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07 April 2020

London claims slump in face of Covid-19 ahead of predicted disputes surge

Data reveals a sharp fall in commercial claims as businesses prioritise survival; for time being

Pic of High Court

London's High Court: claims have slumped but are expected to surge once pandemic is under control Shutterstock

Disruption caused by the Covid-19 pandemic has led to a slump in commercial claims being filed with London’s High Court, according to research published today.

Data released by international law firm HFW and litigation analysts Solomonic reveals a 65% slump in claims lodged with the commercial and Chancery courts over the past four weeks with the total number of claims falling to 143.

Last week’s tally of 29 claims represented the lowest volume of new claims since Solomonic started tracking the data at the start of 2018.

The figures mirror the shock the pandemic has delivered to M&A activity, with Mergermarket recording a 39% fall in global deal value for the first quarter compared to the same period in 2019.

However — in stark contrast to predictions for M&A and other transactional work — HFW is predicting disputes activity to spark back into life after a temporary lull.

HFW dispute resolution partner Damian Honey said declines in disputes activity were typical in times of market stress as businesses focused on their immediate priorities, such as managing cash flow.

“When you're in survival mode, you don't typically go around commencing what could be expensive litigation,” he said.

"We saw the exact same thing happen with the financial crisis in 2008 – the disputes market went really quiet, but that eventually gave way to a surge of litigation and arbitration. We expect the same to happen with Covid-19."

Adam Strong, HFW litigation funding committee chair, said the emergence of litigation funding as a mainstream industry since the last financial crisis would act as an additional spur to claims.

"Litigation funding was a fledgling industry in 2008, but it's now very much in the mainstream – that could have a huge impact,” he said. “Having access to third-party funding allows claimants to not only de-risk litigation, but also to completely remove the legal fees from their balance sheets. 

“That will prove extremely attractive to many companies at the moment, and could mean that we start seeing Covid-19-related claims coming through sooner than they might otherwise."

The prediction is line with an update to the London Stock Exchange provided by litigation funder Burford Capital last week when it said it was anticipating “a significant increase in the volume of large dollar litigation and arbitration matters” despite some short-term disruption.

Further reading on the Covid-19 pandemic

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Cadwalader suspends partner distributions and cuts salaries as Covid-19 impact grows

Allen & Overy boosts partner capital and freezes salaries, Reed Smith slows distributions

Listed top 30 UK firm DWF issues profit warning as impact of Coronavirus bites

Unprecedented response to Covid-19 is 'testament to legal profession's resilience

US businesses 'clamouring' for guidance on fast-moving Covid-19 crisis, survey finds

Staff welfare, supply chain and privacy: the coronavirus-related issues keeping GCs awake at night

'I have realised how powerful technology now is': an Italian lawyer's take on Covid-19

Coronavirus risk may be unprecedented, but the fundamental principles of crisis response still apply

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