by Imogen Winfield, Associate at Brown Rudnick
Here are eight litigation trends that I expect we’ll see throughout this year, much of which looks like more of the same.
► Insolvency disputes as temporary measures are lifted and pandemic-induced losses crystallise
► A continued uptick in cybercrime (including ransomware attacks and crypto-related fraud) and other fraud claims
► More group litigation over inaccurate/misleading disclosures by issuers of securities (s90/90A FSMA) and potentially for breaches of actionable statutory duties (s138D FSMA)
► A continued expansion of ‘opt-out’ collective actions under the competition law class action regime
► More claims arising out of data protection breaches including ‘opt-in’ Group Litigation Orders
► Clarity on some of the unresolved issues regarding business interruption insurance policies following on from the FCA’s test case
► An increase in ESG-related litigation and enforcement actions as companies come under heightened scrutiny from investors, consumers, employees and regulators
► Continued post-Brexit uncertainty around jurisdiction clauses and enforcement of judgments while the UK remains outside the Lugano Convention but with the door still open for anti-suit injunctions in respect of proceedings brought in the EU/EFTA
One noticeable difference in 2022 would be a surge of insolvency disputes which were largely put on hold from March 2020, when the government introduced temporary measures and moratoriums supporting businesses and restricting the ability of creditors to take action against companies suffering financial distress. This provided breathing space to businesses helping to keep them and the wider economy afloat, but the end of these measures will mean the end of some of these companies who have accrued too much debt, interest and other liabilities or whose businesses are simply not sustainable.
While the majority of these measures were phased out in September 2021 (corporate insolvencies having increased since then) and winding up petitions are already back on the table for most creditors, the anticipated explosion of winding up actions has yet to occur. As we emerge from the pandemic though, we can expect to see more lenders/creditors acting decisively in taking concerted/formal action to recover their losses, and more companies being placed into administration or compulsory liquidation.
This will trigger disputes between lenders and borrowers on issues such as whether companies have breached financial covenants in their loan agreements. In some cases there may be cause for claims against the directors of insolvent entities for wrongful trading and breach of duties owed to the company and its creditors. Directors of companies which engaged in fraudulent investment schemes or which fraudulently claimed under the government’s emergency support schemes before entering an insolvency process will likely also face claims. Depending on the extent and scale of insolvencies, this could generate significant commercial litigation for years to come.
Next, We’ll explore the increase in cybercrime and digital fraud which is developing at pace in our increasingly digital world.
