Litigation Trending: Top 10 commercial disputes trends for 2021

2020: a year we won't forget in a hurry. And one in 2019 that no-one could really have predicted. Notwithstanding that, as we all turn our attention to what we hope are brighter times around the corner, the Ashurst Commercial Litigation Team offers some reflections on trends to look out for in commercial disputes in 2021. From Brexit to climate change, we've got it covered.

1. Remote hearings (or hybrids) are here to stay: The Covid-19 pandemic temporarily threw the legal system into disarray, with a great deal of uncertainty as to how courts and the profession would adapt. Cue the rise of the remote hearing. While not without their challenges (not least the occasional bout of "technical difficulties"), remote hearings look like they are here to stay. While we would expect trials will eventually default to in-person arrangements where possible, the courts' (impressive) adaption to the new ways of working which the events of 2020 imposed on us all is likely to survive in procedural and shorter hearings in the future. The courts are busier than ever, and the experience last year has shown us all how remote hearings can work well and serve as a good way to cut out wasted time – no more waiting around, lugging bundles, etc. All of which means that focusing on best practice for remote hearings in 2021 will be time well spent.
2. Brexit: jurisdictional troubles? One thing often remarked about Covid-19 in 2020 was that at least it got everyone talking about something other than Brexit. Towards the end of the year, however, Brexit was very much back in the headlines (to the extent it ever went away) with the UK and the EU agreeing a final Trade and Cooperation Agreement ("TCA") just days before the end of the transition period. However, the TCA is silent on the enforcement of judgments, and the EU's decision on the UK's accession to the Lugano Convention remain pending. So, where does this leave us? In short, if the UK does not accede to the Lugano Convention (joining Iceland, Switzerland and Norway) and is reliant on the Hague Convention, it is fair to say there will be a fair amount of uncertainty.
   
   We noticed an increase in pre-action claims rushing to file before the end of 2020 to avoid any jurisdictional uncertainty. If the EU does not approve our accession to Lugano, we expect that the English Courts will see an uptick in cases regarding jurisdiction clauses in 2021. One particular issue to look out for is whether asymmetric clauses (which are regularly used in finance documents) are "exclusive" for the purposes of the Hague Convention. Read more on the key legal issues around Brexit and jurisdiction clauses here (under "Contracts: General").
3. A rising tide of climate related litigation? The number of climate-related litigation claims rises year on year, with claimants seeking ever innovative ways to use legal action as a tool to pressure governments, companies and investors to take more action to tackle climate change. Relatedly, climate change related disclosure has remained high on the regulatory agenda – so what will 2021 bring? We expect the level of awareness of, and responsiveness to, ESG factors (and climate change in particular) to continue to increase – but it remains to be seen how and when this will translate to climate change related litigation in the UK. An increasing number of claims worldwide have been founded on allegations of inadequate (climate-change related) disclosures causing investor loss. There remain real practical difficulties in this sort of action in the UK pursuant to section 90 or 90A of FSMA 2000 – but that is not likely to deter claimants in what is likely to continue to be seen as a fertile ground for establishing climate related liability.
4. Opening the data breach floodgates? In April 2021, the Supreme Court will hear the much anticipated appeal in Lloyd v Google. The case was brought on the basis that Google had taken browsing data from the devices of Google users, without their consent, and for the purposes of monetising the data. The claim was brought as a representative action for "loss of control" damages. We were involved in a number of data breach related claims last year and witnessed a growing body of claimant law firms jumping on the bandwagon and using the Court of Appeal judgment in Lloyd to pursue claims for a "loss of control" of their clients' data following a data breach - even if they cannot point to having suffered any financial loss or distress. We expect data breach litigation to increase regardless of the Supreme Court judgment in Lloyd. However, if the Supreme Court gives the green light to the pursuit of loss of control damages and also endorses the use of the representative action procedure, the impact will be significant. The recent application for an anonymity order in a "loss of control" claim by a 12 year old child against Tik Tok serves as a good example. We will be bold however and predict that the Supreme Court will decide that "loss of control" damages are not a form of damages recognised in law.
5. Evolution of the class action landscape post-Merrick: December 2020 saw the Supreme Court hand down a judgment in Merricks v Mastercard, dismissing Mastercard's appeal and broadly agreeing with the Court of Appeal that the CAT erred in law in declining to certify an opt-out collective claim.
   
   The £14 billion claim brought on behalf of over 46 million UK consumers as a collective action concerns the multilateral interchange fees set by Mastercard since May 1992, which the European Court of Justice found to be anticompetitive.
   
   The Supreme Court confirmed that there should be a less restrictive approach to the certification of collective actions and emphasised that the test was one relative suitability, namely whether collective proceedings are suitable relative to individual proceedings. In particular, difficulties around availability and complexity of data should not preclude a very wide class of claimants with a reasonable prospect of showing they suffered loss from seeking to do so.
   
   The case has been remanded back to the CAT for re-consideration and much will turn on the CAT's application of the Supreme Court's guidance. However, the Supreme Court's decision will undoubtedly be an unwelcome development for Mastercard and other potential defendants in similar proceedings (notably several global banks facing two competing opt-out claims relating to manipulation of FX markets). The decision is also likely to encourage future opt-out claims. An area to watch in 2021.
6. Another Financial List test case? 2020 saw the first judgment handed down in the Court's Financial Markets Test Case Scheme – the FCA's business interruption insurance test case. The claim was expedited through the courts, going from issue, through a first instance judgment and to a Supreme Court hearing in only five months. Judgment is expected later this month. The Courts have clearly demonstrated their willingness and ability to expedite cases of this nature.
   
   We have been waiting for five years for a case to use the Scheme, which was established in 2015 as part of the Court's Financial List. With the first test case under the Court's belt, the question is whether any more will follow suit. The Scheme has a relatively narrow ambit: it is aimed at facilitating the resolution of market issues which require immediately relevant authoritative English law guidance. Given this, there are likely to be limited cases which fit the bill. When the Scheme was extended in 2017, it was thought that Brexit might throw up a suitable case. Given the current status of negotiations, that might yet be the case. Alternatively, the phasing out of LIBOR – which is expected by the end of 2021 – may also present a suitable candidate for the second Scheme test case.
7. An upcoming insolvency tsunami? In the early weeks of the Covid-19 pandemic, things looked particularly bleak and many predicted an insolvency tsunami. While undoubtedly there have been a number of high profile corporate collapses and administrations, the first three Quarterly Insolvency Statistics published by the Insolvency Service for 2020 revealed that for England and Wales the level of insolvencies were on the decrease in comparison to the previous quarters and 2019. The question is: have the various measures adopted in 2020 by the Government merely delayed the inevitable?
   
   When the UK government Covid-19 support measures and insolvency restrictions come to an end, whether in Spring 2021 or perhaps later, the UK economy will be left with a painfully large number of companies with problems to solve. Some of them will no longer be able to survive and will need to be liquidated. Some of them will have viable businesses, but will be overburdened by accumulated Covid-19 and historical debt, and will need to be restructured. Insolvencies will undoubtedly increase, but restructuring solutions – both novel and tested – will be put to good use. Ashurst's restructuring and special situations team stands ready for the challenge of 2021. See here for their article looking to the year ahead and recapping 2020 by numbers.
8. Litigation Funding trends: The litigation funding landscape has changed dramatically over the last 5 years, with third party funders and ATE insurance providers seeing increased demand from parties looking at alternative ways to finance claims. A number of the developments we've identified above will undoubtedly impact the funding industry, but we were interested in the views of the experts, so we asked Rosemary Ioannou from Vannin Capital and Thomas Byrne from Gallagher for their predictions on what we might see in this area in 2021:
   
   Rosemary says: "We have seen a marked increase in the use of dispute resolution funding by large corporates and other well-capitalised organisations and we expect this trend to continue. Companies are now proactively engaging with funders – adding funding to their financial and legal armoury as they increasingly see the benefit of using funding to aid cash flow and improve liquidity. In the current climate, the benefits that funding offer are even clearer, enabling clients to lay off the cost of litigation, preserve cash and monetize valuable assets.
   
   We expect to see a rise in group action claims through 2021 and beyond. The recent decision in Merricks v Mastercard is a game-changer for the CAT collective action regime. Funding is fundamental to the bringing of these types of claims and is essential for that regime to flourish. However, it is not just in the competition sphere in which we are seeing funded group claims grow but also (inter alia) data breach, securities, professional negligence and environmental claims. If the Supreme Court judgment upholds the Court of Appeal decision in Lloyd v Google and finds in favour of the claimant, the use of CPR 19.6 Representative Actions to bring funded group claims outside of the CAT regime will be another significant step."
   
   Thomas says: "The continued rise in large group actions and the recent Merricks decision could cause insurer aggregation issues and a chase for the available capacity. Carriage disputes arising from group litigation exacerbate the issue, with the insurers finding the 50/50 chance of selection by their client a challenging risk to price. Further pressure will be added by cases currently queuing with insurers, awaiting the Lloyd v Google outcome. It is important therefore to find access to appropriate insurance markets in a timely manner. Security for Costs applications continue to drive issues for funded cases. Will the rise of the anti-avoidance endorsement take over from deeds or bond, and will the insurance market seek to agree standard language in this regard as costs are not insignificant in such instances?"
9. A new approach to witness evidence: In October, the Business and Property Courts' Witness Evidence Working Group published its final report, focusing on issues with current practice for witness evidence and the Working Group's recommendations to resolve them. The Working Group expressed a real concern that with over-lawyering of witness statements at the drafting process the statement becomes an "aspirational" version of what a witness may be able to recall, in the process corrupting and rewriting the witness's memory. The Working Group also noted that reliance on a witness statement rather than examination-in-chief, such that witnesses are immediately thrown into cross-examination, often puts witnesses on the defensive from the outset. While the Working Group has not expressed a desire for sweeping reform, it has recommended a number of proposals, including:
   
   • A statement of best practice for the preparation of factual witness statements, focusing on ensuring that the witness's own words are captured and that the statement is of utility to the trial judge.
   • Developing the statement of truth to ensure the witness understands the parameters of the statement.
   • Requiring a certification of compliance by a solicitor that the statement has been prepared in compliance with the relevant rules; and
   • Consider whether a pre-trial statement of facts would be of utility.
     
     

   While these reforms have yet to be implemented, we expect that the Courts will begin to enforce the spirit of them in 2021 and that it would be prudent for those who are preparing written witness evidence to be served early this year to take them into consideration.

10. Updates on the Disclosure Pilot: The Disclosure Working Group (DWG) provided its third interim report on the Disclosure Pilot in February last year. The report considered feedback from practitioners on their experience of the Pilot and its overall effect. The majority thought it had not brought about a cultural change (78%) or saved costs (85%). Common themes included difficulties in agreeing the List of Issues for Disclosure, overcomplication of Model C requests, completion of the Disclosure Review Document is challenging and costly and complaints about the burden placed on corporates regarding documents preservation notices.
    
    The responses and feedback largely mirror our own experience of disclosure under the Pilot, particularly in relation to cultural change, and the additional work created by the List of Issues, the use of Model C and the DRD. In our experience, extended disclosure under the Pilot has the potential to be more costly than would be the case under CPR 31.
    
    The DWG has decided against implementing wholesale changes to the Pilot at this point, but a number of small changes were approved by the Civil Procedure Rules Committee in October along with an extension of the Pilot to late 2021. While these should go some way to addressing the issues raised in the feedback, the jury is out on whether they go far enough to achieve their intended aims. That said, the DWG are keen to hear what users think and suggestions regarding other possible changes. Any users with recent experience should consider providing feedback to the DWG.

Authors: Jon Gale (Partner), Sophie Law (Senior Associate), Tim West (Senior Associate), Max Strasberg (Senior Associate), Lianne Sneddon (Expertise Counsel), Lindsey Davies (Senior Expertise Lawyer), Aaron Marchant (Solicitor), Catrin Southgate (Solicitor)