Should You Settle Now or Take the Case All the Way to Trial?
Key Points
- The decision between pursuing litigation to trial and forcing early settlement is fundamentally commercial, not legal. It depends in the evidence strength, recovery risk, business disruption, and the realistic range of outcomes.
- Part 36 of the Civil Procedure Rules 1998 creates powerful financial incentives for early settlement. A claimant who beats its own Part 36 offer at trial is entitled to indemnity costs, enhanced interest, and an additional award of up to £75,000.
- Civil proceedings in England and Wales regularly take one to two years to reach trial. Complex matters take considerably longer, and that duration must be weighed against the business value of certainty now.
- The CEDR Mediation Audit 2024 recorded a settlement rate of 87% in commercial mediation, with 70% of those settlements reached on the day, confirming that well-prepared mediation produces returns that prolonged litigation rarely matches.
- A credible trial preparation strategy, investing in evidence, disclosure, and witness preparation as if the case will be heard, creates the settlement leverage that enables an advantageous early resolution.
In my experience, most commercial disputes settle before they reach trial. For any senior management team deciding what to do, the real issue is usually not whether that will happen, but when, at what cost, and on whose terms. Businesses that get a solid result to do so because they have prepared properly, kept their timing under review, and stayed realistic about what the case is truly worth. Unfortunately, there is no fixed formula for making that call. A case that is worth taking all the way to trial for one business may be better settled early for another. It depends on the company itself: its financial position, its appetite for risk, and what it actually needs from the outcome. The more useful question is what factors should shape that decision, what points towards early resolution, and what makes it sensible to keep going.
Litigation strategy is not a decision made once at the outset, it is a running assessment, updated at every significant procedural milestone, that asks whether the current approach continues to serve the company’s interests. Businesses that apply that discipline consistently are in a different position to those that follow the proceedings wherever they lead.
Understanding costs
Before any strategic judgement can be made, the financial profile of the litigation must be fully understood. Legal fees are the most visible element. The cost of management time, the distraction cost to operations, any reputational exposure if the proceedings become public, and the risk of a costs order if the claim fails or the defendant makes a well-calibrated Part 36 offer all need to be in the model.
Cases with several parties, or cases that need expert evidence, often take longer than two years in the Commercial Court. For a business, that means legal fees, staff time, and management attention can build up for a long time. Those costs need to be compared with what the claim is really worth. If there is doubt about whether the other side can pay, that matters even more.
Whether you can actually recover the money is often overlooked. Winning a judgment does not always mean getting paid. If the other side is financially sound, enforcement is usually straightforward. If its finances are weak, a modest settlement now may be worth more than a larger judgment two years later.
What is a Part 36 offer?
Part 36 of the Civil Procedure Rules 1998 allows any party to make a formal offer to settle, subject to specific procedural requirements, which then creates significant cost consequences depending on whether the offer is accepted and, if not, what the court awards at trial.
For a claimant, the incentive to make a well-framed Part 36 offer early is considerable. If judgment is eventually given that is at least as advantageous as the claimant’s offer, the defendant faces costs on an indemnity basis from the date the relevant period expired, interest at up to 10% above base rate, and an additional amount of up to £75,000 calculated by reference to the claim value. That combination is substantial. A sophisticated defendant who receives a carefully calibrated Part 36 offer has a strong financial incentive to engage seriously with settlement rather than run the proceedings to trial.
For a defendant, making an early Part 36 offer at a realistic figure protects against the costs consequences of a claimant who beats a low offer. Both sides should treat Part 36 deployment as an integral part of their strategy from the moment proceedings are issued, not merely a last-resort gesture in the weeks before trial.
Should I play the long game?
There are circumstances in which running proceedings to or near trial is the correct commercial judgement. The most compelling is where the outcome will establish a principle governing the company’s future commercial relationships: a dispute about the interpretation of a widely used contract form, or the scope of a restraint of trade clause that will be replicated in future agreements, may be worth the cost of a full hearing because its value extends beyond the immediate case.
A second factor pointing towards trial is where the other side is conducting proceedings in bad faith: making offers designed to delay rather than settle, or repeatedly taking procedural positions with no merit but which impose cost and disruption. Withdrawing early in those circumstances may reward that conduct and invite repetition.
Cases with strong, contemporaneous documentary evidence of the breach and the loss are better suited to trial than cases that depend heavily on witness credibility. Where the outcome turns on which witness the judge believes, the uncertainty is inherently greater. Clear documentary proof reduces the risk of an adverse factual finding, and the prospects of an enforceable judgment are correspondingly higher.
When is early resolution better?
The case for early settlement is strongest where the primary objective is certainty rather than maximum recovery. A business facing a large disputed liability, or a claimant needing to recover cash to fund operations, will often find that a settled sum certain is worth more commercially than the prospect of a larger judgment, deferred by 18 months of proceedings and uncertain enforcement.
Relationship considerations matter too. Where the counterparty is a key customer, supplier, or joint venture partner, taking a dispute to trial makes a continuing commercial relationship almost impossible. Even where the business relationship has already broken down, the litigation process generates a public record. In the Commercial Court, judgments are published. Details about the parties’ conduct during the proceedings can become part of that record. Settlement removes that exposure.
Mediation offers the most efficient route to early resolution in most commercial disputes. Following Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, courts in England and Wales confirmed authority to stay proceedings and require parties to attempt mediation. Unreasonable refusal to engage carries consequences. The CEDR Mediation Audit 2024 recorded an 87% settlement rate, with 70% of settlements reached on the day itself. Mediation costs are a fraction of the cost of preparing for trial.
Preparing for trial to settle on better terms
The apparent paradox of commercial litigation is that the party best prepared for trial is usually in the strongest position to achieve a favourable settlement before it. Thorough preparation disciplines the claims: it identifies the evidence that supports them and, equally, the evidence that does not. It produces a realistic assessment of the range of outcomes. And it signals to the other side that the proceedings will not be abandoned under procedural pressure.
Witness preparation, document review, and expert evidence are not wasted costs if the case settles before trial. They are the investment that created the settlement leverage. A claimant that has invested seriously in its case before the mediation is in a fundamentally different position from one that arrives with a rough outline of its claim and optimistic assumptions about the damages. The former can demonstrate to the other side precisely what they face if the matter proceeds, and can negotiate from a position of genuine confidence.
A well-framed position statement, a clear account of the quantified loss, and a specific settlement proposal calibrated to the realistic range of outcomes will do more to achieve resolution than a general willingness to talk. Mediation should be approached as rigorously as trial preparation, not as a less demanding alternative.
Reassessing at each stage
A strategy that made sense when proceedings were issued may not make sense twelve months later. Disclosure can change the picture entirely. Expert reports may produce valuations higher or lower than anticipated. The other side’s financial position may deteriorate. New management at the counterparty may bring different priorities to settlement discussions.
Formal review points should be built into the proceedings plan: at the close of disclosure, after exchange of witness statements, and before and after exchange of expert evidence. At each review, the question is the same: given what is now known, what is the realistic range of outcomes, what will it cost to get there, and is there a settlement available that delivers the company’s core objective at lower cost and lower risk? That discipline prevents the twin failures of settling too cheaply because proceedings have become uncomfortable, and continuing too long because the sunk costs make withdrawal feel like defeat. Askews Legal’s civil litigation team works with businesses at every stage of this assessment.
Frequently Asked Questions
What makes a Part 36 offer strategically effective?
A strategically effective Part 36 offer is calibrated to reflect a realistic assessment of the claim’s value, made early enough to maximise the period of costs exposure for the other side if they reject it, and accompanied by supporting evidence that makes the offer credible. The technical requirements under CPR Part 36 must be followed precisely: a defective offer will not carry the automatic costs consequences.
Can we be compelled to mediate in a commercial dispute?
Yes, following Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, courts in England and Wales have confirmed authority to stay proceedings and require parties to attempt mediation. Unreasonable refusal to engage with ADR remains relevant to costs orders, and the practical pressure to engage genuinely with settlement processes has increased.
How should we evaluate a settlement offer against our trial prospects?
A settlement evaluation should compare the offered sum against the realistic range of outcomes at trial, not the best-case scenario, after deducting the cost of getting to trial in legal fees and management time, discounted by the probability of succeeding on the key issues, and adjusted for the risk that the judgment cannot be enforced. That analysis should be carried out with the legal team and updated whenever the factual picture changes materially.
What does indemnity costs mean in practice?
Indemnity costs are assessed on a more generous basis than the standard costs-follow-the-event rule. The burden shifts to the paying party to show that costs were unreasonable, rather than on the receiving party to justify them. In practice, indemnity costs orders produce higher recoveries, and they arise most commonly as a consequence of unreasonable conduct or where a party fails to beat a Part 36 offer at trial.
Is it ever appropriate to refuse mediation entirely?
Yes, there are cases where mediation is unlikely to achieve a settlement: where an authoritative ruling on a point of law is needed, where one party is conducting proceedings in bad faith and a judgment with full costs consequences is the only effective remedy, or where the counterparty has indicated it will not negotiate in good faith. In those circumstances, a refusal should be communicated in writing with clear reasons, because courts require a substantive justification and will scrutinise any bare refusal.
