Thursday March 24, 2022

In our latest article, Nishad Morjaria, Lisa Mazzucotelli and Katherine Parker examine what’s next for commercial litigation

Contrary to the surge in commercial disputes anticipated by us and many industry commentators, 2021 remained a quiet year for disputes. Indeed, litigation analytics platform Solomonic reported in October 2021 that new High Court litigation had fallen by 9 per cent year-on-year with the uptick in COVID-19-related disputes failing to materialise.

This is contrary to the expected upsurge in disputes related work initially expected by us and many industry commentators at the beginning of 2021. However, the inherent time-lag between issues arising and identification of such issues continues to push remedies and resolution to the future. That said, the warning signs of what is likely to come remain. So what can we reasonably expect in the next 12 months?

In Part 1 of our three-part series, we look at what 2022 could hold for business interruption claims and collective actions in the UK.

Business interruption claims: where next after the FCA test case decision?

The Supreme Court’s decision to allow COVID-19-related business interruption claims under certain policy wordings in the Financial Conduct Authority (FCA) test case has resulted in well over £1 billion being paid out to policy holders.  However, the application of this decision was not all encompassing, and more complex claims are now making their way through the UK and US courts.

In the UK courts these cases include Stonegate and Greggs who are claiming against their insurers over issues including whether each change in government restrictions regarding the pandemic constituted a ‘new’ loss event, and whether the business interruption suffered by each of their venues and shops constituted separate claims. A decision in favour of these claimants may well have a similar impact to the test case, paving the way for a multitude of new quantum claims by retail and hospitality businesses.

Collective actions: landmark decision opens the gates?

Traditionally averse to US-style class actions, the legal landscape in the UK has nonetheless changed significantly over the past few years. Whilst it has been legally possible to bring collective action claims on an opt-out basis under competition law since 2015, it took until the decision in early 2021 re Merricks v Mastercard, a follow-on case from a European ruling that the financial services company had breached competition law, to open the door for future collective action cases.

Since then, the UK has seen an increase in collective action claims, including where wrongdoing had not yet been established as shown by CAT-certified claims against British Telecom for allegedly overcharging landline-only customers. There have been some setbacks too, with the UK Supreme Court’s decision in November 2021 to rule against an opt-out claim against Google over their use of personal data because, amongst other things, of a lack of evidence that it had resulted in financial damage or distress. This suggests that the question of the calculation of damages in UK collective actions remains challenging, and will be followed with keen interest amongst the forensic accounting and competition economics communities.

Overall, the expectation is that the number of collective action cases will increase in the UK, with ongoing debate as to whether the opt-out regime should be extended to other areas of law besides competition. Other trends are expected to contribute to an increasing number of collective action claims in the UK, including the role of litigation funders in venturing beyond traditional commercial cases. The claim filed in January 2022 against Meta, Facebook’s parent company, for allegedly exploiting the data of millions of the social network’s users, will, for example, be a case in point. The case, which operates on an opt-out basis, is being funded by a US litigation funder and will require a detailed quantum calculation exercise to assess the damage suffered by the 44 million Facebook users constituting the class.

In Part 2 of our series, we will look at the impact on disputes of M&A activity and the transition from the London Inter Bank Offered Rate (LIBOR) to the Sterling Over Night Index Average (SONIA).