COVID-19 related litigation trends in the UK

Blog

Dec 7

As the world grapples with the devastating impact of the Coronavirus pandemic on society, economy and business, it is inevitable that many of the hardest hit sectors are likely to see an increase in litigation and arbitration, and disputed.io is working with new and existing legal firm customers on related claims.

Sectors experiencing the greatest loss include commercial aerospace, airlines and travel, along with the oil and gas industry. On a more personal level, consumers have been hit with price increases on essential items, and employment contracts have been terminated. The impact of Covid-19 has touched every aspect of our lives and it will fall to the courts to decide on issues of unlawfulness.

At the time of writing, (November 2020) the UK (along with other European jurisdictions) has not yet seen an upsurge in Covid-19 related litigation. Indeed, despite the fairly rapid response from the civil courts to introduce virtual hearings, the Ministry of Justice reported a significant decrease in all types of civil justice actions for the quarter April-June 2020. In the same period, the number of County Court claims were down 75% on the previous year and, more generally, judgments were down 78%.

Legal cases are yet to be determined in relation to whether the pandemic qualifies as a force majeure event that justifies the non-performance of contracts or a material adverse chance (MAC) that might allow a buyer to walk away from a deal. The first, and hugely significant pandemic associated legal decision is The Financial Conduct Authority (FCA) v Arch Insurance (UK) Limited and Others [2020] EWCH 2448 – a Supreme Court case which opened the floodgates to 370,000 potential policyholders with a claim under their Business Interruption Insurance. The judgment related to 700 types of policies across 60 different insurers; it removed the roadblocks to successful claims and made group collective redress by those affected inevitable.

Factors that will help drive Covid-19 litigation

It is important to recognise that the litigation landscape has evolved in the UK over the past 10 years which makes it easier for class-actions arising from Covid-19 to be made. Key drivers include:

1. a political agenda of improving ‘access to justice’ and opt-out collective actions were introduced under the Consumer Rights Act 2015

2. vocal claimants more frequently joining forces to have a stronger collective voice aided by active consumer organisations. For example, on Covid-19 related litigation, publishing content on employment rights, health & safety, and personal injury (inadequate PPE and procedures).

3. the maturing of the litigation funding market, increasing the availability of funding for cash-poor litigants. In March 2020, the value of court cases and cash directly held by UK litigation funders reached a record high of £1.3bn, up nearly 40% on 2017/2018 figures.

What are the anticipated areas of Covid-19 related litigation?

Consumer claims and collective redress: examples include passengers of the cruise ship Grand Princess filing a class action against ship operators for failing to inform them of the risks of a COVID-19 infection aboard their vessel. Similar action is being brought against a hand sanitising company who falsely claimed their products protected against coronavirus.

Contractual disputes: business transactions ground to a halt during the pandemic with parties unable (or unwilling) to perform existing contractual obligations. Businesses also struggled to ensure supply chain compliance, with delays inevitably leading to knock on claims for damages by other contracting parties.

Securities litigation: potential areas include cyber-attacks and data leaks associated with increased working from home.

Insolvency litigation: it is still not yet clear how quickly (or slowly!) the economy will bounce back from the sharp economic downturn. However, it is reasonable to expect an escalation in insolvency and other financial disputes. For example, in the energy sector the drop in oil price has impacted heavily on financial institutions and corporates. The UK government has already foreseen issues in the field of insolvency law and announced proposals to absolve directors of liability for wrongfully trading through a technically insolvent company,

Mergers & Acquisitions: deals stalled or were abandoned during the pandemic due to uncertainty. Parties are likely to try to recover by way of litigation or arbitration losses suffered as a result of a bad deal, where companies haven’t performed as well as they’d anticipated, making the investment less lucrative.

Employment disputes: where redundancies were made, wrongful termination claims and potential class actions against companies will be brought. The number of unemployed people is expected to surge to £2.6 million during 2021 meaning that individuals may be more prepared to litigate.

How Disputed.io can support litigators

Time will tell what litigants will be arguing and what the courts decide, but for the time being, litigants and litigators will need the stomach for the protracted legal battles ahead. Disputed.io’s two platforms - CaseFunnel.io and FinLegal.io – will help law firms to manage high volume or class action cases by automating the onboarding process and improving case economics. FinLegal.io opens up litigation funding opportunities to ensure clients have access to the best deals and quickens the timescales from enquiry through to the signing of funding agreements.