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Should You Accept the Settlement?

Should You Accept the Settlement?


Two parties have a falling out and call in their lawyers. Both sides argue that they are right. “Each side’s version of events cannot be true. How can they have such different beliefs about what happened?” asks Stephen Bate from CEDR. And how do you know when to accept the other side’s terms to settle?

Lawyer showing paperwork to clients only hands visible

Legal advice, commercial factors and decision-making in mediation.

Forecasting of case outcomes by lawyers is a key part of mediation. Are we going to win our legal case?

But what is the role of outcome prediction in settlement and how does it connect to decision-making: whether to settle or go to trial or the final hearing of an arbitration?

First, it is important to understand the value and limitations of a forecast, or what is commonly referred to as ‘advice on the merits.’

Most legal cases are decided on the facts. The winner is generally the party who satisfies the tribunal that its version of events is the more likely, though legal points (e.g. the meaning of a contract) may also affect the outcome.

A breakdown in trust is often at the heart of a commercial dispute. Lawyers are brought in and the correspondence hots up. Both sides argue that they are in the right. Each side’s version of events cannot be true. Parties to the same transaction, how can they have such different beliefs about what happened?

In discussions with the writer, the late Sir Brian Neill (former English Court of Appeal judge) said that when he heard the evidence as a trial judge, each side often appeared to be living in a different world.

There are several reasons for what may be called ‘the problem of two worlds’ in outcome forecasting. Limitations in human perception/recollection, the critical role of bias and the shortcomings inherent in prediction all contribute. Lack of access to information is often less of a factor. The information gap narrows as a case progresses, e.g. with disclosure of documents. But often this does not affect the parties’ perceptions of the likely winner.

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