Law Society Gazette | Grania Langdon-Down
In the face of stiff competition from international rivals, can the Commercial Court maintain its pre-eminent position?
The Michaelmas term starts in the Commercial Court on Wednesday with a new judge – Mr Justice Flaux – in charge of steering it through some potentially choppy waters, as rival international court centres eye any opportunities to compete for business.
Some issues have yet to show their hand, such as the impact the Jackson costs budgeting principles may have on high-value, complex litigation, given the cap was only raised to £10m in April.
The Ministry of Justice has also thrown into the mix controversial proposals for hugely ‘enhanced’ court fees. As the Gazette went to press, the MoJ was still ‘considering’ the responses to its consultation but there are indications it may pull back because of the potential damage it could cause to the competitive position of UK courts.
In the meantime, Flaux begins his new role with a checklist of concerns flagged up by practitioners in a review of the court earlier this year.
Commercial silk and part-time High Court judge Khawar Qureshi QC was asked by the lord chief justice to look at the court’s strengths and weaknesses and identify issues to be addressed. He surveyed 39 law firms and five chambers, and found the judiciary and quality of decisions were considered second to none.
But the views of a significant minority that costs are too high, case management and disclosure are unsatisfactory, and the use of IT before and during trial falls far short of ideal will give Flaux plenty of food for thought.
Drawing on the survey results, Qureshi also cautioned that a degree of ‘complacency’ had emerged about the position of the court as a forum of choice.
That is a trap Flaux is determined to avoid, using his experience on both sides of the fence. A commercial silk with 7KBW, his practice was split between commercial litigation and commercial arbitration. Since his appointment to the High Court in 2007, he has sat regularly as one of the 15 designated Commercial Court judges.
His appointment was greeted with enthusiasm, with one practitioner commenting: ‘He is very proactive and I can’t think of a better judge to be in charge of the court list.’
Anecdotal evidence suggests, says eDisclosure consultant Chris Dale, that Flaux is ‘rather more alive to the commercial imperatives of clients and their lawyers than some of his judicial colleagues, knows that “active management” implies something proactive, and that technology has moved on a bit since he was a pupil. We shall see’.
What is clear is the need for a steady hand, particularly given the important role the court plays in helping maintain the UK’s position as the leading centre for international legal services.
Since 2008/09, the number of claims issued in the Commercial Court has exceeded 1,000 a year. Its jurisdiction is wide, extending to any claim relating to the transaction of trade and commerce, as well as arbitration and competition matters.
What stands out is that there was a foreign party involved in 81% of the 1,100 claims issued during 2013/14 – up from 72% in 2008/09 – and in 48% of cases all parties were from outside the UK.
Research into its usage by communications consultancy Portland found the most common nationalities came from the US, Russia – the 2012 Berezovsky-Abramovich trial alone was reported to have generated £100m in legal fees – Kazakhstan, Switzerland, the United Arab Emirates, India, the British Virgin Islands, Panama, Bahrain and Germany.
The court’s international image was given a modern twist with the opening of the prestigious Rolls Building in 2011. But lack of IT and limited Wi-Fi have long been cited as major shortcomings, comparing badly with the commercial courts in Dubai and Qatar. A viable ‘e-working’ solution cannot come soon enough for practitioners (see box below).
Tony Guise, chair of the Commercial Litigation Association, canvassed members’ views on the competition for London’s crown. ‘There is a real danger Singapore and/or New York will steal a march – and let’s not forget the DIFC Court in Dubai [pictured],’ he says. ‘One member takes the view Singapore has the work now and it won’t be letting go any time soon. With the rise of the far east as a market, he believes Singapore will become the premier jurisdiction for dispute resolution in five to 10 years’ time. Confidence placed in London’s pre-eminence by way of dispute resolution clauses is, in his view, misplaced.’
John Bramhall, chair of the London Solicitors Litigation Association, believes London still has the edge. ‘The Commercial Court continues to attract large numbers of international clients who respect our systems, our law and our judiciary,’ he says. ‘It may not necessarily always be the cheapest place to resolve a dispute but the quality of the judiciary is high; there is, in broad terms, no corruption; and clients feel they get a fair hearing in a relatively timely manner. Those are London’s great strengths.’
Flaux will be keeping an eye on whether work which would otherwise come to London is going elsewhere.
While he acknowledges nothing can be taken for granted, he is confident of the Commercial Court’s strengths.
‘The Singapore court is very much feted, but I don’t regard it as competition as such because it is essentially dealing with far-eastern cases, most of which wouldn’t have come here anyway,’ he says. ‘They might have arbitrated here but, given Singapore is also a well established arbitration centre, the reality is that area of work is self-contained.’
He points to discussions about an English-language court in Hamburg but says that is still in its early stages.
‘The DIFC Court is staffed almost exclusively by retired Commercial Court judges so I must be a bit careful what I say,’ he says with a smile. ‘It’s a pretty good set-up but it largely deals with Middle East cases – a dispute between a Delaware-registered company in the US and a German company isn’t going to be litigated in Dubai.’
He does not view arbitration as competition. ‘Rather, we complement each other in terms of our role supervising arbitration applications and enforcement,’ he says. ‘Historically, a lot of contracts contain London arbitration clauses and they aren’t suddenly going to say “we would rather litigate in Singapore or Dubai”.’
Flaux has seen no signs of demand for the court falling away. Indeed, earlier this month the Law Society predicted that the UK legal services sector would return to pre-financial crisis rates of growth, with reports from practitioners of a continuing surge in disputes work.
There are always the core areas of work in terms of shipping, and insurance and reinsurance, as well as the disputes arising out of the 2007 crisis, the judge says.
‘Derivative disputes of one kind or another are very much the flavour of the year,’ he notes. ‘I have only just started in this role but I have a sense that the Russian oligarch cases have rather run their course. But moves to impose sanctions on Russia are likely to create their own area of litigation.’
The London legal system has certainly shown itself remarkably adept at providing a platform to resolve disputes arising out of situations no one could have foreseen, argues litigator Graham Huntley, founding partner of Signature Litigation and a member of the Commercial Court Users’ Committee.
‘Some things are being done better in other places but I have yet to be convinced they are so much better that it is making them more attractive than London,’ he says. ‘But it would be disastrous if we became complacent.’
While there are pressures in terms of costs and technology, Huntley says success is not down to individual factors but the interaction of the physical structure of the court, the quality of the judicial process and the resources put into the system – including the level of co-operation from parties – so it can function at its best.