‘Disputes arise when there is disruption, and it seems to me there’s just about every type of disruption at the moment.’
With this, Julian Copeman, a disputes partner at Herbert Smith Freehills neatly summarises market expectations for 2023. It’s going to be a busy year.
From the war in Ukraine, to soaring inflation, interest rate hikes and a cost of living crisis, business conditions couldn’t be much more precarious. Add in a steady trickle of litigation from the Covid pandemic and litigators are predicting a boom year.
As Hogan Lovells financial services litigation partner Alex Sciannaca comments: ‘In normal years, parties may choose to sit on the fence for a period before launching claims, but with the economic downturn, and financial pressure building on some businesses, it may not be possible to do that – the need to pull the trigger on claims sooner rather than later intensifies.’
In the same way that many of the disputes stemming from the financial crisis only got going in the 2010s, they predict that 2023 will see a number of cases starting that relate to breach of contract due to Covid.
‘When the credit crunch hit in 2008, everyone was asking: “Where’s the litigation? You’d expect to see litigation arising,” explains Copeman. ‘It didn’t happen in 2008, there was just a lot of running around and trying to solve immediate issues. But it came through in the early 2010s and then there were years of litigation that ended in about 2018. Now there will be disputes that will start and last for the next few years.’
It’s a viewpoint shared by many of his peers in London. Mark Sansom (pictured, centre), Freshfields Bruckhaus Deringer’s London head of dispute resolution and co-head of the global competition litigation group, says that he ‘has not known a time where it’s been as busy as it is now in over 20 years’, adding that ‘certain areas are off the charts in terms of level of activity. We are incredibly busy right across London.’
Simmons & Simmons UK disputes head Patrick Boylan points out that while the last few years have been boom times for M&A, ‘the economic climate is very different now than it was when people were entering into these deals’. In his view, the sight of heavy clouds on the economic horizon will likely encourage clients to seek potential redress through dispute resolution.
But while partners may be expecting a boom in disputes work generally, there are a number of trends in particular that they identify. Here, we take a look at where litigators expect to be busy in 2023.
ESG – related disputes
According to Linklaters’ global disputes head, Alison Wilson (pictured, left), ESG-related disputes have been defining the global disputes market since 2020. She adds: ‘There’s been an increase in greenwashing claims, activity against states for climate inaction, and interest from other regulatory authorities including the Competition and Markets Authority and the Advertising Standards Agency for false advertising claims.’
Sciannaca warns that companies need be aware that they ‘could potentially be liable for acts of overseas subsidiaries, and also need to undertake appropriate due diligence and monitoring of overseas suppliers to ensure that anti-bribery and corruption standards are met. Claims by NGOs could pose particular challenges, as their motivation for taking legal action may extend beyond financial redress to a desire for meaningful change.’
According to partners, they are now seeing disputes mandates across the E, the S and the G, including ESG compliance work and supply chain disputes around sustainability and modern slavery issues.
Group litigation
The rise of group litigation has been one of the big stories in disputes in recent years, and lawyers expect this trend to continue in 2023, particularly in areas such as competition. ‘We will continue to see a growth in collective proceedings actions,’ notes Mark Molyneux, head of disputes at Addleshaw Goddard, ‘especially in the tech space.’
Freshfields global head of dispute resolution, Sarah Parkes (pictured, right), adds that 2023 is likely to be the year when class actions activity in the UK hits maturity, with cases going to trial and settlement details emerging. She comments: ‘The mass claims in all their forms, all those proceedings will come-of-age. In the last year or so, you’ve seen Merricks v Mastercard go up to the UK Supreme Court and back on threshold legal issues – you’ll now see some of those cases actually go through the trial process.’
Litigation funding
With general disputes activity and group litigation looking busy, it’s unsurprising that litigation funding activity is also expected to boom. Sciannaca says there are an ‘increasing number of clients considering litigation funding as a route to pursuing claims, including those that wouldn’t normally have been interested in it’.
Copeman adds: ‘In troubled times people look to invest in things that seem safer. The funders have a spread of cases, they know what they’re doing in terms of spreading risk, so money will keep flowing towards litigation funding, and in the last few years that’s become a force within the market.’
Competition litigation
Competition disputes have been increasing in recent years and many predict this to continue. At Linklaters, Wilson says: ‘the competition litigation sphere will be extremely interesting. It’ll be interesting to see how the competition appeals tribunal deals with the increasing number of non-traditional claims. There’s been a move away from only traditional competition claims, such as price fixing or abuse of dominance, to broader allegations of unfair trading practices.’
Copeman highlights the shift towards competition class actions, pointing out the Meta claim that his firm is advising on. ‘You’re seeing these claims against Big Tech being fashioned as competition claims, and contentious competition litigation.’
Over at Travers Smith, dispute resolution partner Toby Robinson comments: ‘I expect funders to continue to see competition claims as potentially fertile, if uncertain, ground.’ However, he warns that ‘funders aren’t charities – as long as there are problems establishing damages, they’ll be reluctant to fund claims’.
Crypto & blockchain
Digital assets, blockchain and crypto-related claims are also increasing, according to Sciannaca. He points out that one consequence of this increase is that ‘the English courts have been asked to grapple with some tricky issues concerning frauds perpetrated by unknown persons, including the hacking of crypto wallets – and we are seeing the law adapt to allow the victims of fraud to pursue their claims, despite the inherent challenges these types of case present. We’ve seen some progressive thinking from the commercial courts in England, and London could well become a destination of choice for digital asset disputes, where jurisdiction allows for it.’
The high-profile collapse of cryptocurrency exchange FTX has had what Damian Taylor, disputes partner and co-head of international arbitration at Slaughter and May, calls a ‘ripple effect’ across the sector. He continues: ‘Because it’s so new there isn’t really law there’, so investors trying to get their money out of crypto exchanges may find themselves navigating knotty and tortuous paths without clear and well-trodden routes.
Investigatory activity
The final trend that Wilson anticipates is an uptick in investigatory activity. She concludes: ‘The post-pandemic period across the market as a whole saw a decrease in regulatory activity, but we’re starting to see this pick up again, and the FCA is looking to clear some of the longstanding investigations that it has been managing as the new director of enforcement comes in in April.’