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ANNUAL REVIEW

Litigation & Alternative Dispute Resolution 2014

November 2014  | LITIGATION & DISPUTE RESOLUTION

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There are a several options available to parties that find themselves embroiled in a commercial dispute. Firms will need to consider whether they want to use alternative dispute resolution (ADR) mechanisms or pursue more traditional litigation. The popularity of ADR has grown steadily over the years, but litigation, arbitration and various types of ADR all have their pros and cons. Irrespective of the choice, a poorly managed dispute can lead to lengthy delays and rising costs.

 

UNITED STATES

Alexander A. Yanos

Hughes Hubbard & Reed LLP

“In the United States, there are four major arbitration centres: New York, Washington, DC, Miami and Houston. There is additional arbitration activity in Los Angeles, San Francisco and Atlanta. The major challenge for arbitration in the United States is that the original concept that arbitration allows parties to resolve their dispute in a faster and less expensive way no longer applies. The market now generally recognises that arbitration is frequently a slower and more expensive alternative to litigation. However, with respect to commercial disputes, arbitration offers several significant advantages. First, the possibility of selecting a neutral forum. Second, the preservation of the confidentiality of the parties’ dispute. And third, a multi-jurisdictional enforcement of the arbitral award because court judgments are less portable by and large than arbitral awards.”

 

CANADA

Peter D. Shea

Cox & Palmer

“In certain sectors, such as the energy sector, there are often limited options with respect to supply and logistical companies. This mandates the preservation of business relationships and the efficient resolution of disputes. Operating environments such as this facilitate the continued trend from litigation to alternative dispute resolution. There is a general view that courts and available litigation processes do not reflect commercial reality and are an unacceptable method of dispute resolution for any number of reasons, including timeliness, selection of arbiter and privacy issues. Given this reality, businesses are seeking to control the dispute resolution process to the greatest extent possible.”

 

CAYMAN ISLANDS

Kirsten Houghton

Campbells

“The Cayman Islands is unusual in that very few significant commercial disputes that are resolved here arise within the jurisdiction. The bulk of such commercial disputes arise in many and varied global destinations because of a feature of our companies’ legislation, which permits ‘exempted companies’ to be incorporated and registered here, but prohibits such companies from carrying on business here. This is particularly so in the financial services sector; often disputes arise when the solvency of a exempted company is in doubt, in which case insolvency proceedings are generally commenced in the Financial Services Division of the Grand Court. A second significant stream of disputes concerning exempted companies is claims against directors, officers and service providers to investment vehicles, often brought by the liquidators of these entities.”

 

UNITED KINGDOM

Smeetesh Kakkad

Hierons LLP

“London continues to be an attractive and popular centre for international dispute resolution, whether through litigation or arbitration. However, many foreign jurisdictions are modernising particularly their arbitration laws to attract global users, and they are succeeding in creating competition. Costs and delay in arbitration – in London and elsewhere – continue to generate much negative commentary. It is often said that parties themselves should more actively participate in controlling the process, but I believe the primary obligation rests firmly with counsel, upon whom the parties heavily rely, and the tribunal to ensure efficiency is implemented; and that the lack of prescriptive rules, which is a key attribute of arbitration, is not unreasonably and negatively exploited to disrupt the process.”

 

IRELAND

John O’Riordan

Dillon Eustace Solicitors

“Firstly to address the issue of the recurring themes, over the past number of years as a result of the economic crisis there has been a significant increase in the volume of financial services litigation in Ireland. In particular, we have acted in a large number of mis-selling cases and we expect this theme to continue into the future. More recently, we are seeing considerably more bank related litigation in circumstances where financial institutions are taking action against borrowers in relation to outstanding loan obligations. Following on from this trend, a key market challenge is the ability of a successful party in an action to recover from the unsuccessful party. This is particularly the case in circumstances where, due to the economic crisis, there has been a large drop in property values throughout Ireland.”

 

FRANCE

Ozan Akyurek

Jones Day

“Nowadays, it is easier in the European Union to resolve a cross-border dispute. Issues of enforcement of judgments between Member States are governed by EU regulations which provide fast enforcement proceedings. Judgments which fall into the scope of the Brussels I Regulation – 22 December 2000, EC No. 44/2001 – are recognised ipso jure in other Member States through a less burdensome procedure, so as to obtain a declaration of enforceability. However, there are still recurring challenges which are pointed out by parties involved in court litigation. Mainly, parties complain about the length of legal proceedings even if the French judicial system has made substantial progress.”

 

SWITZERLAND

Urs Feller

Prager Dreifuss Ltd

“We are still seeing a lot of bankruptcy related litigation. Owing to the fact that Switzerland is a country of choice for many international holding companies as well as the location of subsidiaries of large conglomerates, insolvencies in other countries inevitably have repercussions in Switzerland. Where several jurisdictions are involved, international bankruptcies can lead to contentious legal issues regarding jurisdictional authority. Just recently, the Swiss Supreme Court had to decide whether the decision of a foreign court can be recognised in Swiss bankruptcy proceedings. Although the effects of bankruptcy law are in general limited to its own jurisdiction, further developments toward a more international approach are not excluded.”

 

GERMANY

Jan K. Schäfer

King & Spalding LLP

“In Germany, disputes resulting from business combinations remain prevalent. They are typically resolved by arbitration. In addition, there is an uptick in banking litigation work, in particular relating to claims against financial institutions regarding the sale of financial products to end-customers. Specifically, in the wake of the financial crisis a number of open-ended real estate funds had difficulties paying out the large amounts withdrawn by institutional investors. As a consequence, the funds were closed. A number of those funds will not be able to re-open and are therefore required to sell their assets to make payouts to the investors.”

 

DENMARK

Peter Skau-Andersen

Skau Reipurth & Partners

“Commercial disputes in Denmark are currently undergoing a change to some extent, in the sense that parties’ interest in reaching a settlement is increasing. A few years ago – when the economy was far worse – many companies fought long and hard to pursue their claims, simply because they had to. Today, with an improving economy, companies seem more reluctant to spend that much time on disputes. Thus, a more commercial, long-term, strategic approach to disputes has returned. This is favourable for all parties involved and provides legal advisers with the option of seeking an amicable solution instead of preparing for trial or arbitration from the beginning, which is often more valued.”

 

HUNGARY

Ilona Rónay-Csordás

CHSH Dezso & Partners

“In June 2014, a specific judicial consolidation law was introduced that put an end to a series of legal disputes underway since 2010 between commercial banks on one hand and consumer debtors on the other. These legal disputes concerned the legal fairness of contract provisions that allowed banks to unilaterally change interest rates and fees under foreign currency based loan agreements. The law enacted the points of interpretation of legal fairness as they have been developed by the judiciary since 1993 and transposed from EU law in 2004, the time of Hungary’s accession to the EU, and in 2009 when consumer protection regulations were fine-tuned. The law established a legal assumption that the right to make such unilateral changes was unfair and provided a 30-day preclusive deadline for commercial banks and leasing companies to challenge the legal assumption. Since mid-August 2014, commercial banks submitted 79 petitions to this end.”

 

RUSSIA

Artem Kukin

Infralex

“Over a number of years, one of the most common causes of commercial disputes in Russia was, and remains, a party’s failure to properly perform its obligations under an agreement. Such violations are the recurring grounds for lawsuits. The courts competent to consider such lawsuits are called the Arbitrazh (Commercial) courts. These lawsuits may be classified based on a type of contract that gave rise to a claim, as well as based on the types of asserted claims. According to the judicial statistics, usually the following contracts cause claims: energy supply agreements, supply agreements, leases, design-build contracts, corporate disputes, insurance and services agreements.”

 

AUSTRALIA

Doug Jones

Clayton Utz

“Commercial disputes commonly derive from deficient or improperly drafted contracts. Where a contract is ambiguous or silent on an aspect of the parties’ commercial dealings, the parties will often have no choice but to resort to the general law to resolve a dispute. Such a contest will involve arguments as to the intention of the parties, which must be ascertained from the terms of the contract. This is particularly difficult for a judge or an arbitrator to resolve where each party takes an entrenched adversarial stance. This problem is not only common in the Asia-Pacific region but across the globe.”

 

CHINA & HONG KONG

Nick Gall

Gall

“Legal costs, direct as well as indirect, remain a significant challenge for companies from a commercial standpoint. Procedural delays and inability of the courts to deal with technical issues are some of the other unavoidable market challenges inherent in court-based litigation. Increasingly, alternative dispute resolution (ADR) has been seen as an expedient alternate process in appropriate cases. ADR is simpler, quicker and cheaper and can offer the involved parties a chance to get a more detailed settlement than would occur in a courtroom. We continue to see the usual broad range of commercial and financial disputes, both from SMEs and MNEs.”

 

REPUBLIC OF KOREA

Lance B. Lee

Lee International IP & Law Group

“Multiparty disputes have emerged in greater scope and frequency in Korea. The growth of multiparty disputes has been triggered by regional developments, including a rise in the number of cross-border transactions and related commercial contracts between several parties. This development has led to key challenges. First, multiparty disputes have led to multijurisdictional issues that transcend traditionally fixed boundaries of governing law and jurisdiction in a contract. An example of this dynamic can be found in cross-border multiparty disputes, where the governing law and jurisdiction may be of one country, yet the assets, evidence and domicile of a party are in another country.”

 

INDIA

S.S. Naganand

JustLaw

“The current market challenges centre around huge engineering disputes. Of late, we have also seen quite a number of disputes relating to foreign collaboration units. We also see a number of disputes relating to the effect of tax laws on commercial contracts. In a few cases, we are seeing a tendency on the part of the government to negotiate and settle sovereign claims. Many trade bodies are also encouraging their members to take recourse to alternative dispute resolution (ADR).”

 

UNITED ARAB EMIRATES

Joseph Durkin

Davidson & Co

“The primary concern of claimants in a commercial dispute is to be in a position for the enforcement of an award to ultimately recover monies owed on an award. Arbitration is still a preferred mechanism for dispute resolution given the familiarity of the process to international parties. A recurring theme is the increasing willingness of parties to adopt arbitration as a mechanism for dispute resolution. The UAE Civil Procedure Code governs arbitration in the UAE. The Code does not expressly set out a duty of confidentiality in arbitration, however parties are free to incorporate a confidentiality clause within their arbitration agreements, which is normal practice. This is one of the primary influencing factors in parties choosing arbitration over conventional litigation.”

 

SAUDI ARABIA

Ziad El-Khoury

El-Khoury & Partners Legal Counsel

“The recognition and enforcement of foreign awards has been a recurring issue of concern in alternative dispute resolution (ADR) in the region. Courts in many local jurisdictions enjoy wide authority to nullify foreign arbitration awards as well as to interfere in local arbitration upon the request of one of the disputants. This is despite the fact that most Arab countries are members of the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards. In addition, there are multiple regional treaties supporting the res judicata principle and mutual recognition of foreign awards; most notably the 1983 Convention on Judicial Co-operation between the States of the Arab League, known as the Riyadh Convention, and the 1995 Protocol between the GCC countries called the Amman Convention on Commercial Arbitration.”

 

NIGERIA

Ukpeme Akpan

La Paix Solicitors

“Costs are at the core of commercial disputes resolution challenges. Often, parties are unable to pay costs and fees for disputes resolution. Also, there is a problem in the extent to which courts interfere in arbitration beyond the provisions of Section 34 of the Nigerian Arbitration Act, 2004 permitting judicial intervention. These hindrances stall the process, causing an inordinate delay which contrasts with the expedited process for which arbitration and ADR mechanisms are preferred to litigation.”


CONTRIBUTORS

Campbells

CHSH Dezso & Partners

Clayton Utz

Cox & Palmer

Davidson & Co

Dillon Eustace Solicitors

El-Khoury & Partners Legal Counsel

Gall

Hierons LLP

Hughes Hubbard & Reed LLP

Infralex

Jones Day

JustLaw

King & Spalding LLP

La Paix Solicitors

Lee International IP & Law Group

Prager Dreifuss Ltd

Skau Reipurth & Partners


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