The cost of dispute resolution is an on-going concern exacerbated by a sluggish global economy. Companies have responded to increased litigation pressure by decisively settling cases early wherever possible to drive down costs.
Faster resolution, and getting litigation “off the books”, is becoming a more urgent priority for companies, according to a recent survey by the BTI Consulting Group. Among important litigation trends anticipated in 2013, the survey found that in-house lawyers in the US expect to resolve more than 40% of their current active matters over the next twelve months, up from 22.2% in 2009.
“Corporate counsel are making ever-more informed decisions about how to tackle and tame even the most unwieldy litigation. Their primary goal: resolution,” according to BTI. “[They] are increasingly dedicated to disposing of litigation as quickly and effectively as possible, whether by savvy legal strategy, negotiation, settlement or other means. This determined focus on resolution is driving dynamic shifts in how clients litigate.”
An apparent shift in mindset is underway, a development seemingly underscored by findings from the 2012 Choices in International Arbitration survey by White & Case and Queen Mary University. Controlling time and cost in international arbitration is a well-documented problem to which solutions have been in short supply. For the first time, the Queen Mary University survey looked at attitudes to fast-track arbitration, which is an expedited process designed to curb costs and deliver a quicker award. The survey shows that although just 5% of respondents were involved in fast-track arbitration at present, in certain contracts, 60% of respondents reported being willing to consider fast-track arbitration in future disputes.
The greater willingness to experiment with newer, faster methods of dispute resolution comes at a time when the relationship between corporate counsel and external advisers is changing. Where previously hourly rates and open-ended budgets have been the norm for litigation, rising costs and lack of predictability have prompted a re-think. Commercial mediators note that general counsel are very much more engaged with dispute resolution, both in terms of steering processes towards fast, more cost effective resolution and in selecting and appointing the arbitrators and mediators who know their industry and can be relied upon to deliver a result.
Consensual dispute resolution either by negotiation or mediation is also an increasingly important relationship building tool for law firms and clients. Opportunities for repeat business for firms are all the greater if disputes are terminated early, rather than pursued over a period of years to outright victory. In short, the indications are that resolution and certainty arising from closure, has superseded winning in most companies’ list of priorities.
Adapting law firms’ business models to one less dependant on long-running litigation is an opportunity as well as a challenge. Aamir Khan, Head of Legal for Dispute Resolution & Contentious Regulatory at LloydsTSB’s Retail & Wealth division, illustrates the client’s dilemma: “Effectively we were paying our external lawyers large amounts of money to process claims which were always going to settle,” he says. “I wanted to find a way whereby we reduced our external spend, settled our cases earlier and provided an incentive for our counterparties to engage with us.”
LloydsTSB’s solution was to implement a mediation programme. In doing so, the bank cut its panel of external law firms to three, but was able to give each a greater proportion of its work in exchange for a fixed per-case fee structure. “By using one of those firms for ADR we were quickly able to establish strong controls over the claims and deal more effectively with our counterparts and their lawyers,” Khan says, “And this substantially reduced our costs and created an incentive for our counterparties to engage in our ADR process. ”
And significantly, he notes that the ADR process took pressure off cash flow as the cost of litigating large numbers of claims disappeared.
Following the success of the programme, other parts of the LloydsTSB Group are actively exploring similar strategies. This ADR project, Khan says, has been equally successful in dealing with “no win no fee” law firms acting on conditional fee agreements which were bringing low-value claims to recover high levels of costs.
Khan concludes that “Mediation can be used in different ways and adapted to any given situation. The flexibility in our ADR process was important. My advice would be to keep an open mind about the power of engaging directly with your opponent and putting to one side the traditional litigation process.”
Looking ahead, then, to 2013 and with only modest indications of economic growth, LloydsTSB’s strategy is likely to be one adopted by many forward-thinking companies.