Disputes Quick Read: What are the litigation trends for 2023?

Members of our Disputes & Investigations team consider litigation trends for 2023 in the current market and beyond.

Is there going to be more litigation generally in 2023?

Historical trends show that financial difficulty leads to more disputes. It is clear that the UK is in a time of financial difficulty. The impact is also global with economic and political instability the effects of COVID-19, Russia's invasion of Ukraine and, more recently, the economic turmoil caused by decisions of the UK government, all having an effect. We are also in a time of rapid technological change which is giving rise to new issues that are challenging the application of the usual legal concepts. 

The backdrop, however, to 2023 is very different to that of the financial crisis in 2008. That financial crisis stemmed from one overarching cause – certain practices within financial institutions which led to a discrete set of causes of action. In 2023, the causes are more varied and so we expect that the impact will be felt across a broader range of areas and that there will be a more diverse range of disputes. The current economic climate also means that we will likely see an increased appetite for litigation. Economic pressures may mean a party is more willing to proceed with a claim as it may not be in a situation where it can choose to delay. The increased uncertainty about the future may also affect a party's decision to enforce its rights and seek remedies - long term commercial relationships may not have the same relevance in the current situation and parties may be more likely to push the button and terminate a contract.

In what areas will we see more dispute activity? 

So what type of disputes can we expect in the coming year?

We have focused on 6 key areas:

• ESG claims
  We have already seen a significant increase in ESG- related litigation. Companies in all sectors are increasingly coming under scrutiny for their response to climate change and other sustainability issues. So, in addition to the more obvious fossil fuel/ carbon related companies, other targets include financial institutions. We also expect there to be more claims against UK companies alleging liability for acts of overseas subsidiaries and against directors of companies in their personal capacity. We are already advising directors on how their general duties apply and on how to mitigate risk in the context of ESG concerns and we see this as an area where there will be more claims. See our recent article on the claim by ClientEarth against Shell regarding directors' duties to manage climate change risk. See here for more information on the firm's ESG experience.
• Civil fraud
  The motivation and opportunity to commit fraud increases as financial pressures impact both individuals and businesses. We are also set to see an increase in insolvencies and the appointment of insolvency practitioners. This also increases the likelihood of fraud being uncovered (if it exists) and investigated. We refer to our recent article in our Fraud Fundamentals series in which we discuss the areas where we predict more civil fraud-related litigation activity.
• Crypto assets
  Litigation involving crypto assets continues to grow and there have been a number of important court decisions in this area over the last year. The courts have demonstrated the adaptability of English law to provide a legal basis for seeking remedies in this area despite the legal challenges posed by the nature of the assets themselves. In light of this, we anticipate that the English commercial court could become a jurisdiction of choice for the continuing trend of digital asset disputes. The recent decision of the Court of Appeal in Tulip Trading v Van Der Laan that Tulip has an arguable case that Bitcoin developers owe fiduciary and/or tortious duties to Bitcoin users, demonstrates that the court continues to be prepared to tackle the new challenges raised by digital assets and blockchain technology. See here for other information about our experience in this area.
• Securities litigation
  UK investors have become more willing to seek redress where they have suffered losses arising from omissions or misstatements in a company's published information. Typically, shareholders bring claims against the financial institution based on s90 FSMA. Difficult financial conditions can lead institutions to act quickly, for example, to raise funds and so there is an increased risk of mistakes being made in the information provided which in turn may give rise to a greater legal risk of claims. Another example is in relation to ESG, where an increasing burden on companies to publish climate related information inevitably increases the risk of omissions or misstatements in the information provided and so the potential for claims also under FSMA.
• Litigation funding
  Litigation funding has been an increasing force in the market and we expect to see this continuing. In difficult times, it is a way of spreading risk and can result in parties pursuing claims which they would otherwise have given up without funding. The availability of litigation funding has also been a significant force behind group actions in recent times. Another area where we think there will be more activity. We include here a link to NeTWork which is a tool we have developed to simplify the process of getting access to litigation funding. 
• Litigation involving AI
  The European Commission is leading the charge in developing the legal framework for AI and recently proposed a new, first of its kind, AI Liability Directive to sit alongside the AI Act. The rules are designed to ensure a high level of protection of the public interests, and in particular, health & safety and people's fundamental rights and freedoms. The AI Act lays down specific requirements with which high-risk AI systems must comply and imposes obligations on providers and users of such systems. The UK government is lagging behind somewhat with a number of consultations underway which have been approached on a sector by sector basis (i.e. the impact of AI on data privacy and product safety). It is difficult to understand the true scale of the market for AI powered consumer products but we are seeing significant advancements in new technologies in other sectors such as automotive and digital health. That said, evidence of real-life examples of harm caused by AI products remains limited and it will be interesting to see if any cases emerge either in the UK or Europe which might assist in framing the developing regulatory and liability regime. See our article on reforms to the Product Liability Directive and our article on a new AI Liability Directive. 

If you would like more information on any of the areas mentioned, please contact a member of the Disputes and Investigations team.