Roundtable: Commercial Litigation

The International Who’s Who of Commercial Litigators has brought together five of the leading practitioners in the world to discuss the key issues facing litigators today.

Participants:

Gregory Joseph
Gregory P Joseph Law Offices LLC
USA
Kent Thomson
Davies Ward Phillips & Vineberg LLP
Canada
Andrew Salgo
Baker & McKenzie
Australia
Jonathan Wood
Clyde & Co LLP
England
Alvin Yeo SC
WongPartnership LLP
Singapore






Current Economic Conditions

Who’s Who Legal: Previous economic recessions have generally been accompanied by a rise in commercial litigation. Is the current global financial crisis any exception?

Gregory Joseph: There is a great deal of commercial litigation that has been spawned by the credit crisis that began in August 2007 and accelerated dramatically following the collapse of Lehman on 15 September 2008. There is one difference in this recession, though. The financial institutions have been directly and seriously affected. This has at least two implications. Many cases that are being considered remain pending because the viability of the prospective defendants (eg, hedge funds or private equity funds) and therefore the collectibility of judgments is in doubt. Second, credit is tight, and commercial entities have to muster resources for other purposes as well as litigation. Credit scarcity has an impact.

Kent Thomson: Speaking from the perspective of a Canadian litigation counsel, it appears that the current economic climate has had virtually no impact on the sort of complex “high stakes” litigation we tend to focus upon. These include securities cases that arise in the takeover bid context. There is, if anything, a much greater volume of litigation of that nature than people might have thought would be the case. It appears that as a general matter, many companies have virtually no choice but to proceed with or defend cases of that nature. Litigation that is more discretionary in nature, however, has diminished for the reasons Greg Joseph mentions. There has, as well, been an increase in insolvency and restructuring-related litigation as more and more companies experience the inevitable impacts associated with tightening credit markets as well as substantial increases in accounts receivable and bad debts.

Andrew Salgo: With the notable exception of the insolvency area, I do not believe Australia has yet seen a rise in litigation as a result of the crisis. But large disputes and serious claims operate on long lead times. The likelihood is that lawyers will see a trend to increasing involvement with disputes from now for the next couple of years. Whether these hit courts for final determination, or are able to be dealt with (in the main) in smarter, better, less expensive ways, remains to be seen.

Jonathan Wood:Yes, in England in relation to commercial disputes there is a difference in the current global financial crisis as compared to previous recessions. With notable exceptions, there was not the general upswing in commercial litigation in areas where it was perceived this might occur. The anticipated disputes between financial institutions, while much talked about, have not materialised to a significant degree. There have been some notable collapses as with Lehman Brothers and Madoff Investment Securities but these do not represent a trend. In certain areas, where longer term contracts are usual, such as commodities and shipping, there has been an explosion in disputes. This patchy approach, which has seen many companies reluctant to litigate, has been due to a need to conserve cash, rather than spend it on the lawyers, on the one hand, and not to throw good money after bad, where the prospects of enforcement are more uncertain.

Dispute Developments

Who’s Who Legal: Are clients favouring alternative dispute resolution methods? What key factors are affecting the number of “pure” litigation cases that make it to court? Is the age of the specialist commercial litigator over?

Alvin Yeo SC: In Singapore, it has been a trend for contracting parties to select arbitration as their method of dispute resolution, particularly where parties are from different jurisdictions, owing to ease of enforcement of foreign arbitral awards and confidentiality concerns. We are definitely seeing an increase in Singapore-seated arbitrations.

Of course, this hardly sounds the death knell for the specialist commercial litigator. The commercial advocacy/dispute resolution skill-set is the same in arbitration as in trial, and most commercial litigators in Singapore have an active practice in both.

Andrew Salgo: To the extent that this question involves arbitration - no notable change.

However, there is an observable increase in the efforts of corporates to avoid the court/arbitration outcome. In my view this has been driven by a number of factors, which include the very high cost of many litigated outcomes – this is more relevant given the pressures of the financial crisis – and the growing sophistication of lawyers (counsel, mediators and judges) in crafting more acceptable ADR solutions and methodologies.

Commercial litigation continues to meet a necessary business need. However, the market has compelled more effective and responsive solutions (not just cost-effective) to be used and adapted, particularly in smaller disputes. This enables, in many cases, earlier settlements and better controlled outcomes for litigants.

Jonathan Wood: We are resolvers of disputes by whatever means available - ADR, court process or arbitration. The modern day practitioner has to be adept in all methods of dispute resolution. If a client comes with an arbitration which requires urgent application to the court for injunctive relief, it is no answer to the client to say it needs to be passed to a colleague to make the application. Likewise with ADR, if the court directs mediation, then the practitioner must respond and deal with it. Precious distinctions are made by some who would have arbitration treated as something different – but this is not so. The increase in ADR is driven by the desire to reduce cost and by the encouragement of the English courts. The increase in arbitration in part is driven by the sectors where there is most activity and where arbitration has for a long time been the venue of choice.

Kent Thomson: I agree that the skill sets of counsel who are successful in commercial arbitrations are essentially identical to those of advocates that appear before the courts. The age of the specialist commercial litigator is definitely not over, at least in Canada. If anything, there is a greater need now for senior litigation counsel with specialised expertise in complex commercial matters than there ever has been. In Canada, serious commercial cases are rarely tried before juries, with the result that companies that elect to resolve domestic disputes by arbitration do not do so to avoid the vagaries associated with the jury system. Rather, they seek to resolve disputes before hand-picked, experienced and respected decision makers that both parties will be comfortable with, in a manner that is more expeditious and less expensive than a full-blown judicial proceeding might otherwise be. Canadian companies that do business internationally frequently resort to arbitrations to resolve disputes for a host of reasons, including (in the North American context) to avoid any risk of having their fates determined by juries in the United States.

Gregory Joseph: The trend toward ADR is, in the US at least, a function of the expense of litigation in the federal courts and the perceived unpredictability of juries in state and federal court. Commercial litigation skills are the same in arbitration as in trial, and the meaningful threat of litigated proceedings is the only reason cases settle, whether in mediation or otherwise. The end of the world has not arrived.

Sector-Specific Litigation

Who’s Who Legal: What do you consider to be the current “growth areas” in commercial litigation? Are any industry sectors witnessing a rise in the number of litigation cases? Have any formerly busy areas seen a drop-off in litigation proceedings in the last year?

Jonathan Wood: Growth areas are in commodities and shipping, with disputes often involving difficult jurisdictions. There is an increase in aspects of financial institution-related disputes coupled with professional indemnity-type cases. There is continued growth in the regulatory type disputes and increasingly public law in the form of judicial review as government continues to intervene in every aspect of business life in England.

Gregory Joseph: Financial institution litigation is skyrocketing against established institutions. The ability to be adverse to major financial institutions is critical. Deal-related litigation is dead.

Andrew Salgo: Litigation arising from restructuring and insolvency is at a very high level in Australia, as I expect it is globally. This is not industry-specific, but tracks all areas of financially stressed businesses. To my observation the level of other commercial litigation has not trended up or down since the commencement of the global financial crisis.

Alvin Yeo SC: In Singapore, commercial litigation has been on the upward swing since the start of the global financial crisis, as corporates experience financial difficulties and liquidity issues arising from the credit crunch. As with the last cycle, litigation relating to restructuring and insolvency is at a high.

While litigation against financial institutions was initially slow, this is likely to increase in coming months. Of particular note is the Monetary Authority of Singapore’s recent report on its investigations into the financial institutions involved in the sales of structured notes relating to Lehman Brothers.

The regulatory environment

Who’s Who Legal: Have there been any recent regulatory and legislative changes in your jurisdiction that might affect the volume of commercial litigation work?

Gregory Joseph: Securities and commodities regulatory changes – such as anticipated short-selling limitations – will likely increase regulatory litigation. Antitrust changes should impact antitrust litigation. General commercial litigation I see as less affected.

Andrew Salgo: Australian federal courts have had a “representative” or class action facility since 1992. However, in the past few years the increased availability of litigation funding, and a number of judicial decisions which have, broadly, supported access to justice through litigation funding, have combined to make class actions in commercial litigation more prevalent. Even apart from class actions, litigation funding has become a more common feature of the Australian legal scene.

Jonathan Wood: The increase in regulation generally especially in the face of the economic downturn and in the area of financial services in particular has been notable. The “class action” in England and Europe has a long way to go before representing the sort of threat to business that it does in North America, although the threat of US class actions to European companies has grown. The English Commercial Court in particular is still perceived as dispensing fair justice to all comers, but at a price.

Cross-border Litigants

Who’s Who Legal: What challenges or advantages face foreign litigants when they go to court in your jurisdiction?

Gregory Joseph: In the securities field, the Supreme Court has granted certiorari to decide whether a foreign plaintiff who purchases or sells a foreign security on a foreign exchange (an “F-cubed” plaintiff) may sue in the US. That decision will likely sound the death knell of that type of case.

Kent Thomson: I believe that foreign litigants are treated fairly and with respect in commercial litigation in Canada, both before the courts and in arbitration proceedings. If one assumes that Canadian courts have jurisdiction to entertain the dispute in question and that forum non conveniens challenges would fail, the only practical impediment of any significance that foreign litigants might face in commencing proceedings in court here would involve being required to post security in relation to any costs awards that might be rendered against them as the litigation proceeds. Foreign defendants are subject to no such obligation, however, and the requirement to post security for costs typically does not arise in arbitration proceedings. There is no particular advantage associated with being a foreign litigant in proceedings before a court in Canada.

Andrew Salgo: As with Kent’s comment, re Canada, Australian courts provide foreign litigants with a fair and non-parochial forum. I do think that some foreign parties are surprised at the rigour and sophistication of Australian judicial processes. Sometimes this is received positively. But there are also times when I know foreign corporates have felt that disputes before our courts have demanded significant time and attention.

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Nominees have been selected based upon comprehensive, independent survey work with both general counsel and private practice lawyers worldwide. Only specialists who have met independent international research criteria are listed.

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