monday, 27 april of 2020

Covid-19 - Litigation

Call to give companies ‘breathing space’ on coronavirus litigation: UK

A group of leading UK judges and academics have made a plea for commercial disputes to be resolved before they reach the courts to avoid a “deluge of litigation” in the wake of the coronavirus pandemic.

Lord Neuberger and Lord Phillips, both former heads of the UK Supreme Court, are among those calling for more emphasis on conciliation to help businesses facing contract disputes arising from the crisis.

A note agreed at a meeting of the British Institute of International and Comparative Law pointed out that in countries such as Singapore, rules have been changed to give temporary “breathing space” to companies and individuals unable to fulfil legal contracts because of the epidemic.

“In many jurisdictions, procedural rules already encourage conciliation — can these be developed further?” the note said, adding that the initial focus should be on continuing business contracts where viable.

Lawyers said that companies are not rushing to file coronavirus-related lawsuits at the moment because many are in survival mode, trying to conserve cash and work with suppliers to resolve problems and fulfil contracts.

The number of claims filed in the commercial court dropped sharply in April compared to the previous year.

However, as with the 2008 financial crisis, lawsuits linked to disputes and broken contracts are expected to come within months. Many cases are expected to be backed by litigation funders which finance disputes in return for a share of any compensation.

Julian Diaz-Rainey, partner at Pinsent Masons, believes companies are wary of rushing to court. “Certainly it's a different vibe to the 2008 or the 1990s property recession,” he said. “I do not think it's aggressive?.?.?.?people are being sensible.”

Alex Sciannaca, partner at law firm Hogan Lovells, agreed it is “less aggressive” than in 2008. “Clients want to understand their position and protect their rights and have no desire to go out and litigate at the moment as that would be badly received,” he said. However he added that companies may ultimately decide to take action to recover losses.

Legal action is expected in a wide range of areas, including against insurers for refusing to pay out on business interruption claims as well as professional negligence claims against lawyers, accountants and property valuers. Lawyers also expect lawsuits arising from companies skipping rent payments.

Company directors, who are normally covered by insurance policies that protect them from claims arising from their work, could also face litigation from shareholders and companies over claims they mishandled any response to the outbreak.

Adam Strong, partner law firm HFW, said that in 2008 the litigation funding industry was in its infancy but now it is “awash with cash” that could be used to fund disputes.

Analysis by law firm RPC in March found the 15 largest litigation funders in the UK had amassed almost £2bn in assets, including cash to fund cases.

“That will prove extremely attractive to many companies at the moment, and could mean that we start seeing Covid-19-related claims coming through sooner than they might otherwise,” Mr Strong said.

(Published by Financial Times, April 27, 2020)

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