One of the strangest features of Covid-19 is that it manifests itself in the human body in a random and unpredictable manner. The same can be said of its effect on the world of commercial disputes. My view is that nothing ever quite pans out in a way many commentators assume.
If one thinks back to the financial crisis of 2008, the only racing certainty was an economic downtown. To that extent, the same might be said of 2021. The prediction 13 years ago was that we would see the usual raft of fraud and insolvency work that typically accompanies a recession. It was anticipated that events would mirror those of the early 1990s, which gave rise to a boom in white collar crime cases and resultant professional negligence claims arising from corporate failures. It did not play out in that way. The scale of the frauds made them almost beyond the scope of litigation. The banks did not rush to insolvency proceedings since they themselves were on the brink of collapse and had no appetite for repossessing worthless assets.
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.
Stewarts’ Alex Jay and Tim Symes discuss past and present growth in international fraud
The increase in fraud following the 2007-8 financial crisis was sharp and sustained. KPMG’s ‘Fraud Barometer’ – the longest-running fraud report of its kind in the UK – showed that fraud cases in 2008, 2009, and 2010 increased
year-on-year both by value and volume.
Disputes specialist Stewarts has seen double-digit revenue growth for two years on the spin, posting an 11% increase in turnover to £77m for 2019/20, up from £69m from the previous financial year when it increased just shy of 11%. Profit per equity partner, meanwhile, saw a modest 3% increase to £1.25m; a needed rebound after the figure plummeted 16% in 2018/19.
The latest results show Stewarts’ continued recovery after its 2017/18 setback , where ‘non-linear’ income patterns from contingency work accounted for revenue falling by a fifth. The broader picture is that revenues over a five-year period have enjoyed a healthy uptick – rising almost 46%.
The firm also stressed it has widened the equity across the partnership in a bid to remunerate future talent. Currently the firm’s equity spread stands at £609,000 – £1.72m.
Commenting on the results, managing partner John Cahill (pictured) said: ‘We are pleased to post another good set of financial results. During the year we have made substantial investment in strengthening existing practice areas and in our book of contingency fee cases. In previous years I have indicated that our revenue patterns would be non-linear and that remains the case. We expect that Covid-19 will have a negative impact on both revenue and profit in the financial year 2020/21.’
The emerging picture as firms continue to announce their financials for 2019/20 is one of resilience in the face of the Covid-19 crisis. Freshfields Bruckhaus Deringer, Clifford Chance, Allen & Overy, and Herbert Smith Freehills are among the major players to have increased revenue, albeit as profitability across the LB100 suffers some attrition.
Stewarts’ Mo Bhaskaran and Pia Mithani discuss the huge growth in international fraud
Fraud thrives in systems that permit secrecy and anonymity. Technological innovation and the continued growth of international trade are allowing fraudsters to use increasingly opaque and complex techniques. The globalisation of finance has allowed such activities to grow to jaw-dropping levels.
In the fiery political debate on Brexit, relatively little attention has concentrated on the threat to the UK as a world-renowned centre for litigation. Some say that an abyss beckons and that there will be an exodus of litigants fleeing our jurisdiction. Are these fears justified?
For starters, our legal system remains highly respected for its integrity and expertise. Our European neighbours are promoting their credentials as never before, but in truth, many smaller European countries are far from being able to compete in terms of sophistication and true independence. Moreover, English remains the language of international commerce, and this factor alone will continue to have a bearing albeit that the Netherlands and Germany are now developing English-speaking courts.
Stewarts’ Marc Jones discusses the implications of crypto-assets for the litigation sphere
The chances are that in January 2009, when the first bitcoin was mined, nobody reading this article had heard of bitcoin, crypto-currencies, blockchain or smart contracts. Less than a decade later in late 2018, the World Bank raised $110m by selling a ‘blockchain-operated debt instrument’. This instrument runs on a private version of the Ethereum blockchain, which creates, allocates, transfers and manages the bond to maturity using distributed ledger technology.
Stewarts Law has partly recovered from a 20% drop in turnover last year in what managing partner John Cahill described as a ‘very satisfactory’ year, although partner profits have continued to fall.
The UK’s largest litigation-only firm increased revenue by nearly 11% to £69m in the 2018/19 financial year, following a 20% drop in turnover from £77.9m to £62.4m last year. Profit per equity partner (PEP) decreased a further 16% to £1.2m from last year’s £1.4m: a figure that had dropped 28% the previous year.
On a five-year basis, however, revenue has increased by 49%, with PEP up 7% on average in that time. The firm is aiming for revenue of £100 million by 2022.
Cahill (pictured) commented: ‘We are pleased to post another very satisfactory set of financial results. During the year we have made significant investment in new practice areas including financial crime and media disputes.’
The firm appointed in June last year Richard Kovalevsky QC as a partner to head up the new financial crime department, joining after 13 years at 2 Bedford Row. David Savage also joined the team from SG Kleinwort Hambros Bank recently.
Cahill added: ‘I indicated last year that our revenue patterns would be ‘non-linear’ and that remains the case, although both revenue and PEP have increased over the last five years.’
Stewarts is acting for 58 institutional investors including the BAE Systems pension scheme, the Church Commissioners, Bank of America, the government pension fund of Thailand and the American Red Cross in an on-going case against Tesco. The firm is also representing 280 individuals in a case against Ingenious Media regarding investments in film and video game production partnerships.