The Commercial Litigation Summit 2015

More than 160 senior litigators and GCs came together for Legal Business’ first Commercial Litigation Summit on 13 May in central London. We bring you comprehensive coverage of the day’s debates.

London – still delivering for global clients?

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London’s ascent as a global disputes hub marches on.Our panel finds a strong bench, credible enforcement and robust disclosure underwriting London’s courts.

The first session of the Commercial Litigation Summit, a panel chaired by disputes veteran Ted Greeno, tackled London’s supremacy as a global litigation hub. Greeno observed that we have a ‘Rolls-Royce’ system that is comprehensive and expensive, but asked the panel whether it could be made cheaper, and whether this would denigrate what London offers and make it less attractive as a disputes venue.

Fittingly, the first response came from the buy side. Kevin Smith, senior legal counsel at Shell, observed a tension between the way the business world and the legal world perceive the cost-versus-quality analysis. ‘The business will look for something that works, which is not necessarily optimal,’ he said, noting lawyers’ tendency to look for the most thorough response.

Smith argued the London commercial court has an unmistakeable brand, universally acknowledged and respected by international businesses, for the quality of the lawyers and judiciary. That said, there are other options available to global businesses, such as international arbitration. The challenge in keeping the commercial court attractive centres on case management. How individual judges run cases and the way in which they apply procedural rules is absolutely critical, as is law firms and barristers running cases in a proportionate and commercially viable manner.

Simon Bushell, partner at Latham & Watkins, pointed out that clients do not always have a choice on where they are going to be sued and making the English disputes process ‘cheap and cheerful’ would play into the hands of potential claimants wanting to target banks or Big Four audit firms. ‘If you speak to the bankers and the in-house counsel at the Big Four audit firms, many of them are happy to be litigating in the commercial court because they want that commercial process; they value the transparency it brings and the ability to appeal if there is an error that creeps into an otherwise high-quality process,’ he said.

RPC senior partner Rupert Boswall argued the system could benefit from a preliminary adjudication mechanism similar to those seen in construction disputes, which allow 28 days for pleadings and responses, followed by a decision within a very fixed period. The adjudication is not binding, but the decision is reached usually by a QC or an industry expert and the merits of a claim are tested. Many cases, after an adjudication has been made, then settle. Informal research by RPC on adjudications that have subsequently gone to trial showed that few people are persuaded by the advocacy itself in litigation, with opinions changing little from those formed in an adjudication.

The debate moved to controversial damages-based agreements (DBAs), with Greeno asking whether they had made London a more accessible and attractive place to litigate. Boswall argued DBAs were a more attractive prospect than the conditional fee arrangements they were intended to replace, but uptake was slow so far.

Iain Roxborough, a partner at Clifford Chance, said DBAs had arrived and his firm was currently seeing mis-selling case claimants using DBAs against its clients. Jonathan Fortnam of Pinsent Masons noted more enterprising examples, such as Hausfeld in cartel damages actions, bringing together groups of corporates with large claims, presenting the litigation to them almost as a no-lose situation; not having to part with a penny for legal fees, disbursements, or after-the-event insurance premiums. Such an approach will likely come into play in a wave of Libor-related claims.

Bushell added it is undoubtedly a strength of the system if claimants could use funding to bring robust claims they would otherwise not be able to bring, and that would create work opportunities for claimant and defendant firms. He pointed out that third-party funders are also a very interesting dynamic in the market as they are thorough in the way they investigate their claims. ‘If you are a defendant to one of those claims, you have already got to be on top of your game,’ he commented.

Greeno, coming from disputes specialist Quinn Emanuel Urquhart & Sullivan, observed that litigation-only firms are better able to understand the risk of alternative funding approaches to disputes than firms with a much broader practice.

High tech

One of the other major challenges for the English court system in particular is that it does create huge challenges in dealing with bulk evidence, particularly electronic documents. The challenge is to try to marshal this more effectively, using technology in preparation and at trial itself.

Fortnam pointed to the development of the use of IT since the Rolls Building opened its doors in 2011 as a sign of the UK’s commitment and investment in technology to advance its legal industry; it was part of a political imperative to have London as a global disputes centre. However, he warned that simply having the infrastructure is not enough in itself. Initiatives such as online dispute resolution (ODR) for cases involving amounts under £25,000, about which a report has recently been published, are very important.

‘It is not going to be enough for litigators to use IT to bolt on to existing processes,’ he said. ‘E-disclosure can be even more expensive than trial. We have to embrace technologies that do things lawyers used to do. We risk losing our pre-eminence in London if we do not start experimenting.’

One particular area that will benefit from intelligent use of IT is case management, particularly as regards disclosure. Fortnam believes that it will help parties to organise. ‘When you have a massive database of stuff, it is much easier to marshal the information and documents in a more intelligent way, rather than simply marching terabit by terabit into oblivion,’ he said.

The solution is better organisation, not less disclosure. One of the attractions of London to international business is having full disclosure and access to the other side’s documents – something not available in many other courts. Without it, cross-examination fails and the system falls apart.

However, Jasbir Dhillon QC, from the floor, argued that there are limits as to how far technology can help during the trial process and that lawyers themselves also have a responsibility to try to narrow the issues to ensure that only the most important points are addressed. He noted the continued exasperation from the judiciary at law firms ‘throwing the kitchen sink’ at cases. This point was dismissed by some as utopian, arguing that as judges themselves have to address every point, leading to very long judgments, the judiciary was feeding the system it was criticising.

Asset protection

The last point in London’s favour as a global disputes hub is the availability of particular types of interim relief with, sometimes, worldwide application. The panel’s perception was that even in the US courts, it can be difficult to get temporary restraining orders. ‘London really is leading in this area, with worldwide freezing orders, domestic freezing orders, search orders and now the anti-suit injunctions, so to protect the jurisdiction of London,’ said Roxborough. ‘It is not just that these are available; it is that the commercial courts are making them available. They are willing to hold hearings at fairly short notice, issue reasoned judgments which are intelligible and explain why the orders are being made on a substantive basis with proper integrity.’ He added that one of the unique strengths of this system is that the courts are also prepared to issue contempt proceedings against parties who flout interim orders.

Bushell cited two advantages where the UK courts come into their own. One is that in other jurisdictions judges can be more reluctant to get into the detail of what is needed to reach the correct outcome as regards granting worldwide freezing injunctions. The second is that the courts have played their part in ensuring that England is also a popular venue for arbitration and a major factor behind that success comes from granting interim relief in arbitration.

Greeno concluded that the English courts are able to grant interim relief because they have confidence in disclosure from all the parties involved. That is why, he argued, it is essential, if London is able to continue to offer this type of relief to clients, that the full and frank disclosure rule is rigidly enforced.

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The commercial court – procedure and pain

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Budgeting, sanctions relief and case management – the summit’s second session drilled into the key stress points of litigating in London.

In the second session of the morning at the Commercial Litigation Summit, the discussion moved from London’s status as a global disputes hub to trends and war stories over pressure points in the system, once again chaired by Quinn Emanuel Urquhart & Sullivan’s Ted Greeno.

Harbour Litigation Funding’s Susan Dunn kicked off with a topic close to her heart – budgeting, or rather the lack of it. Although the Jackson Reforms introduced a seachange in attitude towards costs in litigation, in practice the belief that he was formalising a practice that lawyers were doing anyway was, in Dunn’s words, ‘a complete lie’. ‘The reality was that we all avoided it and hoped that we did not have to do it, that we could give some rough estimates and hope for the best,’ she said. ‘Therefore, there has in fact been a big change that has come with it.’

According to Dunn, old attitudes die hard; few of those seeking funding compare past estimates to actual costs to gauge how well they are doing in budgeting. The root of the problem, she said, goes back to the training of lawyers: ‘When I talk to people who are now emerging as solicitors, they appear to be doing almost exactly the same course as I was doing in 1989. That is terrifying; that things have not moved on in a way that they need to do and that, in fact, we need to be training ourselves.

‘It is surely possible, based on our extensive experience, for us to be able to look at what we do, gather our management information and become more sophisticated about how we go about things,’ she commented.

Dunn found a challenger in Greeno, who argued that cost budgeting is not the answer to managing and reducing costs. In many cases, he said, it is likely to increase the cost, because once you set a budget, you tend to meet it.

‘The answer is to have much tighter teams that are led more by senior lawyers who are experienced and know what needs to be done and what does not need to be done. So the work is focused, rather than done by large teams of largely unsupervised associates, doing things that do not need to be done and filling their timesheets up because they can,’ he said, referring to a recent case against a Magic Circle firm where its rates were exactly the same as Quinn Emanuel’s but its fees were more than three times more expensive.

Tom Leech QC, formerly of Maitland Chambers and now at Herbert Smith Freehills, struck a middle ground: ‘One size does not fit all and there are important and big cases that will justify all the costs the parties want to spend on the litigation. However, cost budgeting, even from my limited experience of it, does generate a discipline which may be helpful in some cases at least.’

His view was echoed by Essex Court Chambers’ David Joseph QC, who added: ‘I not only agree with budgets, but I think there should be fixed prices for different products. We have become a bit lazy here. What is wrong with just sitting down, thinking about it for 20 minutes and saying: “This is what I am going to charge”?’

From the floor, Mark Berenblut of NERA Economic Consulting commented there is an expectation now that predictability of costs is required, while Ross McCartney of Boies, Schiller & Flexner argued that the legal profession should follow the accountants and bring in project managers, as the pressure to bill for lawyers provides little incentive to budget effectively.

Draconian reversal

The next topic was relief from sanctions, particularly looking at the wave of cases and controversy that followed the decision in Mitchell v News Group Newspapers which, according to one participant from the floor, was ‘ridiculous’ and ‘harms our reputation’, and the subsequent softening of that position in the 2014 case Denton v T H White.

There was general agreement in the room that the effect of Denton was to introduce an element of proportionality to proceedings, an acknowledgment that, according to Joseph QC: ‘In certain circumstances, if you stick by the rules and the time provision without a sensible consideration for the needs of efficiency and proportionality, it will result in an increase in costs and nothing else.’ The hope expressed is that while things will hopefully not return to business as usual, the situation will bed down and the courts will see far fewer Mitchell applications.

Dunn was unimpressed: ‘What are we saying? That we want to just be able to bend [the rules] because we do not like that, because we might lose out? I do not want us to have some odd reputation, but we cannot just choose which bits of the rules apply to us because we do not like them, because they are new, or a bit difficult. So we have to be a bit careful about saying, “We want those bits to be bent more than others”.’

The overarching issue, raised from the floor, from the Mitchell saga was that it illustrates a fixation on the efficiency of lawyers but the elephant in the room is the efficiency of the court, with judges under terrible pressure, embroiled in an administration process that is creaking at the seams.

Keeping control

In the final part, the panel discussion turned to case management in the commercial court. Leech QC looked in detail at how the rules and attitudes have changed in the last 18 months, by reference to three paragraphs in the commercial court guide: paragraph C1, which deals with the form and content of particulars of claim; paragraph H1 on the creation and form of witness statements; and paragraph D8, which covers the commercial case management conference (CMC).

In cases that have dealt with those three provisions in the last year, the experience has centred around wasting the court’s time with overly long particulars and witness statements being struck out. In Leech QC’s view, it is the courts’ time that has mattered and that is a trend that will continue. ‘We have all been warned,’ he said. ‘This firm approach to case management is something that is going to continue. However, it is accompanied by an increasing awareness that one size does not necessarily fit all. Heavy cases will always need a CMC and in most cases parties should to be able to set out the material facts, one would have thought, in 25 pages.’

Leech QC added that strict rules on witness statements spoke to a much wider debate now taking place about the value of oral evidence altogether. Increasingly, he said, judges are questioning the value of oral evidence when the case features documents, particularly when the witness statement deals primarily with information already contained in the documents. In his view, witness statements should be limited to what a witness can genuinely remember, unaided by a gargantuan file of documents.

Finally he noted that ultimately the control of procedure by the court was part of a genuine effort to reduce court time. ‘We have to find a way of limiting the use of lawyers and focusing on the key parts of the case that may involve much more limited disclosure orders or it may involve much more active case management.’

Joseph QC had a slightly differing viewpoint. While praising the ‘extraordinary strengths’ of the commercial court, he has noticed over the last few years an obsession with the application of minute rules that bring a danger of undermining the strengths of the commercial court.

‘We just need to relax a little bit so we can ensure that this work can continue and we do not just become obsessive rule-keepers,’ he said.

It was left to Dunn to round the session off with unsurprisingly the most pragmatic analysis of all: ‘The three most important things in any case are: “Are we going to win?”; “How much are we going to win?”; and “How much is it going to cost?”

‘There is a disproportionate amount of excitement in the cases that we see about winning and then not enough excitement about how much are we going to win and how much is it going to cost. What we should all do, always, right at the beginning of the case, is to ask: “Who are going to be the people presenting the case and what are they going to say?” That is the front loading that we do and is probably the front loading that everybody should be doing in assessing their cases.’

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From red meat disputes to reputation managers

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Rachel Atkins argues that, even in the age of social media, litigators have many tools to protect reputations.

How can you keep ahead of a crisis in the age of Twitter? I would switch that from not can you keep up with it, but how can you prepare? Everything is so fast moving nowadays, you need to be ahead.

Some things have not changed in terms of publicity. Courts were always public. The biggest change is that social media will increase the speed with which everything becomes public and decrease your control. So gone are the days of a press association journalist sitting in court taking a shorthand note, then going away and sending out one press release. Journalists are tweeting in court. It is impossible, I would say, to be fair and accurate of a day in court in 140 characters.

Not that long ago people could say to you: ‘Let’s think about what we want to achieve here. We will come back to you in the morning.’ Now you can more or less say to people not to bother. If it is out there on social media, it is going to carry on being out there. You need to deal with it immediately.

I was with someone the other day who was preparing for a big trial. They had to spend a day with the communications people of the client. That lawyer said the day with the communications experts meant she had to spend all night doing the day’s work in preparation for the trial.

Why does it matter? One reason would be regulators. A lot of regulators have said they are forced by the media to take action if the story has become very public and everyone is reading about it in the press.

One client has a piece of litigation offshore so I know they thought: ‘It is offshore. No-one in mainland is going to read it or no-one is going to hear about it.’ It was a fairly boring bit of litigation but because the words ‘fraudulent misrepresentation’ appeared in the pleadings the heading in a newspaper that covered it became, ‘Fraud, money gone missing’. It effectively stated as fact, as headlines often do, and then somewhere in the small bit says: ‘The case is carrying on and there has been no proof of it.’

The reports are supposed to be fair and accurate, in summary. It was not, we said, and we took a lot of time unpicking various bits in the article. To some extent, [you are] relying on law and driving the lawyers at the publication mad and not letting it go. Eventually, they just pulled the article. So it helped the client move forward that the article is not still up there. You can move to a different narrative. The message would be: ‘Don’t panic and there are some things that can be done.’

Another real change over the years is the cyber element. Years ago I remember doing litigation where there was a huge risk that things would leak. We had all the disclosures on watermarked paper with different numbers so if there was a leak we would be able to tell where that leak came from. That is just impossible nowadays with electronic documents.

We all know that people use litigation for different ends. People leak stuff to journalists. They will leak stuff and there will be a sideshow about what is the real story here. There are things that can be done. In the current climate the media, in particular, are concerned about allegations of hacking. They are worried about whether you can prove by technical means that your services have been hacked into and that is where the document has come from. We work a lot with cyber experts. It is amazing, lawyers used to be able to get hold of documents, Norwich Pharmacal applications, but now it is 100 times quicker for someone with technical knowledge to say: ‘There are certain things I can do to work out where that came from, whether you have been hacked or whether there was a leak.’ They cannot always find out exactly who, but they can go a long way a lot quicker than we can via applications. Private confidential hacked information can be stopped.

Reporters in court can tweet with 140 characters. We had one case where it was a trial and we were involved on the periphery. A junior colleague of mine sat in the public gallery with the journalists all day. She was saying to me: ‘Did you know that there are about five different channels where Sky are putting out their news?’ So it is not just the news in terms of watching it on the TV. Then you have social media and all the other forums. She was following them and she would come out of court and phone journalists and say, ‘That is not accurate. You know that that is misusing the trust’ or ‘That was accurate at nine o’clock this morning, but it is not accurate now’. On that case, it was right to not go in on a litigious, confrontational manner. It worked quickly in terms of changing the narrative. What would not have worked is coming back to the office, drafting letters, because it would already have gone.

There are similar things that can be done worldwide. We had a client where the main proceedings were in the States. It was a case about money. There were no salacious details but it was a good story. Our client was not even a witness but their name was caught up and allegations had come out. Effectively, we worked around the world and followed it through the sun. As the story broke in different jurisdictions, we would engage, if we needed to, with the lawyers or whoever was the relevant publication at the time and say: ‘You have the message wrong. This person was not involved in fraud. These are true facts. Take that article down or change the headline.’ It was immensely time-consuming. A lot of people did not have any sleep for about three weeks but it really worked. It really proved to me not to give up on social media.

The litigation strategy nowadays has to include a reputation strategy. If something breaks it has to be done quickly. It cannot be done tomorrow, on Friday or later in the week. That is just the fact of the world we all live in.

This article is an edited version of a speech delivered by Rachel Atkins, a partner at Schillings, at the Commercial Litigation Summit.

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The legacy of Lehman – financial services litigation

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The summit’s third session looked at how the Lehman collapse changed the face of disputes litigation and what’s to come as the number of crisis-driven claims tail off.

The afternoon session began with a meaty topic, introduced by Signature Litigation’s Abdulali Jiwaji, analysing how the collapse of Lehman Brothers has changed the face of disputes litigation and identifying trends. Jiwaji observed that with limitation periods starting to expire there had been an uptick in claims against banks, while Travers Smith’s Huw Jenkin noted that although there are still claims in the courts, overall the number is decreasing with the Lehman administration over six years old.

‘The back end of the administration would be where you would find the most difficult, most challenging and most unattractive cases. I am told by counsel that there are still some very large, very thorny cases going through the courts,’ said Jenkin.

Brick Court Chambers’ Jasbir Dhillon QC agreed with Jenkin’s assessment, noting there were two broad categories of case, firstly those that directly involve a Lehman entity, which are largely termination disputes, valuation disputes and disputes about the financial effects of a close-out of a transaction as a result of the Lehman insolvency. Separately there is a large group of other cases that qualify as a Lehman-related case because they were triggered by the collapse of the bank. We will soon, he said, enter the ‘enforcement phase’, with the Swiss liquidators of Lehman, which will trigger a whole new wave of litigation.

‘If experience is a guide, we are coming to the end of the Lehman cases, but I suspect that there will always be another financial crisis, albeit almost certainly not quite as big as the Lehman crisis, that will give rise to further fodder for banking litigators,’ he said.

Damian Bisseker, managing director and head of litigation EMEA at Credit Suisse, was on hand to provide the bank perspective on post-Lehman litigation. He said there was a great deal to be learned from the disputes and the detailed rigorous analysis that the contractual methodology has been put through. However, he said he could feasibly see another serious market dislocation and there would always be scope for litigation, despite the lessons learned.

The key issue on Lehman, as far as Bisseker is concerned, is the number of mis-selling cases relating primarily to structured products issued by Lehman amid allegations that bankers should have been on notice that Lehman was going to collapse and should have warned their clients.

‘In all the cases we have taken through, the courts have taken a pretty rigorous view that there is not such an obligation on banks in that sort of situation,’ he commented.

In terms of apportioning blame, when asked why banks have appeared to be reluctant to ‘take the gloves off’ in significant pieces of litigation against other large financial institutions or each other, Bisseker confirmed there is still a great deal of reluctance for banks to take that step against institutional counterparties.

He added that banks would prefer to either reach a commercial compromise or, if they are forced into a litigation scenario, to do that through a Part 8 procedure, in an attempt to obtain contractual certainty and clarification from the court.

‘This should be mutually beneficial for the parties, rather than having bankers being cross-examined rigorously on the stand,’ he said. ‘Failing that, one option we have increasingly turned to is some form of expert determination, or a rather confidential dispute resolution process, rather than taking that step of actually litigating.’

Particularly relevant to that last point was the news from Dhillon QC that a week before the summit, the commercial court and the Chancery Division had issued a proposal and consultation on establishing a specialist court to resolve financial market disputes, branding it ‘the financial list’. The basic elements of the proposal include having nominated judges with expertise in financial markets litigation on a docket system, enabling parties to have the ability to issue claims in that court with a value of at least £50m. Interestingly part of the proposal includes the suggested adoption of a market test case procedure, which will allow parties to obtain English law guidance on issues without the need for an actual dispute.

‘As I understand it, the test case procedure enables the dispute to be resolved with no order as to costs. If it encourages an ability to get a quicker and more effective resolution of a dispute with less adverse consequences if you do not win, then it seems to me to be welcome,’ said Dhillon QC.

Although details on the proposal were sketchy at best, Dhillon QC said he believed the main difference between the proposed test case procedure and what already exists, which is the early neutral evaluation, is that it would be binding.

In the view of Ronnie Barnes, principal at expert witness firm Cornerstone Research, of the main advantages a specialist finance list could bring is that having someone who spends all their working day on such cases would be a great benefit, recounting a recent case before a non-specialist arbitral panel in New York, where there was a concern that the lack of sophistication on that panel would make a lot of the technical detail irrelevant.

Looking ahead to cases that may have a significant impact on the financial services industry, a number of different matters came up. Dhillon QC said he felt that the mood music before Lehman was no different to now: if you were seeking to advance a mis-selling case against a bank, it was almost impossible to succeed unless you could establish fraud with strong facts. Subsequent cases that have failed have borne this out, such as Deutsche Bank v Sebastian Holdings, which was a spectacular indication that life has not become necessarily any easier for a claimant in the commercial court.

Bisseker noted that the doctrine of contractual estoppel, entrenched in JP Morgan v Springwell, is still king but Credit Suisse has noticed judges becoming increasingly critical of bankers, and more willing to find dishonesty and bad faith in bankers giving evidence. However, he noted that the Vestia case, in which Credit Suisse is a claimant and comes before the Court of Appeal in July, is going to be ‘one to watch’ as it will deal with the interesting battle between ultra vires and contractual estoppel.

Jenkin then went on to highlight three likely causes of disputes in the medium term. These include private follow-on claims following regulatory investigations, such as cases against Mastercard and Visa which are due to come in at the end of the year; Libor-related claims will also be coming through the courts, such as Property Alliance Group v RBS. The other significant growth area will be litigation brought by shareholders over the disclosure, or lack of it, of information about a company. The obvious example of that is the RBS rights issue litigation and claims against Lloyds Bank.

One case that was highlighted from the floor that is of particular interest is Bathurst in Australia, where a local authority successfully issued claims for negligence against one of the ratings agencies and some investment banks over its investment in a structured product. Two sets of proceedings are now coming to the UK, one involving the bank, the other involving the bank and the ratings agency and these could open up a swathe of litigation if the agency is found liable for the verdict it gave.

Finally, the topic turned to how the proliferation of disputes boutiques in London is giving clients taking on the banks in financial services claims a number of options. Bisseker said that from a Credit Suisse perspective he only tended to see boutique firms on the opposite side of the table. He commented: ‘The new firms that have come into the claimant market, suing banks, are probably a lot more sophisticated now than they were immediately pre-crisis, when we used to see a lot of small two-or-three-man bands heavily reliant on counsel making a bit of a hash of it for their clients.’

As a barrister Dhillon said that it is striking how the landscape has changed in London from 2007, when there was a relatively small number of law firms that were equipped to deal with sophisticated financial markets litigation.

Bisseker added that the preference for the major banks is still going to be the Magic Circle and, like most of his peers, is not too impressed with one of its firms asking for a conflict waiver: ‘We are not unusual in being quite reluctant to agree to a conflict waiver. In fact, we actually maintain a blacklist, if you like, of any firm that we have seen even threatening litigation against us. They are blacklisted from any transaction or other work across the whole region.’

On the flip side, Bisseker added that from a bank’s perspective the increased incidence of mergers between global law firms is welcome: ‘It actually increases the number of firms that have a significant international reach. We do not have to rely on a network patchwork quilt of different law firms in different jurisdictions, which never works ideally well. If anything, we are trying to reduce down the number of firms we use to have them more knowledgeable about our business and our relationship, and obviously in terms of economies of scale and fees as well.’

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Minding the watchdogs – it’s complicated

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A rapidly changing environment in white-collar enforcement means challenges for litigators and clients as legal privilege come under increasing scrutiny.

Of the topics debated during the day, the area of regulation, anti-corruption and white-collar crime is perhaps the fastest-moving and most high stakes for companies. With a now well-established trend towards tougher measures against corporates in both civil and criminal cases and agencies routinely co-operating at national and international level, it is becoming increasingly difficult for advisers to help companies stay out of the firing line.

Opening the debate on regulation, enforcement and corruption, moderator, Kirkland & Ellis’ Satnam Tumani, noted the change in the last ten years towards pursuing corporate prosecutions and a more recent shift to in addition develop civil actions against companies.

Bringing further pressure on companies to tighten their anti-corruption policies, Tumani highlighted the tougher enforcement stance of the Serious Fraud Office (SFO) under current director David Green QC. He also cited the increased scrutiny these trends have placed on legal professional privilege, as agencies like the SFO fight to stop companies closing down potential evidence with their own internal investigations.

Picking up the point, Daniel Thornton, head of legal in the enforcement and market oversight division at the Financial Conduct Authority (FCA), told delegates: ‘I am not sure that David Green would describe himself as a watchdog. He regards himself as a dyed-in-the-wool prosecutor. He does not watch; he attacks.’

Noting the complexity of the current regulatory framework, Thornton commented on the FCA’s approach in working alongside the SFO on a matter: ‘We work hand in glove, in close co-operation. The position in the UK is nothing like as complex as it is in the US, but it is a different legal landscape. In the US, it is quite common to have multiple civil regulators pursuing the same case at the same time, and each getting their pound of flesh, but also simultaneously to have the threat of criminal proceedings being available.

‘In the US, it is quite possible for a firm simultaneously to reach settlements with the civil regulators, and at the same time enter into a [deferred prosecution agreement (DPA)] with the Department of Justice. The tradition in this country is that we do not tend to proceed against the same entity for both civil remedies and criminal convictions.’

Linklaters partner Satindar Dogra asked if the UK was moving towards a model where an institution would likely face sanctions from both the market regulator for rule breaches and the SFO for criminal offences.

Thornton responded: ‘This is an area that currently is too vague, frankly. Up to now we have managed to work relatively well, because it has been quite clear what sort of things each agency is focusing on at particular times. If you have a US-style situation where everyone is interested in the same thing, that creates all sorts of legal and efficiency problems.’

Asked how a company facing the threat of multiple actions from the FCA and SFO should respond, Dogra was blunt: ‘Plead guilty as soon as possible.’ He added: ‘There are some very important practical points that you have to address, and that applies regardless of how many prosecutors are looking at you. It is really critical that the first thing for you to do is to jump on the evidence and preserve that. Then, you have to work out, at the early stage of any dual investigation, what you need to do as a company to triage the situation. We are going to come onto some issues around disclosure and such like. It is not as simple as just waiting for the prosecutors to arrive or handing things over. You have responsibilities to the market and to your stakeholders to deal with the situation that you face.

‘It is incredibly important to try to maintain a very early and good line of communication with each of those regulators, and to try to understand what the scope is of their investigation.’

However, Dogra warned that policies in these areas will be subject to change while the courts wrestle with emerging issues. ‘If we do end up with a multiplicity of proceedings, then there will be some really interesting case law developing as to which one of those should take precedence. It very likely that the criminal case will be given precedence.’

Pinsent Masons partner Barry Vitou picked up the point about the challenges of managing criminal, regulatory and civil processes at the same time. ‘There is an overarching point, which is like a Facebook update about people’s relationship status: “It’s complicated.”’

Exploring those issues, Vitou highlighted how unsettled the new UK regime is for DPAs, the US-style model of plea bargaining that was introduced last year to aid prosecutors to pursue corporate wrongdoing. Vitou also warned over an increasing tension between companies and prosecutors over legal privilege. ‘There are a bunch of rules about DPAs out there. The SFO put loads of stuff up where it has talked about legal professional privilege. Some of it makes actually no sense. You get into a debate about, for example, whether there is privilege over notes of interviews conducted by lawyers in an investigation. It gets cheesed off, frankly. The flipside is that, if you are a corporate, you want to get to the heart of the matter to understand what is going on, because you have to stop it.’

Linklaters’ Dogra picked up the point: ‘We are all agreed on one thing, and that is that the environment is changing. We are catching up with the US.’ Dogra went on to argue that prosecutors have taken on unworkable positions on privilege, commenting: ‘It is increasingly unrealistic, at that moment of impact, to suggest that litigation at that stage is not reasonably in contemplation, and that the work that you are doing is not actually predominantly for the purpose of that litigation… This area is not properly tested in the law. As time progresses, it will be fascinating to see how it develops.’

Thornton noted that the courts have been ‘grappling’ with the issue: ‘What I think the courts were grappling with was that they did not like the idea that effectively the first account interviews that had been done by the lawyers should actually, in these circumstances, be privileged.

‘There is a whole question of the extent to litigation privilege, where you have different judges who take a rather different view of litigation privilege. The precise scope of litigation privilege is an issue that is probably right for litigation in the English courts. In the end, this does not often turn out to be as big an issue, because it is often parked.’

Tumani concluded that this ‘is the issue in the next decade that will be resolved one way or the other, and will have a fairly profound impact, as to how these processes go forward’.

Stretching liability

Leaving aside privilege, the panel felt that the moves to extend corporate liability for corruption would continue, with Vitou noting that a ‘failure to prevent fraud idea has been doing the rounds, for several years. It has got quite a lot of support’.

He commented: ‘It is extremely hard to come up with a pithy sound bite to say that you are against a law that says it is an offence to prevent fraud. By the time you have gone into the weeds on why it would be technically a terrible idea, you have lost everybody and they are not going to vote for you. There is even some talk of almost bringing in something akin to vicarious liability for corporates for criminal activity, which is sort of what they have in the US with respondeat superior [the legal doctrine that a company is responsible for its employees’ actions conducted during their employment]. You have basically got a mountain to climb if one of your employees goes over the wall and does the wrong thing.’

In a less-forgiving environment, the panel highlighted the mounting pressure on clients to co-operate, with Thornton dryly noting that the FCA Handbook meant that a regulated institution or individual has ‘an obligation to effectively grass yourself up to the regulator’.

Despite the pressure on companies and individuals to self-report wrongdoing, including the threat of tougher sanctions being levied, there was considerable scepticism on the panel about the SFO’s hardline position.

Dogra commented: ‘The problem with the DPA regime as it stands at the moment, is that [Green] really does expect you to bend over and beg for more to put it in a very crude way. He wants complete co-operation. He wants it to be a new case, which has not ever come to him in any other way. He wants full-frontal disclosure of documents in a way that he probably is not entitled to under the law. At the end of all that, he is saying: “Actually, I am really not guaranteeing anything.” In those circumstances, saying co-operation is beneficial has attracted a great deal of scepticism.’

Vitou echoed the point: ‘What they say they want and what they actually are going to get, are two different things. You are thinking, “There is no way on earth anybody in their right mind is ever going to give you that.”’

Nevertheless, Tumani concluded that self-reporting to regulators allowed clients to avoid ‘unintended consequences’, noting problems that Deutsche Bank and Alstom faced for being regarded to have failed to initially co-operate in separate investigations. Noting the extent that prosecutors share information he told delegates: ‘One of the things I did in my old role as head of the mutual legal assistance department at the SFO was to data mine every single request that came into me from foreign prosecutors…to see whether there are avenues for a criminal investigation in the UK. Pretty much all of the prosecutors do that. What you then have is a dynamic where by not co-operating, by not engaging you open up avenues across the world for different prosecutors to take a bite out of the action or to develop their own.’

As Vitou noted: it’s complicated.

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Things have moved on

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Clients give their view on the service and value of disputes advisers and discuss developments from the GC perspective.

The final major debate of the day, ‘Buying resolution – GC perspectives on procuring litigation’, focused on the experiences of clients in buying dispute resolution services.

Judging by what heads of litigation want from their advisers, the assembled clients’ wishlist reflects the wider shifts in legal procurement, with BAE Systems head of disputes Mike Stocks citing the traditional benefits of a formal adviser roster in providing benefits such as secondees, training and better rates, including fixed fees. ‘Law firms that get all those things right and sell all those sorts of services to an in-house legal team stand apart.’

While there was agreement that value and service offered by litigation providers have improved since the dramatic shifts in the global economy in 2009, the panel felt there was plenty of room for improvement.

Paul Wortley, head of litigation for RSA, noted that some solicitors still fail to add much to the process. ‘The particular bugbear I have at the moment is what I call postbox law firms – firms that during the course of litigation are too reliant on counsel. I inherited one pretty large claim when I joined RSA, where it became increasingly difficult for me to work out what real value the law firm was adding. Counsel were drafting the correspondence; counsel had drafted the witness statement; junior counsel had even carried out some document reviews. All I could really see the partner at this law firm doing was sitting in a meeting with me and counsel, pouring the tea and not even contributing to those meetings. There is a particular kind of firm and a particular kind of claim where there is a danger that will happen. That is something I am trying to stamp out at the moment.’

Despite general counsel (GCs) feeling that panels need constant attention to deliver, there was a general feeling that formal rosters are an effective means of buying disputes services, not only for volume, but for complex matters.

Wortley commented: ‘There is real value in developing relationships with external lawyers who then truly understand your business. We are not wedded to our panel for high-value claims; we will go off if we need to. However, if you make your panel decision sensibly, the number of times you need to do that should be pretty small, even on high-value claims.’

Despite an acceptance of a defined framework to instruct lawyers, general counsel had a somewhat jaded view on procurement professionals.

Wortley said: ‘It really depends on the particular procurement individuals and their experience. The danger is if they do not fully understand what is being purchased. They need to try not to shoehorn legal services into the same bucket and processes as are used in large corporates to buy other things.’

Stewarts Law partner Sean Upson was likewise critical of procurement teams, arguing that working with external funders produces a more constructive rigour.

‘We worked with some procurement agents on one file and we had a bad experience, in that they spent their time looking at time and motion studies, and not really assisting in managing the legal spend, the budget and so on. You actually get a very strong budgeted product for the client as a result of going through the [external] funders. My comparison of the two is that that has been a good process, whereas the procurement agents were not good.’

Known unknowns

But while there were mixed views on how to control costs, clients agreed that litigators – traditionally the least budget-conscious commercial lawyers – have become considerably better in the last five years.

Stocks noted: ‘If I ask in advance for some sort of cost budget at the start of something that looks like it might be a protracted bit of litigation, a law firm is more than willing to provide it. There are all sorts of cost-modelling programmes that law firms now have that enable them to create, frankly, fairly good, fairly accurate cost budgets. I have never had a law firm challenge me on the request or provide a budget that has been way off.’

Wortley agreed: ‘If you are talking to a law firm at the outset of a significant piece of litigation and they tell you that it is really, extremely difficult to tell you how much it is going to cost, in this day and age, you are talking to the wrong law firm. Things have moved on from that.’

He added: ‘There are variables; you have to be realistic. My experience is you can actually get reasonably accurate estimates these days, with variables and parameters built in there. What firms sometimes forget is that in-house lawyers often value certainty as much as they value lowering the cost. [But] firms have got better at that sort of thing.’

Upson argued that litigators have largely raised their game on budgeting, but conceded that discovery and excessive staffing remain major problems. ‘When you budget, I always believe in remembering that Donald Rumsfeld quotation: “There are known unknowns.” I always budget for there being two or three known unknowns. Something is going to happen. It is not those; you can predict that something strange is going to happen. It is two things. It is massive over-attention to disclosure. Disclosure can be totally moved out of the boundaries of any common sense because there is a failure to focus on the issues. In a case I have got at the moment, disclosure has just gone from 100,000 documents to 500,000 documents. It is just absurd. In another case, I saw my opponent’s budget move from £1.8m to £2.8m in six weeks. Then you looked around the court and saw 20 people sitting there. It is the padding of the hours and the lack of focus on disclosure [that push up costs].’

BAE’s Stocks said that GCs still need to scrutinise bills closely, adding: ‘Be under no illusion – I review every single invoice that lands on my desk. Even though all our organisations have fairly deep pockets, we are still under a lot of cost pressure. We will scrutinise invoices when they come through and challenge things that do not look right. Things that annoy me would be mysterious people appearing on bills when I have no idea who they are or what they have been doing.’

Stocks added, however, that advisers were increasingly willing to take a constructive line on discussions over value: ‘They are now much more prepared to knock time off. We agree reduced hourly rates anyway, which we are very grateful for. However, they are prepared to round down invoices if there is a feeling that for the work done, they have over-egged the pudding.’

On the topic of costs, there was also agreement that going straight to the Bar can prove a very cost-effective solution. Stocks commented: ‘There is always a place for going straight to counsel for a view on something. It can be cheaper, quicker, will often involve providing fewer documents and sometimes you get a more honest answer. I have seen that side of the relationship develop in the past few years.’

Wortley echoed the point: ‘I can get, from certain chambers, a senior junior with ten years’ call for the same price as someone who is basically a trainee in a Magic Circle firm and he is going to give me a better answer.’

There was less consensus on the role of risk-sharing or outside funding, though Stewarts’ Upson argues that advisers have been too slow to take the options to clients: ‘The other day, in-house counsel came to us with an ISDA [International Swaps and Derivatives Association] close-out dispute. Their current law firm was conflicted. We said to them: “Are you happy that you can cover the cost of this? Do you want to consider [after-the-event insurance]? Do you want to think about how it should be funded?” And – I am not making this up – the guy on the phone said: “Actually, sorry, can you stop a minute; I need to Google ATE and CFA.”’

While there is still considerable reticence among GCs about using contingency fees, Wortley pressed the case for substantive use of fixed fees.

‘The more fixed fees you enter into, the better you get at it. At RSA we have a lot of litigation at all ends of the spectrum, from international shipping arbitrations worth hundreds of millions of dollars to someone whose dog has been hit by a car. We have been offered fixed fees on litigation at every level of that spectrum. It can work and there is an element of swings and roundabouts about it.’

Technology, inevitability, was on the mind of the panel given the advances in predictive technology and data mining in litigation and discovery.

Wortley said: ‘The volume end of our business is particularly interesting. Analytics are becoming more and more important. So we have models that show if a low-value claim comes in and is from a certain part of the country. We are able to get a pretty good idea of how long the litigation will typically last and how much it will cost based on our experience. That is really interesting right now and it is getting more and more sophisticated.’

Nayeem Syed of Thomson Reuters predicted major advances in predictive technology and data mining in disputes, noting initiatives in the US to assess case outcomes on the basis of the track record of the assigned judge.

‘The e-discovery thing is amazing,’ he said. ‘There are a lot of software packages where you upload a document and then it extracts it, summarises it and tries to segment it. I do think that when they say artificial intelligence, what they mean is machine intelligence, because what e-discovery does is machine intelligence. You train it to look for something according to something that a human has ranked.’

Concluding the debate, Upson noted the ability of developing technology platforms to shake up complex litigation. ‘In financial disputes, particularly in close-out disputes, you do not merely need to analyse a lot of data and crunch many thousands of documents; you often need to analyse those very closely on a time basis to match up what is going on Bloomberg, what is going on e-mails, what is going on in chat rooms, what is happening to the relevant stock market index – all at that moment in time. The platforms that are now pulling that together and allowing you to see a snapshot of everything that is going on across all your streams of disclosure are absolutely fascinating. Those are great products.’