagement clauses, and a degree of control over messaging that litigation cannot match. For listed companies, regulated entities or those in sensitive sectors, this can be a decisive factor.

Why Fight?

That said, there are clear instances where litigation is not only necessary but also strategically justified.

One is where the legal and evidential position is strong. If the documents clearly support the claim, the contract terms are on your side, and the counterparty is solvent, litigation can be a direct and cost-effective route to recovery. This is often the case in straightforward debt recovery or breaches of well-drafted agreements, especially where legal costs are likely to be recoverable.

Another is where the dispute sets a wider precedent. This might involve the enforceability of key contract clauses, exclusivity arrangements, or intellectual property rights. If a business accepts one challenge on those points, others may follow. In Triple Point Technology v PTT [2021] UKSC 29, the Supreme Court clarified how limitation clauses apply to liquidated damages. The judgment reshaped how such clauses are interpreted and highlighted that some legal questions are worth resolving publicly.

Finally, litigation may be necessary to deter speculative claims. In regulated industries or where multiple stakeholders are involved, settling one claim, even for commercial reasons, can signal vulnerability. In post-M&A disputes or group claims, taking a firm stance can prevent a cascade of similar actions and protect long-term commercial value.

Mediation

In 2025, ADR, has become embedded in how disputes are resolved. Mediation remains the most flexible form. It allows parties to explore outcomes that courts cannot provide, such as renegotiated terms, agreed statements, or future cooperation. It also keeps discussions confidential and preserves relationships where that is commercially valuable.

Importantly, parties that fail to consider ADR in good faith may now face cost consequences — even if they go on to win the case. The message is clear: ADR is no longer a box to tick — it is a core part of the litigation process.

Strategic Decision-Making is Key

Ultimately, there is no universal answer to whether a business should settle or litigate. But the most successful outcomes often follow the same pattern: early legal insight, clear commercial objectives, and a willingness to engage with all available options — including ADR. The businesses that get it right are not just those with strong cases, but those with clear thinking from day one.

For bespoke advice or assistance with any stage of a dispute, please get in touch.

This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.