Roundtable: How corporates can prepare for the wave of litigation to come
Following an influx of coronavirus-related claims and virtual trials, as well as reinvigorated litigation funders, there is no doubt that Covid-19 is driving a new approach to dispute resolution.
This emerging trend was put forward by Stewarts during a recent roundtable, with insight provided by three of the firm’s partners alongside general counsel from a whole host of companies.
The debate, which formed part of The Lawyer’s virtual general strategy summit, revolved around three core areas, including risk appetite, the mechanics of litigation and the rise of third-party funding.
Stewarts’ partner Sean Upson kicked off the conversation by addressing how Covid-19 can impact client strategy when it comes to litigation. Most recently, Upson was involved in the mammoth Tesco shareholder dispute that was set to go trial before settling.
One observation put forward by Upson was that there has been a “drastic fall in litigation” of late, with corporates putting decision-making on hold. By referencing data from The Lawyer’s Litigation Tracker, he said it was clear to see in August that the High Court experienced a significant drop-off in the number of claims being filed.
He put this down to “organisations focusing on the acute urgent issues coming out of Covid”, adding that this time lag is comparable to the financial crisis of 2008 when claims arose in waves based on urgency.
“There is a lot more consideration about whether and when to pursue disputes and if can they can be put off,” said Upson.
The tightening of the purse strings also plays a part, with Upson stressing that there is now a “lot more budget planning that existed ever before.”
However, this does not mean clients are rejecting the prospect of litigation altogether, with Stewarts already boasting experience of clients seeking claims that can bring cash back into the business.
As one delegate put it, it is all about “making litigation a profit centre for the company”, particularly when eyeing cartel or securities-related opportunities.
In whatever form the claims emerge, they will likely be entering a new landscape of remote hearings. Notably, Stewarts was involved in the first virtual trial to be heard in the Commercial Court over lockdown, giving the firm’s partners direct experience of the pros and cons of remote proceedings.
“Virtual trials are hard to set up but once you have done so it comes with great advantages,” he said. “The time demands on organisations are very much less.” An example being that GCs can dial in online rather than jumping on a flight to the High Court.
Upson also flagged that “trials are now getting less publicity than ever before” due to court closures, which may be a bonus for clients looking to keep out of the headlines.
One separate topic that sparked inevitable debate was the growth of litigation funding, which since its inception has largely been perceived as a claimant-led tool.
Stewarts revealed it has so far enjoyed a mixed reception when discussing third-party funding with corporate clients, although this has not prevented it from acting in 125 significant disputes on an alternative funding basis.
One GC from a FTSE 250 company admitted it has yet to be convinced by litigation funding: “We’ve looked at it from time to time but you have to share the pie at the end of the day. Unless you are cash poor and you want to take it off your balance sheet, I don’t see the real merit in going down the funding path.”
He added that the more pressing issue for his company is going up against large classes of claimants taking action with the help of funding: “You’re against a formidable force because they’re not paying for their costs at all.”
Stewarts’ partner Stuart Dench echoed this sentiment: “It’s the legal mechanisms that are developing to enable those cases to be brought combined with the availability of capital and insurance. That will mean cases are seeing the light of day that might not have done 10 years ago.”
Elsewhere, another delegate flagged a separate issue relating to a general increase in workload when collaborating with an external funder: “The zero cost in the sense of having to write a cheque is very attractive but it depends on the case.
“One of the things that makes funding slightly less attractive is not the [lack of] control, but the admin burden that comes with having a funded case. There’s a lot of admin in terms of reporting and cooperation. Companies have got to look at not only the cost of writing a cheque but also the cost of reputational, PR management and admin.”
Broadly, funding is just one additional tool in-house lawyers must get to grips with as the litigation market evolves. With a wave of cases to come amid a backdrop of hungry funders and virtual hearings, a new approach to dispute resolution is key.