How to manage unwanted litigation in a Covid-impacted world

05 Oct 2021

You don’t chose to litigate. I often say to clients that you only litigate as a last resort when all other means of resolving things have failed. The pandemic has put a massive strain on our Court system so clients can be forgiven for wondering how we can now effectively manage a dispute during Covid times. This is a particular concern where one business acquires another and “inherits” existing litigation that the target is already involved in.

Q.      So since you asked, how are the Courts faring?

 With difficulty. Certain parts of the Court system were already creaking pre-Covid and much is now being done online. Understandably, it’s generally taking longer to get hearings listed. It’s rare at the moment (though not unheard of) for physical hearings to be taking place, although we will have to see to what extent that changes as the landscape continues to change. Obviously there are logistical challenges with doing Court hearings by platforms such as Zoom or Teams, but everyone has had to manage as best as they can. There is always the potential for a comedy moment! But the bottom line is the show must go on and the Courts are still there and functioning.

Q.      What about mediation? Is it still viable to consider this as an option?

 For those who don’t know, mediation is a process outside the Court system where the parties to a dispute come together in the presence of an independent mediator, whose role is to perform “shuttle diplomacy” between the rival camps to explore the potential for broking a settlement. In my experience there is a “dynamic” that you get when you have everyone together physically which lends itself to constructive dialogue. About 75% of the mediations I have been involved in succeed, which was also roughly the general success rate statistically pre-Covid.

Q.      So that’s all gone out of the window then? 

Surprisingly not. Remote mediations have taken over during lockdown and anecdotal evidence suggests that the settlement rate is even higher now, and the view therefore is that they are here to stay. There are various reasons for this. Time and travel costs are avoided in a remote mediation (with my most recent mediation involved one party joining from Thailand). Depending again on how the landscape changes going forward, a remote mediation could suit a party that still needs to be shielding. There have also been cases where the parties simply cannot bring themselves to be in the same building. There’s even talk now of “blended” mediations where some parties are physically with the mediator and others not, although in my experience that wouldn’t be the ideal approach.

Q.      How do we hedge against the cost of unwanted litigation?

There are now many “products” available in the market place whereby a funder will be prepared to underwrite the cost of litigation in return for a percentage cut of any financial recovery that is achieved. Not all cases lend themselves to funding but if this works for a client, it’s a good way to take the risk factor out of running a claim. It’s also possible to buy what’s known as ATE (after the event) insurance, which will cover the costs that you have to pay to an opponent if you lose a case. This is a fast developing area and one which you will need to stay on top of.  

Q.      So is there going to be more litigation in the future?

Most businesses will already have enough on their plate thanks to the pandemic. Unfortunately we are going to see an increase in certain types of disputes because of the unique circumstances in which we now find ourselves. I can see disputes as a result of supply lines being disrupted with parties looking to escape from contractual obligations. Fraud claims are likely to be on the rise, as are insolvency related disputes where businesses that have been propped up by state support finally collapse when that support is withdrawn. There will inevitably be other areas that are “Covid specific”.
We can help you with all of the above areas that have been discussed in this Q&A, should the need arise. Please get in touch with your usual contact at DMH Stallard or Rhod James by email or by phone on 020 7822 1555.

Further reading

Ganz v Petronz FZE & Goren – key decisions of the arbitration claim

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Reversal of changes to High Net Worth Individual and Self-certified Sophisticated Investor criteria implemented

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As discussed in our recent update, the government announced in the Budget that the eligibility criteria for the exemptions, which allow shares and other financial instruments to be marketed to High Net Worth Individuals and Self-certified Sophisticated Investors without the regulatory protections
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FCA to investigate personal guarantees in small business lending following a super complaint

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ECCTA: Fundamental changes for companies and considerations for lenders: Practical points to note

Tyne Harman outlines some of the key considerations for lenders and borrowers alike to be aware of.
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