Commercial Litigation on the Rise
The collapse of the multinational construction firm, Carillion, has led to shareholders and other relevant parties contracted with the firm, to consider taking legal action, particularly against actions taken by the company’s directors. Further high profile litigation cases include the infamous Volkswagen ‘Dieselgate’ emissions scandal, which is set to be heard in the High Court. 55,000 claimants who owned the diesel cars will be represented and lead solicitors and commercial barristers are set to be appointed.
The top four banks including Barclays and RBS demonstrate increasing legal disputes and subsequent settlements between banks and shareholders through an increased ‘culture of accountability. Both RBS and Lloyds Bank have faced action by shareholders with RBS having recently agreed to pay £200m to individual shareholders.
Additionally, Lloyds Bank is currently being sued by shareholders over the reported loss of £400m, from the rescue of HBOS in 2008. Even oil and gas companies are reportedly setting aside funds for potential legal costs due to increased regulatory scrutiny. The pharmaceutical sector also set aside around £1bn in potential legal costs.
These high profile cases demonstrate the sharp rise that commercial litigation has witnessed post-Lehman and the 2008 global banking crisis, through fines and other costs relating to misconduct and abuse.
It has been reported that over £26 billion has been set aside by FTSE 100 in 2016 alone in order for companies and banks to meet their litigation costs.
With litigation funders also “on the march” according to research, with funding being provided for commercial lawyers to pursue litigation for clients who wish to keep litigation costs off the balance sheet.
The Tory peer and commercial barrister, Lord Faulks QC, has criticised litigation funders as being parasitic. However, litigation funders such as Harbour Capital have stated that they have good support from the judiciary with litigation funding seen to be in the public interest.
Litigation funders liability for an adverse costs order has historically been capped through the ‘Arkin Cap’ where any liability for costs was capped at the extent of the funding which was provided. This cap also has had the benefit of keeping funding and costs reasonable and proportionate. However, there may be a crack appearing in the “Cap” following the judgment of Mr. Justice Foskett in Bailey v GlaxoSmithKline UK Ltd [2017] EWHC 3195 (QB)
In any event, It seems that the rise of litigation cases and disputes will inevitably lead to an increased need for litigation funders.
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