Impact of coronavirus set to bring wave of legal disputes – Sheila Webster and Frances Sim
There’s no doubting the economic impact of coronavirus will be far-reaching and affect businesses across multiple sectors on many different levels. One of the specific consequences is a likely rise in the number of legal disputes resulting from the disruption to businesses caused by this sustained period of lockdown.
We’ve already heard from numerous companies complaining about insurers not paying out on business interruption policies. We are also seeing arguments emerging over lease payments from tenants that have been restricted in their ability to trade, as well as disputes about cancelled events and unfulfilled contracts, especially on construction sites, with significant disagreement over what constitutes a force majeure event. Law firms are experiencing increased enquiries from clients unhappy with the actions of either a contractor, supplier, landlord, or professional adviser in the current climate.
Coping with this potential spike in cases will, however, present a huge challenge to Scottish courts, which were already struggling before the pandemic took hold. There were an unprecedented 81,200 civil law cases initiated across the Scotland’s Court of Session and sheriff courts in 2017-18. It has been suggested that the restrictions on hearings in lockdown will mean a two to three year backlog in the criminal system, which directly impacts on the availability of judges and courtrooms for civil cases. While even more companies may now be considering pursuing litigation, it is likely to be a slow process for the foreseeable future. Businesses wanting to access timely justice will therefore need to consider other solutions.
Recognising that full-on litigation is often not the best option for clients, many lawyers have embraced other forms of dispute resolution which avoid the inevitable court process delays. While these options will not be suitable for every case, arbitration and mediation as well as alternative forms of dispute resolution, including online processes, could offer a solution for many businesses.
However, even with these alternative processes in place, securing the finance required to pursue a dispute through legal means – including concerns about the possible adverse award of expenses – remains a huge challenge for many businesses, especially after the impact of lockdown measures.
There have been a number of developments within the legal profession, including the introduction of damages based agreements where a solicitor takes a percentage of the sum eventually awarded to their client, which can help make pursuing a dispute more financially viable for many SMEs.
Commercial litigation funding can also provide an ideal means of giving businesses access to justice. Litigation funders invest in existing or prospective cases – often those which might otherwise not be able to be pursued – to enable their clients to progress their dispute. While this form of support was traditionally suited to larger and more complex claims, its model has changed in recent years. It is now geared for a wider range of claims and, with a number of commercial litigation funding providers moving into the Scottish market, it is more accessible to our SME market.
Commercial litigation funding, provided by Restitution, the only Scottish-based litigation funder, supported a Scottish businesswoman who received a substantial settlement in a case last year against a family business where she was a director but had been systematically excluded from its dealings. Without this funding she would not have been able to pursue her case and the other shareholder’s behaviour would have gone unchallenged.
Now with increased suitability for other forms of dispute resolution, commercial litigation funding offers an attractive option for businesses in the current climate.
Among the numerous challenges facing businesses as we emerge from this pandemic is the potential spike in commercial disputes, many of which will have been a direct result of the sudden lockdown due to Covid-19. With courts already under huge pressure, the dispute resolution market in Scotland continues to innovate to provide wider choices to support those who want to pursue a legal settlement to a dispute. Even at a time of significant financial strain, there are ways and means for many firms to access justice.
Sheila Webster is a partner, Davidson Chalmers Stewart, and Frances Sim is general counsel at Restitution, an independent provider of specialist commercial litigation funding
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