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COMMERCIAL DISPUTE RESOLUTION: An Introduction

The commercial dispute resolution market is proving to be resilient in the face of a particularly challenging year. The uncertainties surrounding the end of the Brexit transition period were expected but, combined with the global coronavirus pandemic, have led to a double-whammy of disruption across the market.

The current economic climate in the midst of the pandemic is comparable only to times of war, and the effects of the government measures in response have been mixed across sectors. Financial services, for one, have largely been free from the effects of ‘mothballing’ the economy; the retail, manufacturing, and real estate sectors, on the other hand, continue to experience considerable stress and uncertainty.

Company directors, however, have borne the brunt of the burden. Freezing the economy through lockdown has created artificial trading conditions and it is no coincidence that the pandemic has seen a rise in administration proceedings. In addition, the mothballing measures designed to mitigate the economic effect of lockdown have created a novel legal framework within which corporate decisions have needed to be considered. From the Bank of England’s Corporate Financing Facility, the UK Government Coronavirus Business Interruption Loan Scheme, the Coronavirus Job Retention Scheme, to the more recent Corporate Insolvency and Governance Act 2020, the content and scope of the duties of directors and administrators continue to pose questions of unprecedented complexity.

These challenges have come at a time of increased applications before the Companies Court in anticipation of Brexit. As multinational companies continue to restructure their businesses across the EU Member States, whilst now also having to take into account mothballing and lockdown measures, the economic forecast remains uncertain.

Remote hearings: a novel measure or part of the digital economy?

Nevertheless, remote hearings by way of video-conferencing platforms have demonstrated the resilience and adaptability of the English courts in periods of social and market upheaval. Although remote hearings in their present ‘makeshift’ form have elicited mixed responses amongst court users, digitised access to justice more generally can be seen as part of a wider agenda of modernising the English courts and tribunals. It is worth the reminder that this was well under way as early as 2016 with the HMCTS Reform Programme.

Remote hearings in the time of coronavirus may be on the one hand a novel, temporary measure to meet an unprecedented challenge, but on the other, a taste of what is to come.

Jurisdiction: issuing proceedings in England after Brexit

On 8 April 2020, the UK formally made an application to re-accede to the Lugano Convention 2007 when the transitional period under the Withdrawal Agreement comes to an end (due to be 31 December 2020 at the time of writing). Pending the outcome of this application, the extent to which the English courts will be bound by the EU regime for jurisdiction and the recognition and enforcement of civil and commercial judgments is unclear. This is of considerable significance for issuing proceedings in the English courts: under the EU instruments, the general rule is that a defendant, whatever his nationality, shall be sued in the courts of the Member/Contracting State of his domicile, free from jurisdictional challenge.

Case law of the CJEU and the English courts confirms that one of the purposes of the rule is legal certainty for both defendant and claimant as to where proceedings should be issued. For defendants, the rule also provides the advantage of defending the claim in their ‘home’ jurisdiction. Should the UK not accede to the Lugano Convention, and in the absence of any other agreement in this respect, it is unclear whether English domiciles will continue to benefit from such legal certainty, or whether increased consideration of issues such as forum non conveniens will be necessary in cross-border litigation. On the other hand, in such circumstances, English courts would also no longer be obliged to decline jurisdiction in favour of the courts of another Member/Contracting State, which is likely to prove fruitful for domestic litigation.

Witness statements 

On 6 April 2020, amendments to Practice Directions 22 and 32 came into force, providing for foreign language witness statements. In sum: the witness statement and statement of truth must be drafted in the witness’s own language; the witness statement must provide details of the process by which it has been prepared, including use of an interpreter; the party wishing to rely upon a foreign language witness statement must file the foreign language witness statement with the court, have it translated and the translator must sign the original statement confirming that the translation is accurate; the witness statement should also include the date of translation.

Practice Direction 22 also stipulates a new form of the statement of truth which, in the case of a witness statement, expressly acknowledges that the maker of the statement understands that “proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.”

Such amendments come hand-in-hand with an increasing degree of scrutiny on the ‘lawyering’ of witness statements in the Business and Property Courts. On 6 December 2019, the Witness Evidence Working Group published its Final Report, which recognised that, notwithstanding the provisions under Practice Direction 32, witness statements, which often in practice are ‘engineered’ by lawyers and typically approved by the intended witness with only minor amendments, presenting an “aspirational” rather than an “unvarnished” version of the witness’s account, must “if practicable, be in the intended witness’s own words”.

Nevertheless, in contrast to the approach taken under the Disclosure Pilot Scheme, the Final Report did not ultimately recommend radical change, such as re-introducing examination in chief, but made recommendations to inform best practice guidelines. Such guidelines are likely to be forthcoming, especially given the clear message in PCP Capital Partners LLP and PCP International Finance Limited v Barclays Bank plc [2020] EWHC 646 (Comm) and Skatteforvaltningen (The Danish Customs And Tax Administration) v Solo Capital Partners LLP & Ors [2020] EWHC 1624 (Comm) that judges will take an increasingly hard line on witness statements that do not conform with the rules.

Arbitration 

English law continues to thrive in arbitration, both as a supervisory jurisdiction and as the applicable law. On 15 July 2020, the ICC published its statistics for 2019 and, of a total of 869 new cases registered, the most selected place of the arbitration was London (114 cases) and a further 16% provided for English law as lex contractus. The popularity of English law was further confirmed by the LCIA’s Annual Casework Report 2019, published on 19 May 2020. A total of 406 referrals were made, with England remaining the most frequently chosen arbitral seat (89%), reflecting the primacy of London as preferred seat of arbitration. English law was also chosen as governing law for 81% of arbitrations administered pursuant to the LCIA Rules.

The popularity of English law in the arbitration field should continue, with long-awaited clarity from the courts on an issue that has divided the authorities: the applicable test when determining the law of an arbitration agreement. On 29 April 2020, the Court of Appeal handed down judgment in Enka Insaat Ve Sanayi AS v OOO "Insurance Company Chubb" & Ors (Rev 1) [2020] EWCA Civ 574, which fully acknowledged that “the current state of the authorities does no credit to English commercial law which seeks to serve the business community by providing certainty,” and proceeded to deliver authoritative statements of principle as to the law governing an arbitration agreement in the absence of choice by the parties, and relative weight to be given to the proper law of the contract and the law of the seat, where the two differ.

Although guidance from the Court of Appeal is welcome in itself, an expedited appeal was heard by the Supreme Court on 27 and 28 July 2020. The business community can therefore expect a final position of the highest authority in the near future, as well as long-term certainty, on this particular issue.