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COMMERCIAL DISPUTE RESOLUTION: An Introduction

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From day one, 2019 promised to be a year of change, innovation, uncertainty and opportunity in the Commercial Dispute Resolution market. It has lived up to that promise. On the first of January, practitioners and clients welcomed (with some trepidation) the introduction of the Disclosure Pilot Scheme in the Business and Property Courts (B&PCs). While there had been hopes for greater clarity as to the direction and legal consequences of Brexit in the first half of the year, at the time of writing we are still waiting. In other areas, the year has seen significant developments in the third party funding sector and continued success for the jurisdiction as a seat for international arbitration.

The Disclosure Pilot 

While 2019 has seen a number of procedural changes in the court system, including the spread in the use of electronic working from beyond the Rolls Building to the B&PCs nationwide and electronic filing in the Queens’ Bench Division, the most significant has been the introduction of Disclosure Pilot Scheme.

Where engaged, the Pilot represents an innovative response to concerns that existing rules (and approaches) to disclosure and document production had created an environment where litigation was becoming excessively burdensome and expensive. Designed to prompt a culture shift in court users’ approach to document management, disclosure and production, the Pilot has presented clients and advisors alike with a steep learning curve, as they work to new codified and developed Disclosure Duties and novel procedural requirements.

To the extent they still do, court users and courts are required to stop considering the well-established, but increasingly ineffective, CPR ‘standard disclosure’ as the norm for disclosure. Instead, in any given case the very need for disclosure (and document production with it) needs to be broken down on an issue-by-issue basis, and then by reference to a range of potential disclosure Models. Meanwhile, the entire process is to be underpinned by inter-party cooperation and the use of technology.

The Pilot is bedding in across the courts to which it applies, with ad-hoc updates supplied as required to clarify where and how it might apply in a given court. In the first major decision on the Pilot, UTB LLC v Sheffield United Ltd [2019] EWHC 914 (Ch), the Chancellor of the High Court took the opportunity to (amongst other things) reiterate that the Pilot was intended to effect a culture change and to stress that new approaches to disclosure are not to be used as a tactical weapon.

Brexit  

On-going uncertainty over the likely timing and form that Brexit will take (and the legal framework that will follow it) continues to cause some turbulence in the market.

A useful example is the lack of clarity over the manner and extent to which domestic judgments will be enforced in EU Member States after Brexit. There is anecdotal evidence that some clients have adopted a ‘wait and see’ approach to potential litigation, pending clarity, and that others have begun to replace exclusive English jurisdiction clauses with non-exclusive ones (or arbitration agreements) to provide them with alternative options if no easy enforcement regime is put into place.

Naturally, it will be some time before the impact of any such steps will be seen (as well as the fact and impact of similar concerns in the market that some parties may be beginning to swap out English governing law provisions, for the laws of other jurisdictions, in contracts they are now entering into).

More generally, Brexit continues to foster disputes work in some areas, as clients continue to seek advice on the potential implications of the process for existing and future relationships. This includes interest in exploring potential routes out of contracts that are, or promise to become, commercially unfavourable or unworkable in light of Brexit. To that end, the potential for Brexit and its consequences to operate to frustrate a contract has already come under review in Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch). The decision has been described as "to some extent, a test case for the argument that a lease might be frustrated as a result of Brexit and its consequences." Amongst other things, the legal issues arising in EMA’s unsuccessful attempt to argue that the withdrawal of the UK from the EU would cause their under-lease of a property in Canary Wharf to be frustrated, highlights some of the difficulties a party might face in arguing that (amongst other things) the referendum and the UK’s transition from a Member State to third country should constitute a frustrating event for a contract.

Third Party Funding 

England and Wales is understood to be the jurisdiction with the largest number of specialist litigation funding companies and the year has seen significant developments in the funding arena. The market continues to be dominated by the established funder members of the Association of Litigation Funders and, notably, we have seen evolution in the form of law firms announcing facilities with such funders. Some facilities have been put in place following an RFP (Request for Proposal) process run by the law firm, creating closer alignment between the firm, the funder and clients seeking a funded solution to their disputes.

The landscape is changing for funders, too. In Davey v Money and others [2019] EWHC 997, Mr Justice Snowden elected to depart from the ‘Arkin’ cap (what he described as being an approach - as opposed to a rule or guideline - to the effect that a commercial funder’s liability for adverse costs was to be limited to the amount of their financial contribution), ordering instead that the commercial funder in question was liable for all of the Defendants' indemnity costs incurred post the funding agreement, in a successfully defended claim. We wait to see the full significance of the decision, but it may be that moving forwards we see (if the facts merit it) more instances of funders being ordered to pay more significant adverse costs orders, as well as a development in the ATE market, as funders require more ATE cover for an increased adverse costs risk.

Arbitration  

England and Wales, and London in particular, continue to thrive as a centre for international arbitration. Uncertainty over the post-Brexit UK-EU judgments regime looks to have increased the attraction of arbitration as a dispute resolution mechanism (with enforcement in the EU and beyond, under the New York Convention, unaffected by Brexit).

Further draw factors for a post-Brexit English-seated international arbitration agreement include: (i) the potential that if operating outside the recast Brussels Regulation, English courts may be free again to issue anti-suit injunctions to restrain proceedings brought in breach of an arbitration agreement in EU Member State courts; (ii) England may be an effective and attractive neutral seat to resolve intra-EU BIT arbitrations following on from the CJEU’s judgment in Achmea, which undermined intra-EU BIT arbitration within the EU.

Statistics, albeit for previous periods, support the picture of a buoyant market. Reports for 2018 published by both the ICC and the LCIA show an increase in the number of arbitrations in the UK, with banking, energy and finance cases dominating the London arbitration sector, and a strong showing by the LMAA with an impressive volume of cases recorded in 2018. Despite many established and new arbitration centres in the world vying for position, in a post-Brexit world, it seems likely that the jurisdiction will maintain its standing as a leading centre for international arbitration.