Global Taxes

Dispute resolution: pandemic strains system but forces new approaches

Margaret TaylorThursday 28 May 2020

The Covid-19 pandemic has had an unprecedented impact on global markets. Share indices have been in free fall, millions of businesses are facing bankruptcy and most sectors in most economies appear to be under threat.

Against this backdrop a deluge of commercial disputes is expected to arise, as businesses seek to regain some of the ground lost when transactions were cancelled and liquidity dried up. With the pandemic meaning courtrooms around the world are currently either closed or seriously restricted, that deluge has the potential to be overwhelming.

Neerav Merchant, Membership and Communications Officer of the IBA Litigation Committee and a partner at Indian firm Majmudar & Partners, points out that the Supreme Court of India and various state High Courts ‘have issued circulars requiring litigants to approach courts only for matters which are urgent and not otherwise’. The country’s lower courts, meanwhile, ‘are not well equipped’, believes Merchant, to use technology to allow them to continue to function.

The end result is that a whole bunch of people will gather new skills

Thomas Valenti
Vice-Chair of the IBA Mediation Committee

It is a picture that is recognisable in many other jurisdictions. In April the British Institute of International and Comparative Law – whose members include former United Kingdom Supreme Court Presidents Lord Neuberger and Lord Phillips, former Judge in Charge of the Commercial Court, Sir William Blair and former Court of Justice of the European Communities judge Sir David Edward – warned that to avoid ‘placing a strain on the system of international dispute resolution’ a ‘more creative, graded, but nevertheless rigorous approach’ would have to be found.

Thomas Valenti, Vice-Chair of the IBA Mediation Committee and Founder of mediation services provider Valenti Law, believes that mediation could be the answer.

‘Mediation is more likely to happen as a result of this because lawyers around the world will realise that clients were put into a difficult situation [due to Covid-19] and don’t have the luxury of time to resolve it,’ he says. ‘It will force counsel to resolve a real dilemma. We’ll see more use of mediation because the need is there and companies that are shut down have financial constraints.’

Mediation is of particular benefit in a crisis because it allows disputes to be resolved far more quickly and cheaply than either arbitration or litigation. Valenti, who says that even ‘billion-dollar disputes’ can be resolved through mediation, even believes it brings better justice because, ultimately, it is the parties rather than a judge who decide the outcome.

Not all jurisdictions are set up to roll out mediation on a sufficient scale, however. Federico Antich, also a Vice-Chair of the IBA Mediation Committee and Founder of Studio dell’Avvocato Antich, notes that, even though both mediation and arbitration have been encouraged in Italy for more than two decades, in practice they have been rarely used.

‘Despite that big effort, scarce results in quantitative terms were collected,’ he says. ‘A more rosy situation was seen when the law on mandated mediation was systematically implemented in 2014, though Italy still lacks a generalised legal provision calling for mandatory mediation in all contractual disputes.’

Sandrine Giroud, Newsletter Editor of the IBA Litigation Committee and a partner at LALIVE, says that while mediation could be a good way to ‘absorb’ the volume of cases being pursued in the wake of the pandemic, in Switzerland at least it is simply not part of the corporate culture. Nor, she believes, is that likely to change in the near term when legal advisers are not geared up to offer it.

‘You have to bear in mind that a lot of lawyers will have suffered a lot and will want to have work,’ she says. ‘If they are not trained mediators, they go to court and will do what they know. Mediation is a different job and you need to have a proper setting for that. In some jurisdictions people are really suffering – some people doing pure court litigation have had no work for two months because there have been no hearings.’

Despite these challenges, what is clear is that lawyers, just like everyone else, are finding new ways of working amid the pandemic. Alexander Leventhal, Young Lawyers Liaison Officer on the IBA Mediation Committee and a senior associate at Quinn Emanuel Urquhart & Sullivan, says that while this may not stop the flood of litigation, it could lead to a more efficient handling of disputes in the longer term.

‘Everyone is learning how to do things that they have been doing all along with technology and other tools that existed all along but [that people didn’t use],’ he says. ‘The court system has been no different, with different results in different places. In the US there’s been a great openness to using technology where that’s necessary. That’s only going to increase in the future.’

Leventhal says this is something the alternative dispute resolution world needs to keep in mind because the way people go about their lives and operate their businesses is going to change.

While that is unlikely to stop a mountain of cases building while court time remains greatly reduced, Valenti agrees the outcome will be that those cases will be dealt in a more efficient and pragmatic way when they do get to court.

‘The end result is that a whole bunch of people will gather new skills,’ he says. ‘Sometimes lawyers put in too much evidence because they can, but now the focus has to be sharper. It makes us better lawyers. This crisis is a huge obstacle, but it will make us think about how we approach dispute resolution and how we can sharpen our skills.’