From AI to ESG and class actions, top London litigators predict the hottest litigation trends for 2024
If the view of London litigators on the coming year could be summarised in a single word, it would be ‘more’.
The anticipated trends for 2024 are much the same as in 2023 – the development of the class action regime, the growing influence of funding, the rising importance of environmental, social, and governance (ESG) concerns, further technological developments and the underlying context of economic uncertainty.
Few, if any, disputes lawyers predict any major break with the past. Rather, they predict that the effect of these trends will continue to intensify into the next year.
Class actions: bigger bang ahead?
2023 saw a widely anticipated explosion in the class actions space, and that boom is expected to echo into the new year. ‘Group litigation represents a major and growing risk to businesses across sectors and industries, with increasing numbers of group claims being litigated in the English courts’, explains Maxine Mossman, group litigation partner at Clifford Chance. ‘This was a key facet of the litigation market in 2023, and this trend is set to continue. We predict the growth in this area will be exponential.’
The competition sphere has seen an increase in follow-on claims, with litigation increasingly brought without the need for a prior finding by any competition authority. In the view of CC antitrust litigation partner Samantha Ward: ‘These cases are good examples of parties using competition law as a weapon of choice in advancing or protecting their commercial interests. We are acting on more of these types of claims and anticipate this being a feature of litigation for 2024 and beyond.’
But the headline development in competition remains the ongoing evolution of the Competition Appeals Tribunal (CAT). December saw the first settlement in an opt-out claim, with the CAT awarding £1.5m in damages and costs in the in car delivery charges cartel case. The settlement saw Compania Sudamericana de Vapores (CSAV), the smallest of the twelve defendants, exit the claim, which will continue for the remaining defendants.
The settlement is a major step for the nascent class actions regime in the UK. What will be even more important, however, is the first full trial of an opt-out claim in the CAT. ‘It may be that 2024 is the year we finally see a collective proceedings claim go all the way to trial in the CAT’, says Heather Gagen, head of the dispute resolution department and co-head of the ESG and impact group at Travers Smith. ‘The results of this are eagerly anticipated.’
In the absence of precedent in the UK, many firms may look abroad to inform their strategies on group litigation. The regime bears similarities to those in the US and Australia, and firms with experience in those markets see particular opportunities. Mayer Brown global litigation and dispute resolution practice co-lead Ian McDonald comments: ‘In terms of pitching, we certainly leverage the class actions experience we have in the US. The process is different, but some of the principles are the same; whether it’s the same claim, or the same loss, for example. Because class actions here aren’t as common and don’t have the same history, it’s the obvious place to leverage our experience.’
As this regime develops, claimant firms and funders have continued to devise novel approaches to test the limits of what sort of claim can be brought in the CAT. Freshfields disputes partner Cat Greenwood-Smith comments: ‘In 2024 we expect to see further use of the collective proceedings regime to pursue opt-out claims in the Competition Appeal Tribunal that are not concerned with conventional antitrust issues at all, but are effectively about non-competition law issues such as information opacity, product liability, data privacy, and environmental breaches.’
Funding: the banquet continues in the aftermath of PACCAR
With the growth in class actions and claimant firms looking to hold corporates to account, it is unsurprising that the litigation funding industry continues to be busy, despite a tumultuous year.
Pressure from investors wanting to ensure solid returns, coupled with an unhelpful judgment in PACCAR that required many existing litigation funding agreements (LFAs) to be renegotiated, has ruffled feathers. But the ever-resilient funding industry has adapted relatively smoothly to this, with many renegotiations being resolved amicably. In Therium v Bugsby, however, there were signs of tension, with Therium client Bugsby Property arguing that the entirety of its LFA with Therium was unenforceable.
As these renegotiations were taking place, lobbying from the industry resulted in the addition of an amendment to the Digital Markets, Competition and Consumers bill that would allow the use of damages-based agreements (DBAs) for opt-out collective proceedings in the CAT. In the words of Tets Ishikawa, managing director of LionFish Finance, ‘the amendment, if passed into law, would confirm what has always been intended since the DBA regulations were first introduced in 2013.’
He adds: ‘The speed with which it has moved shows how critical a role litigation funding has in the legal ecosystem and the deep-rooted support there is in this country.’
For Patrick Boylan, head of UK dispute resolution at Simmons & Simmons: ‘Funding has had a significant impact on the market. It’s encouraged the growth of really significant cases. It’s obviously impossible to know what would have happened in the counterfactual, but funding certainly seems to have enabled cases to be brought that would not otherwise have been brought.’
There are some in the industry who raise concerns that funding could incentivise the bringing of bad claims. But Simmons disputes partner Robert Allen ably summarises the opposing view: ‘The level of diligence that quality litigation funders apply has meant that, while we have seen a far greater number of claims, we haven’t seen a decline in quality’.
Despite the turbulence, views from funders and lawyers alike are that the industry is one that will continue to grow in 2024, despite the higher interest rate environment.
Technology and scale: courts remain between the buttons
Across the disputes sector, as elsewhere, the use of technology and AI are popular topics of discussion. Lawyers are particularly enthusiastic about the potential of AI in large-scale data analysis. ‘Anything that can help us wade through millions of documents and make sense of them helps a lot’, says Stephen Moi, litigation partner at Mayer Brown. ‘I qualified in 2010, and since then things have changed massively. Back then, very few people were using these tools. Now, unless we’re on a case with an extraordinarily low load of documents, the courts expect us to be using it.’
Similarly, AI allows lawyers and others in the market to better analyse what sorts of claims are being brought. This in turn allows disputes teams to give clients more accurate predictions of what challenges they will face, and to help prepare for the sorts of work they are likely to take on.
This is particularly useful as courts struggle to deal with ongoing increases in the number and size of claims on their plate. With the courts under pressure due to an increasing number of claims, trials are regularly listed for years in advance. In response, many judges are bundling claims together, to hear several at the same time.
Paul Lewis, joint managing partner of the global disputes practice at Herbert Smith Freehills, expands on this approach: ‘It’s quite interesting to see how courts have managed an increasingly litigious environment. When faced with the volume of Covid claims, we saw judges put in charge of a consolidated number of cases, and many were heard at the same time. Now with the war in Ukraine, one of the biggest pieces of litigation is the insurance claims arising out of aircraft that haven’t been returned to lessors – the court has agreed to hear a number of these in one trial in October 2024. We’re seeing the same thing in the class action space in the diesel emissions cases.’
Also in the name of judicial expediency, a judgment in Churchill v Tidvill County Borough Council will allow courts to require claimants to use mediation first, and stay proceedings pending this. For Lewis, the decision will add to the impressive mediation capability already present in the jurisdiction: ‘We have a very sophisticated mediation offering in England and Wales and with the courts now really getting behind this it will be interesting to see if it still further enhances the standing of our judicial system.’ A combination of this and signing up to the Hague Convention of 2019 that allows for easier international enforcement of England and Wales, only further burnishes the reputation of the courts in England and Wales.
ESG: steel wheels keep rolling
ESG continues to loom large over the litigation landscape, though lawyers are perhaps more likely to sound a sceptical note on the topic than they were a year ago. ‘ESG has been everywhere’, notes Stewarts commercial litigation partner Alex Leitch. ‘There’s a lot of investments in this space, with investment managers keen to promote ESG credentials. In theory you can get a lower interest rate or a higher return if you’re ESG compliant. The question is whether there is really fertile ground for significant claims, there’s difficulty with the quantum for these. For example, if a pension fund has invested in a fossil fuel company when they said they wouldn’t, you might have gained more money rather than lost from that investment decision.’
On the climate front, few believe that there will be any dearth of public law environmental claims. But the failure of ClientEarth’s derivative action claim against Shell has closed off what many on the claimant side of the market saw as a promising route for climate activists to pursue claims. Few commentators if any believe that activists will simply give up on pursuing change through the courts. But there is little consensus yet on how they will do so.
Regulatory changes, too, have yet to bite. The CMA, FCA, and ASA have paid increased attention to greenwashing. And the digital markets bill contains provisions that would introduce steep fines for companies that make misleading green claims. But any steep increase in claims relating to greenwashing is still a way over the horizon.
And regulatory change does not go just one way. For Alston & Bird arbitration partner Will Hooker, the UK government’s decision to delay the introduction of a ban on new petrol and diesel cars and vans from 2030 to 2035 may drive disputes. ‘There are a load of companies that have responded to that change with the sort of language that you often see accompanying BIT claims. They’re saying ‘we’ve made our investment plans based on a 2030 phaseout, we need consistency of policy in order to organise our businesses’.’
In addition to changes in regulation, litigators point to volatility in energy prices as another factor set to drive disputes in 2024. ‘Any time you see energy price volatility, you also see litigation and arbitration’, explains Hooker. ‘Businesses can’t sustain an environment where you go from $10 oil and gas to $100 and back again. And in the renewables market you’ve got a similar problem: whatever pricing regime you have, you’re exposed to this volatility on the carbon-related market.’
Looking ahead
2024 is set to see changes in a wide range of areas, then. And those changes will begin imminently. Boxing Day 2023 will see the Economic Crime and Transparency Act come into force, which will create a new offence of corporate failure to prevent economic crimes, and replaces the ‘directing mind and will’ test with a ‘senior manager’ test.
Addleshaw Goddard investigations partner Michelle De Kluvyer explains the importance of the change to the identification doctrine: ‘This traditionally attributes criminal conduct to a company in circumstances where a directing mind and will of the company engages in the behaviour. The change dials up the risk for the corporates, conduct that previously would’ve been an individual issue is now a whole company issue.’
The start of January will see Liza Gormsen, the director of the Competition Law Forum at the British Institute of International and Comparative Law, attempt to be certified as the class representative in a highly publicised claim against Meta, following an unsuccessful certification hearing in 2023. ‘The Meta claim was rejected on the basis that it didn’t lay out a clear blueprint to trial’, says Boylan. ‘But the CAT also indicated that part of the claim had been improperly framed as a competition claim when it was in fact a consumer claim’. In a climate where claimants continue to explore the bounds of what can constitute a ‘competition claim’ for the purposes of the CAT, both the reformulation itself and the decision will be interesting to watch.
Also in January, the first antitrust collective action will be heard in Le Patourel. In the growth area of class actions, Ward explains that while the judgment might not come next year, ‘seeing how CAT examines this claim will be informative.’
And while s90 FSMA claims have been discussed widely all year, and are predicted to continue, there has been only one relevant judgment to date. The quantum hearing on HP v Autonomy is set for early in the new year, which will further indicate how the securities litigation space is likely to develop.
And while economic indicators look somewhat more positive at the end of 2023 than they did at the start, with both inflation and interest rates starting to settle, there is no sense among disputes lawyers that this will cause a slowdown in work. Alex Leitch gives his view: ‘The economic predictions are not for a full-blown recession; people see it as more nuanced than that, but the market adjusting away from a period of growth and low and stable rates, and people no longer being able to service debt or receiving disappointing returns will catalyse a large amount of litigation.’
As Gagen neatly summarises: ‘The London disputes market continues to distinguish itself for the diversity, innovation and importance of the claims being brought here. The impact of macro-economic trends and world events are starting to influence the disputes landscape.’