Legal Business Blogs

High-value commercial litigation rises 16% as recession-related disputes filter through to courts

2013 saw a sharp rise in high-value commercial litigation as major disputes arising from the recession filter down to the courts in greater numbers, according to research released today (7 April) by RPC.

Statistics compiled by the firm shows that 1,353 cases were launched in the Commercial Court in 2013, up 16% on the 1,167 cases started in 2012.

RPC said the increase is likely due to the length of time it can take for a claimant to pull together a major case or because of situations where parties have failed to reach a deal, leaving the claimant deciding litigation is the only option to resolve the dispute.

RPC’s head of commercial litigation, Geraldine Elliott, said: ‘This kind of “big-ticket” litigation tends to be quite complex as well as very contentious – it’s not something that can be rushed to court. So there’s bound to be a time-lag between disputes arising during the downturn and when they start to come through the system.

‘Sometimes high-value or large-scale claims can take several years to actually get as far as filing a claim, let alone a court hearing, which is why we are seeing such an upswing in cases coming to court now, even as we start to leave the recession behind us.’

The research also indicated that banking litigation will continue to be a key area for high-value claims, as PPI mis-selling, Libor and interest rate swap scandals faced by financial institutions have resulted in a steady pipeline of cases in recent years.

Banks preparing themselves for further potential claims include the Royal Bank of Scotland, which earlier this year announced it would set aside an additional £3bn for legal claims, including £1.9bn for mortgage-backed securities claims.

The amount of money set aside for FX manipulation claims is also likely to be higher according to the research, as banks not only have to face fines and penalties but have to undertake costly investigations.

RPC financial disputes partner Andy McGregor, said: ‘Claims based on alleged FX manipulation are likely to be particularly complex, and the scale of resources required to deal with the regulatory probes could dwarf even what we saw with Libor. Increasingly, the Financial Conduct Authority is looking to the banks themselves to organise and fund the bulk of data mining and other investigative work, which is going to take huge amounts of specialist manpower.’

Examples of high-profile commercial cases involving banks last year included a dispute between UK trading and investments firm CF Partners and Barclays. The former filed a claim against Barclays last year alleging that the bank breached a confidentiality agreement. CF Partners, whose claim is being bankrolled by Harbour Litigation Funding, alleged that Barclays used confidential information it supplied to the bank when requesting funding for its own bid for Swedish carbon trader Tricorona.

This research coincides with a study published today by Eversheds, which has released similar findings on the rise of large commercial disputes, despite the fact that corporates do not want to resort to litigation. In a study entitled Companies in Conflict: How Commercial Disputes are Won, whether a company wins or loses in court is determined by the calibre of the professionals involved in the case, while corporates that generate revenue of more than £1bn were typically engaged in two to five large disputes over the last three years, but 16% of companies were involved in more than ten. One fifth of businesses involved in the study considered managing reputation to be the most important factor in pursuing a dispute.