COMMERCIAL DISPUTE RESOLUTION: An Introduction

COMMERCIAL DISPUTE RESOLUTION OVERVIEW 

As the world and the English legal market emerge from the COVID-19 pandemic and associated restrictions on human life, the direction of the disputes market is likely to be dictated by the devastating impact on business and commerce. Its lasting economic effects plunged markets around the world into recession and put significant pressures on business.

Litigation & arbitration 

In that context, the market for commercial litigators looks strong. Figures for litigation and arbitration show a broadly consistent level compared with the 2019-20 period for the Commercial Court. The 2020-21 Commercial Court report shows 802 claims issued in the Commercial Court over the last 12 months with a further 283 claims issued in the London Circuit Commercial Court. This year, 27% of all Commercial Court cases were general contractual disputes, followed by insurance and reinsurance disputes (8%). “International” cases continue to make up a significant proportion of the Commercial Court’s work (74%).

Referrals to arbitration seem to have declined slightly against the 2020 period, with the London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC) reporting 322 and 840 referrals respectively. This is slightly down on 2020 which saw a record number of filings for both LCIA and ICC arbitrations.

Nevertheless, the Commercial Court continues to receive around 25% of its work from disputes arising out of arbitration. The majority of these claims are challenges to arbitral awards (s.67), challenges alleging irregularity (s.68) and appeals on legal points (s.69). London thus remains an important centre for international arbitration.

Growth areas for commercial disputes 

We anticipate growth in most areas of commercial disputes but in particular those arising out of contractual arrangements which, in a hostile economic and inflationary environment, are no longer economically viable for one party, as well as increased corporate/shareholder fallouts leading to boardroom deadlock and unfair prejudice petitions. Given the prevailing economic conditions, we expect a number of these commercial disputes to have an insolvency flavour.

We expect to see more boardroom disputes generally as the economic conditions put businesses under immense pressure and the rise in environmental and climate awareness brings with it renewed focus on ‘ESG’ type disputes. Global companies are boosting their anti-bribery and corruption mechanisms with greater consideration for their ‘ESG’ commitments. Of particular importance are factors relating to ethical supply chains, employment rights and practices, equality and diversity, and sustainable climate practices.

Shareholders (and in some cases other stakeholders) are becoming increasingly aware of and exercised by these issues. In a likely economic downturn, senior leadership teams and boardrooms will need to manage carefully this tension between profitability and financial resilience on the one hand, and corporate social responsibility on the other.

We also expect a sharp rise in fraud and related civil fraud claims. 2021 saw a 50% rise in civil fraud claims coming before the English courts, accelerating the upward trend for fraud disputes over the last five years. Corporate, banking and tax fraud in particular are on the rise as fraudsters become more sophisticated and central anti-fraud authorities further stretched.

Relatedly, we expect the English courts will continue to grapple with the proliferation of digital assets and their propensity for giving rise to complex commercial disputes. We expect the courts to develop an increasingly creative approach both to the law’s accommodation of this unique asset class and to the procedural issues which can arise between litigants. For example, the Chancery Division of the High Court recently followed a US court’s lead in permitting service of proceedings on a crypto fraudster by provision of a non-fungible token (NFT) on the blockchain. We anticipate English law will continue to establish itself as a jurisdiction of choice for crypto disputes, particularly where issues of fraud arise.

Finally, the effects of the COVID-19 pandemic have not been purely economic. We can expect a resolution to the trickle of high-profile insurance disputes concerning coverage issues for COVID-19 related losses.

Negotiated dispute resolution (NDR) 

Finally, the integration of negotiated settlements into the litigation process is a key objective of the Civil Justice Council and Master of the Rolls, and we can expect the acceleration of that process over the next 12 months.

This acceleration is particularly likely following the Civil Justice Council’s conclusions as to the legality of making NDR processes mandatory for civil litigants in England & Wales. Some form of mandatory NDR in civil disputes now seems more likely than ever; time will tell whether this is the year. In any case, we can expect courts to be pushing commercial parties harder than ever to mediation and other forms of negotiated settlement processes in the next 12 months and beyond. It is now a core part of the litigation process in England & Wales.

James Shaw & George Eyre  

Gatehouse Chambers  

8 August 2022