Recent Reforms

The major change in terms of Commercial Disputes came into effect in April 2013 which saw the threshold value for small claims rise from £5,000 to £10,000 as part of the Jackson Reforms to Civil Litigation procedure. This has obviously had consequences for businesses in that they can’t now recover their legal costs when pursuing amounts below £10,000 through the courts. There has been some suggestion that this threshold would further increase to £15,000 but nothing has materialised to date.

Rise in Commercial Disputes

The legal system in recent years has witnessed a rise in contentious work. Continuing economic uncertainty has meant that businesses are failing to get paid. There has been a national and international growth in disputes going to arbitration as many corporate parties look to prioritize cost savings. Major commercial contracts are increasingly including arbitration clauses as a matter of course. Commercial litigation has experienced a very high level of activity both nationally and internationally with such trend looking certain to continue next year. It is clear that business’ increasing awareness of case costs has not undermined their appetite for litigation.

Companies are still becoming insolvent in the current economic climate and subsequently insolvency litigation and enforcement has seen an increase. Regulators and creditors have become more aggressive in the pursuit of outstanding debts and less cautious in filing suits, this is despite an increased awareness of the costs involved. There is a need to strike a balance between cost effectiveness and efficient case management. The number of businesses actively turning towards arbitration has risen steadily over the past couple of years and such trend is likely to increase through 2015. Corporate parties are more incentivized by costs considerations.

Increase in Arbitration

Commercial litigation and arbitration have both experienced continuous growth over the past year. More parties are voluntarily turning to arbitration – the steady rise of mandatory arbitration clauses in multi-jurisdictional contracts is certainly a contributing factor to the increased use of such forum. Recent case law highlights that parties in commercial litigation risk adverse costs sanctions if they unreasonably refuse to mediate or if they ignore a request to mediate without providing any justification. Whilst judges cannot compel parties to mediation, many judges appear to take an active role in case management issues and are keen to encourage parties to agree to mediation.

Whilst mediation is not compulsory (unless there is a contractual clause to that effect), there is a growing trend towards parties attempting it, even in cases where it is unlikely to be successful.

Possible Reforms

Recent commentary suggests that the minimum figure for issuing a Statutory Demand is due to increase from £750 which would make the threshold debt figure higher for making an individual Bankrupt or commencing Winding Up Proceedings against a company. There has however been nothing concrete as yet and things are only at the consultation stage. The reports suggest that the £750 figure could be increased to around £1,500 – £3,000. The implication will be that businesses could face further difficulties in recovering debts below such amounts.

General Guidelines for Businesses

An effective debt recovery strategy is increasingly important, this can include an effective case management system and accurate profiling of debtors to distinguish the “won’t pay” from the “can’t pay”. A competent solicitor will be able to quickly advise you of a situation where you are wasting time and money in pursuing someone who can’t pay. Commercial disputes can be costly, time-consuming and stressful. Minor disputes can quickly escalate causing damage to reputation and can even threaten a business’ survival. Clear written agreements between customers and suppliers are essential in order to minimize the risk of a dispute developing. A long-term relationship with a reliable firm of solicitors can also help to minimize disputes and allow for them to be dealt with in the best possible way at the outset.

Here at Farleys we possess a wealth of experience of representing both individuals and businesses in the area of Commercial litigation. Do not hesitate to contact us today to speak to one of our specialist solicitors for advice on the grounds for successfully bringing or defending a claim. To speak to an experienced Commercial Litigation solicitor please call 0845 287 0939  or alternatively you can email us.