Sponsored briefing: 2021 – a year of change

Stewarts’ Sean Upson considers how the upcoming year will define and influence new working practices

Certain years define and influence our practices for years to come, and 2021 will likely be one of those. If anything, it will eclipse the 2007-2008 financial crisis, where the market disruption played out in the courts for well over the following decade. Unlike 2007–2008, we are not now simply seeing market disruption but also seeing new working practices caused by Covid-19 and the disruptor that is Brexit. These themes are likely to define the disputes landscape for the next decade.

The 2007–2008 market disruption caused litigation in waves. The immediate pause to take stock was followed by the urgent, business-critical claims, followed by close-out/foreclosure disputes, claims to unwind complex derivatives, high-profile insolvency claims and finally, fraud claims. Some of those claims (such as the recent PCP Capital Partners LLP and another v Barclays Bank Plc [2020] EWHC 1393 (Comm) judgment) have only come to court now.

One already detects these trends playing out in 2020 and 2021. The immediate ‘pause’ was reflected in a drop in the number of claim forms issued. This number dropped from about 600 in January 2020 to about 100 in each of April, May and June. Cash was king in the immediate aftermath of the first lockdown, and businesses appeared to draw breath before spending money on litigation.

Claim form numbers returned to some form of normality towards the end of 2020 (about 400 per month). Business-critical claims began to emerge, and the market appeared to realise that we were encountering a new normal. Matters put on hold not only had to be progressed but could be progressed (as to which, more below).

Among the business-critical claims, force majeure and business interruption insurance claims featured prominently. Airbus rejected attempts by EasyJet to declare force majeure in respect of a contract for 107 aircraft, and the French energy regulator (the CRE) rejected similar claims based on the fall in on-sale energy prices. Businesses welcomed the January 2021 Supreme Court’s ruling on the FCA’s insurance test cases.

But we may not see all the disputes caused by Covid-19 until at least the end of the year. Government support and the moratorium on insolvencies have delayed close-out/foreclosure and insolvency claims. The sort of volatility seen in 2007–2008 has not affected derivatives to the same extent in 2021. The full impact of Covid-19 on the legal landscape has not yet therefore been felt.

In the meantime, Covid-19 has brought changes to disputes practice which, in part, will be with us for years to come. The adoption of remote hearings is a prime example.

In March and April 2020, the court heard the first virtual trial in National Bank of Kazakhstan v the Bank of New York Mellon. Trial showed that the format could work in a complex trial with evidence across a number of jurisdictions. In January 2021, Mr Justice Marcus Smith referred to a ‘dramatic shift’ in approach in Bilta (UK v SVS Securities and others [2021] EWHC 36 (Ch), while cautioning that not every case and every issue may be appropriate for a remote hearing. He stressed that having cross-examination of witnesses live in court remains the ‘gold-standard’. Views remain divided on whether trials involving allegations of fraud or dishonesty should be heard remotely. Nonetheless, scores of trials (including multi-week hearings) have taken place, along with the full range of interlocutory hearings.

Covid-19 has brought changes to disputes practice which, in part, will be with us for years to come.

While in a post-Covid-19 world the courts will want to return to the ‘gold standard’ of live trials, there is likely to be greater acceptance of remote interlocutory hearings, overseas witnesses attending virtually and the use of technology. Indeed, remote hearings appear to provide advantages that should not easily be given up. Remote hearings seem to run efficiently, with issues generally being addressed well within time estimates. This appears to be a bonus arising from the even greater need for hearing preparation beforehand. Businesses have also embraced the format. Client representatives can attend court from their desk, minimising time away from other business functions and increasing client involvement and input. Valuable time of overseas employees is not lost travelling to give evidence in the UK.

All this chimes with Sir Geoffrey Vos’s comments in November 2020 that the profession needs to adopt dispute resolution mechanisms fit for new business methods and embrace digitalisation.

Added to all this, Brexit is a disruptor bringing practical and substantive changes that will affect the disputes landscape for some years.

As a practical matter, the cross-border litigation regime has changed and is presently left with ‘gaps’. Change and gaps have traditionally been a source of controversy. The starkest illustration is found in the fact that the Brussels Regulation ceased to apply to new claims issued after 1 January 2021. We have moved from a codified regime setting out when the court will take jurisdiction to a return to common law rules (and where it applies, the Hague Convention). The court will likely have greater discretion to grant or decline jurisdiction or to grant anti-suit injunctions. If the UK’s application to accede to the Lugano Convention is accepted, we may return to a familiar landscape, but a new regime and greater discretion will likely lead to more debates about jurisdiction in the meantime.

Brexit is a disruptor bringing practical and substantive changes that will affect the disputes landscape for some years.

Brexit will also have a substantive impact. Manufacturers have already reported delays and costs caused by the impact of Brexit on supply chains. A clear example is found in the suspension of production at certain car plants at the start of the year. These issues are already translating into the legal arena. Contracts are being reviewed to understand how they allocate new, unexpected costs and delays between the parties.

Ultimately, 2021 will be a seminal year. It will be interesting to review how this year’s events unfold by the time of the 2022 or, indeed, the 2032 Disputes Yearbook.