Lord Falconer (pictured below) predicted an explosion of ‘mega-litigation’ when delivering his keynote speech at the Legal Week Litigation Forum in
His speech was set against the backdrop of Lehman Brothers’ dramatic collapse a couple of days earlier but the rhetoric recalled the days of Maxwell, Lloyd’s of London and BCCI.
For Falconer, the profession is at the gates of a new era of mega-litigation, the likes of which has not been seen before.
“Until now there has not been a great flow of people trying to blame somebody for the mess the financial institutions found themselves in,” he said. “My own view is that this is about to change.”
While the Lehman bankruptcy lay at the core of his thinking, Falconer also cited the impact of the Legal Services Act and the rise of third-party litigation funders, including hedge funds, that viewed litigation as an asset class.
It would be unfair to describe the audience as shell-shocked after Falconer’s rallying cry, but there were certainly some sceptics among the gathering.
Who could blame them, given the fact that for the last five years most senior barristers and litigators have been bemoaning the decline of red meat commercial litigation in the wake of the Equitable Life and BCCI fiascos.
Sure enough, it was not long before delegates and panellists alike had rolled up their sleeves and settled down to discussing precisely how the courts could be made to work more effectively.
Following the collapse of the Bank of England case — and with a searing attack on the state of the courts by none other than the governor of the bank himself ringing in their ears — the judiciary responded by establishing the Commercial Court Long Trials Working Party, which was chaired by Mr Justice Aikens.
The working party, which unveiled its recommendations last December, called for more judicial case management and limits to the length of opening and closing speeches. It also called for a list of central issues to be drawn up at the outset of cases that would set the framework for subsequent hearings.
While most delegates agreed with the committee’s cornerstone principles, strong doubts were raised about their propensity to frontload costs, with the proposal to agree the central issues being singled out for the most criticism.
“What is proposed will lead to a huge increase in pre-trial costs,” said one speaker, Anthony Boswood QC, of
However, senior Clifford Chance (CC) litigation partner Simon Davis and Commercial Bar Association chairman Ali Malek QC called for the recommendations to be given a better hearing.
Lawyers are often accused of coming up with proposals for the benefit of their clients without consulting them. On hand at the conference to give their views were two senior in-house lawyers: Lisa Cameron, general counsel of Ernst & Young, and Stephen Pearson, head of group litigation at Royal Bank of
Their message was a strong one. What most concerns clients, they said, was the need for certainty and a better command and understanding of how their cases are proceeding.
They were sympathetic to the notion put by panel chair Graham Huntley (right), a partner at Lovells, that if litigants want shorter and less expensive trials, they will have to embrace the concept of ‘rough justice’ — or at least rougher justice.
Judges are often accused of being overly reluctant to intervene in cases, thereby encouraging the lawyers involved to indulge in prolonged trench warfare where every conceivable avenue is explored.
Cameron drew a distinction between ‘bet the company’ cases, where clients needed their lawyers to be aggressive, and the large bulk of litigation.
“Occasionally you want your lawyers to step back and not be as aggressive as they are,” she said.
She said there was no appetite among court users for cases to go to full trials unless absolutely necessary.
Pearson said judicial feedback early on in a case would be welcome because it would allow his bank to take an early call on whether to pursue a case or not.
“A key to making our system better would be more judicial time available and more hands-on judicial management,” he said.
The panel also called for better communication between advisers and their clients. If a case was going badly, they would prefer to know early on. There was a suspicion, they said, that advisers sometimes failed to pass on bad news in the hope they could bring a rabbit out of the hat later on.
Of course, not all companies have the resources to pursue claims in the courts even if they have strong cases. Even clients with deep pockets would sometimes welcome the opportunity to share the risk of losing a case with a third party.
Third-party litigation funding has developed beyond all recognition in recent years. Several new companies have entered the arena and there is an expectation that the number of providers could double within the next six months.
Businesses that have entered this market include IM Litigation Funding, Allianz, hedge fund MKM Longboat and Juridica Investments — which
publicly listed for £78.4m last year. Brokers include Calunius Capital and The Judge.
At the conference Mick Smith, a partner at Calunius Capital, and Susan Dunn, of Harbour Litigation Funding, were on hand to debate the merits of third-party funding.
“A few years ago I was viewed like a double glazing salesman,” observed Smith, “but now law firms have recognised the funding market. I am now getting more presents at Christmas.”
One indication that third-party funders are here to stay is an initiative within the funding community to draw up a set of guidelines.
Dunn, who helped draw up the draft set of rules, said they were likely to be introduced by early next year. She and Smith agreed that a set of mandatory rules would help underpin confidence within the profession in third party funders.
The debate concluded with an acknowledgment that third-party funding was set to become widely accepted. Panel member and Norton Rose litigation partner Sam Eastwood said: “People with money are looking pretty desperately at where to put it, especially at the moment. Litigation is an asset class and always will be, irrelevant of market conditions.”
The purpose of the Legal Week Litigation Forum, which is now in its third year, is to bring barristers, litigators, judges and policymakers together to debate the challenges facing commercial litigation.
The final session focused on
It began with a rallying cry from Bar Council chairman Timothy Dutton QC. He told delegates that
And he cited the Aikens report as just the latest in a long line of initiatives.
For Dutton, “the elephant in the room” was the sheer cost of pursuing cases in
Des Hudson, the Law Society’s chief executive, said the society was part of a steering group that had been set up by the profession’s representative groups to determine the threats to the
He noted that one in 10 solicitors currently practise overseas, working in 92 different countries. But he warned that the profession would have to work hard to preserve its credentials in a fast-changing world.
Only time will tell whether Falconer’s predictions of a litigation boom come to fruition.
But the consensus is that commercial litigation will be thrust firmly back into the limelight in the years to come.