COMMERCIAL DISPUTE RESOLUTION: An Introduction
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COMMERCIAL DISPUTE RESOLUTION OVERVIEW
There are two particular matters that are likely to frame the disputes market over the next year: the continued evolution of the COVID-19 pandemic and the on-going impact of Brexit, as the economic and legal consequences of the process continue to emerge and settle.
The COVID-19 pandemic has forced wholesale changes to the way parties did business (to the extent they were able) and the way commercial dispute resolution occurred.
Further, as we begin to ease out of lockdown conditions, keeping a close eye on each variant as they emerge, the commercial dispute market outlook is generally positive. While a fast-changing environment (with snap local lockdowns imposed around the world and the risk of such lockdowns set to be a part of life moving forward) we are seeing significant parts of the local and global economy begin to get back to business.
We anticipate a marked increase in the use of ADR to resolve disputes over the coming year. This looks likely to be driven by various factors, including: (a) real potential for a cautious approach and reduced appetite for full scale litigation from parties, as they seek to preserve existing and future relationships to foster their recovery; (b) through the provision of guidance from business groups; and (c) potentially, by requirement through changes to the Civil Justice System.
We have seen published guidance from the British Institute of International and Comparative Law (BIICL), in its Concept Note 3 (“On guidelines for the resolution of disputes following the 2020 pandemic”). Published as part of BIICL’s “Breathing Space” series, reflecting this zeitgeist the Note proposes practical guidelines for the legal and business communities to foster a more conciliatory approach to contractual disputes that might arise and to avoid protracted legal disputes.
July also saw the publication of the Civil Justice Council’s report entitled ‘Compulsory ADR’, which promotes the greater use of compulsory ADR processes in the future. While more work on the detail is required, and the changes may not come into force in the next year, the Master of the Rolls hailed the report as opening ‘the door to a significant shift towards earlier resolution’.
Kitchen-table advocacy looks set to come to an end – at least in part. In keeping with the recommendations of the Bars of England & Wales, Scotland, Northern Ireland and Ireland in their joint statement of May 2021, it seems likely we will see a shift back to a default position of ‘in person’ attendance at hearings that are potentially dispositive of all or part of a case. However, it seems likely too we will see remote hearings becoming the default for short or uncontroversial procedural business, as the Courts capitalise on the advances in technology in the last eighteen months.
Anecdotal evidence from commercial litigation and international arbitration indicates a move in that direction.
Insurance and Commercial Contracts
The next year is likely to see many disputes as the past, current (and, unfortunately) future implications of the COVID-19 pandemic are resolved. None are as high-profile as the proper treatment of insurance related pandemic claims.
On the tails of the Supreme Court decision in The Financial Conduct Authority & Ors v Arch Insurance (UK) Ltd & Ors  UKSC 1, and otherwise, we anticipate an uptick in insurance related disputes as the implications of this decision filter through the market. Further disputes are also expected on COVID issues relating to insurance outside the scope of this decision, which addressed only twenty-one sample types of policy issued by eight insurers. This is likely to complement a continued rise in cases involving, or turning on, arguments over the law of force majeure and frustration, in the circumstances of the COVID pandemic.
Unsurprisingly, the decision in the FCA test case (along with the publication of industry materials like the Baltic and International Maritime Council (BIMCO) update to its Infectious or Contagious Diseases (IOCD) clauses) has already affected the way parties who may become liable to large scale claims draft their English law governed commercial contracts. Given the fact that insurers and owners will continue to seek to limit liability for future outbreaks of COVID, or epidemics or pandemics more generally, the ongoing presence and prevalence of COVID means there is much scope for fresh dispute.
Several months into ‘Brexit’, we await news as to the applicable rules on questions of jurisdiction and the enforcement of judgments, following the European Commission’s recommendation that the UK’s application to accede to the Lugano Convention be refused (and the subsequent deposit of the Note Verbale to the Swiss Federal Council on the subject). This uncertainty aside, the banking and finance sectors have remained generally strong and steadfast on their choices of litigation in England, irrespective of the EU’s position on the Lugano convention. Many other sectors have inserted material arbitration clauses in their commercial contracts with European parties, since 23rd May 2016.
International commercial arbitration is therefore likely to become an even more attractive option, compounded by the return of the English Court’s ability to order anti-suit injunctions against parties seeking to litigate in the EU, in breach of an arbitration agreement. It will also be interesting to see whether investors begin to structure their EU investments via UK structures, to overcome the adverse effects of the Achmea decision (namely that arbitration arising from intra-EU investment treaties are incompatible with EU law). Despite the UK’s political declaration to terminate its bilateral investment treaties with EU member states, it later joined Ireland, Austria and Finland in refusing to sign the termination agreement on 5th May 2020. Unlike the other non-signatories, the UK is now outside the EU and therefore termination would be futile and disadvantageous, at least from a purely legal, rather than political perspective.
Disputes over the next year
As to practice and procedure, lawyers practising in the Business and Property Courts will have to complement their knowledge of the CPR Disclosure Pilot Scheme (the operation of which has been extended to the end of 2022) with the new requirements of CPR Practice Direction 57AC (Witness Evidence at Trial).
As to the dispute resolution market more generally, standing back, it seems likely that the prevalence and continuation of larger disputes, both in terms of litigation and arbitration are likely to be unaffected by COVID or Brexit, as they have generally tended to be, over the course of the pandemic. Further to the recent decision of the Competition Appeal Tribunal this may include class-action claims against Mastercard. More modest commercial disputes are likely to see a reduction in pre-issue and post-issue trials for the ADR reasons already stated, especially with foreign parties who may have the added risk of fluctuating exchange rates. An increase in reliance on third party funding is also likely, as has already been seen during the pandemic.
Figures for litigation and arbitration remain strong in England & Wales. The 2019-20 Commercial Court report shows 860 cases from October 2019 to September 2020, up from 807 the previous year 2018-19 and 849 the year before, 2017-18, in the same period. The same can be said for arbitration with the London Maritime Arbitrators’ Association (LMAA) reporting 1,775 new cases in 2020. The London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) reported a record number of new cases with 444 and 929, respectively for 2020. All signs point to an active year ahead.