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Litigation 2017: Trends & Conclusions

Despite macroeconomic pressures, the UK’s impending exit from the EU and general political uncertainty that surrounded the presidential elections in the US and France, among other recent events, a steady stream of litigation continues to be seen worldwide and volumes of claims remain robust. Lawyers we spoke to note a burgeoning crossover between criminal investigations and civil litigation and an increase in financial and group litigation. As in the legal profession more generally, clients increasingly require a mix of both acute local knowledge and international capability from the law firms they choose to instruct.

The Legal Landscape

The Magic Circle continues to dominate our top 10, with Clifford Chance, Freshfields and Linklaters all featuring. International powerhouse Baker McKenzie also appears, with Schellenberg Wittmer and Homburger contributing to a robust European offering. Quinn Emanuel Urquhart & Sullivan and Lenczner Slaght Royce Smith Griffin make up a weighty North American contingent. The UK Bar is represented in significant proportion by Essex Court Chambers. It would appear that litigation remains well represented globally.

Lawyers told us that clients increasingly prefer firms that can provide both an international outlook and people on the ground in the regions of interest – firms have responded to this by continuing to open regional offices where possible and fewer jurisdictions than ever before seem off-limits. For instance, CMS opened an office in Oman in 2014 – prior to the merger that created CMS Nabarro Olswang – while Berwin Leighton Paisner opened in Myanmar in 2016.

In a post-Brexit UK with a minority government, uncertainty dogs what has, for a generation, been a robust and healthy legal market. One leading lawyer told us that London was still “in some sense the dispute resolution capital of the world”, but added that it now has its own set of challenges to deal with in terms of what things will look like outside the European Union. The Asia-Pacific region is increasingly looking to assert its favourability for disputes and, according to the Financial Times, will become the world’s second-largest regional legal market by 2018. North America will still stand as the largest, but its formerly unassailable status as the key market for litigation is clearly weakening.

What, then, is the solution for established firms working in an increasingly competitive market? Litigate creatively, says one practice head at an international firm. This goes alongside innovative fee structures and leaner teams, which drive cost efficiency and also work well for associates, who accordingly receive a bulkier caseload and can cut their teeth on big disputes early on.

Evidence-gathering as a part of wider project management was also mentioned as a key area where law firms can be innovative in their litigation services, and demonstrate the utility of their e-discovery offerings. While they are solicitors first and foremost, partners in particular need to keep a keen eye on how entire projects fit together and how they can maximise time and resources for the benefit of the client. While this all sounds somewhat secondary to the job at hand, interviewees assured us that litigation will only keep growing in importance.

New Forms of Litigation

Litigation continues to diversify around the world. Class-action litigation has an increasing profile outside the US, particularly in Europe and the UK, thanks in no small part to the EU’s Consumer Rights Directive and the UK’s corresponding Consumer Rights Act 2015. However, a recent decision by the Competition Appeals Tribunal to block a £14 billion class-action lawsuit against MasterCard perhaps demonstrates a desire from the get-go to ensure that the floodgates of litigation remain tightly closed.

Labour, IP and regulatory disputes are also set to increase, with both developing and developed economies strengthening legislation in these areas, leading to an increased opportunity for litigation. Arbitration remains litigation’s closest bedfellow, but is still a distant second according to some lawyers we spoke with. Nevertheless, ADR has, over the past generation, established itself as a viable alternative and complement to old-fashioned litigation.

Financial litigation is another area on the rise – not only disputes involving corporations, but also individual cases. Leading lawyers within the industry suggest that personal responsibility and accountability are now the new normal in the financial world. Alongside increased regulation for financial entities, the UK Supreme Court’s recent decision in Prest v Petrodel  that “piercing the corporate veil” – the concept that separating the legal personality of a company from its shareholders is acceptable in certain circumstances – means that individuals, as well as their companies, can now face prosecution in English courts, something that the US and Germany have been doing for several years already.

Alongside such developments is the rise of criminal investigations as part of litigation, most notably in the recent LIBOR case, which resulted in four Barclays bankers being convicted of fraud and sentenced to jail time. This is the first time an English court has issued custodial sentences in the course of any litigation relating to the global financial crisis. Notably, this was sanctioned by the Serious Fraud Office which, like the Competition Appeal Tribunal, looks to want to bear its teeth to a greater extent going forward. In any and all financial litigation with a criminal element, the US DOJ was the trailblazer in writing the rulebook and Germany has stayed ahead of the curve on this.

Data is another growing concern that is likely to yield work for litigation lawyers. With digitalisation rapidly changing business models and data protection, ownership and transference are all big issues for corporations and small businesses alike. The growing trend is for litigation concerning data. A recent report by international firm Norton Rose Fulbright marked out data preservation, privacy and cross-jurisdictional cybersecurity matters as areas that are ripe for increased litigation in the coming years.

All of the above means that cross-border litigation can only get bigger; in an increasingly interconnected business environment, international firms with regional specialisms will reign supreme. Boutiques can still carve out their own niche, however, with plenty of specialist work to go around. In fact, while the behemoths can safely assure themselves of their long-term future, the number of disputes boutiques in the post-crash legal market only continues to rise.

New Rules, Old Game

Of late, lawyers have been kept busy by a variety of issues including – to name just a few – increased regulation and closer regulatory integration among EU member states; an increase in litigation funding; and changes in how litigation is conducted both in and outside of the courtroom.

In the US, regulation has been most prevalent around labour litigation. However, with the current policy of the Trump administration appearing to favour less regulation and more of a “hands-off” approach, this may be set to change. Australia and Canada’s regulatory regimes remain robust, particularly in securities litigation. The power of governments to investigate, particularly in financial matters, has also led to increased regulation. As a result, adhering to regulation registers ever more highly on the list of concerns for litigation practices. EU regulatory policies mean that, increasingly, litigation conducted within member states must adhere to pan-European rulings.

Litigation funding, once treated with suspicion, has now become an established and growing aspect of proceedings. Moreover, whereas historically investors were almost exclusively high-net-worth individuals, the market has matured and diversified to include several significant funding vehicles. One of the key differences between markets is the permitted use of contingency fees. In a market such as the US – which does allow them – litigation funders are enjoying healthy growth, whereas in a market such as France – which does not – the pool remains small. Needless to say, litigation funding has not nearly reached its full potential.

Data protection regulation has also meant increased spend from litigation departments and a greater eye on issues of digitisation within the courtroom. For example, technology assisted review, which only a few years ago was looked upon dubiously by the courts, has been so successfully integrated into courtroom proceedings that it has even been declared in one instance to be “black letter law”.

Conclusion

Where there are transactions, contracts, IP filings and fraud there will always be disputes and litigation. Despite political uncertainty and an underwhelming global economy, and while more companies than before may be willing to settle, businesses will always look to go to court if it means being able to reclaim what they feel they are owed in the form of damages.

Litigation has been aided by a proliferation of forms, but this is tempered by clients who want a head-to-toe service and a litigation team that knows how to provide a cost-effective delivery. Data and digitalisation seem inescapable for the future of courtroom proceedings. All this adds up to a bright future for litigation – albeit one in which the market’s top firms need to be increasingly dynamic and keep a keen eye on the ceaseless and rapid developments in the market.

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W11 1QQ, UK