Disputes Yearbook 2023:
Commercial litigation

UK to join Hague Judgments Convention

The UK Government has announced the UK will sign the Hague Judgments Convention 2019 as soon as possible and then ratify it once the necessary implementing legislation and rules have been put in place. The Convention will enter into force for the UK 12 months after ratification, which is likely to mean sometime in 2025. It will then apply to the enforcement of judgments between the UK and the other contracting states (which by that time will include at least Ukraine, Uruguay and all EU member states except Denmark) in proceedings issued after that date. The UK’s decision to join Hague 2019 is a helpful step in facilitating enforcement of English and other UK judgments abroad, particularly post-Brexit as the recast Brussels Regulation and Lugano Convention no longer apply to the UK. For more information see our blog post here.

Litigation funding agreements involving a share of damages are DBAs

In a surprise decision in the Paccar case in July, the Supreme Court held that agreements which provide for a litigation funder to be paid a share of damages are damages-based agreements (DBAs) and therefore unenforceable unless they comply with the restrictive regulatory regime for such agreements. See our blog post here. Litigation funders have been amending their agreements to try to avoid the effect of Paccar, by ensuring they either fall outside the definition of a DBA or comply with the regulations.

The decision has particular implications for opt-out collective proceedings in the Competition Appeal Tribunal (CAT), since DBAs are currently prohibited in that context, although the government has recently introduced a legislative amendment to allow the use of DBAs with litigation funders (but not with solicitors or barristers) in such cases, as outlined here. In one case (discussed here) the CAT has held that an agreement where the funder was to be paid a multiple of the funding provided, rather than a share of damages, was not a DBA.

Testing the boundaries of the CPR 19.8 representative action

In the past year there has been much debate about the proper boundaries of the Civil Procedure Rules (CPR) 19.8 representative action procedure. The mechanism allows a claimant to bring an "opt-out" claim on behalf of others who have the "same interest" in it – including debate as to the scope for using a "bifurcated process", as envisaged by the Supreme Court's 2021 decision in Lloyd v Google. That is being tested in an appeal in the Commission Recovery v Marks & Clerk case, in which the High Court allowed a claim in respect of secret commissions for IP renewal referrals to proceed as a representative action, despite significant differences in class members' individual circumstances (see our blog post here). The Court of Appeal's decision is expected to clarify various issues as to the proper use of the procedure. In the meantime, the High Court has allowed a bifurcated process to be used in a claim by a bank against a representative defendant (see our blog post here).

Claimants' attempts to use the CPR 19.8 procedure in a novel way in a number of securities class actions have been knocked back following the court's decision to strike out the claim in Wirral Council v Indivior Plc. Unusually, in that case, the claimant was seeking to use the procedure on an "opt-in" basis, with the aim of enabling the claimants to dictate the issues to be progressed and determined at the initial trial stage. The High Court rejected the claimant's attempt to tie its hands in that way, finding that any claims should be pursued as ordinary multi-party proceedings with the investors as claimants (see our blog post here).

Failed pursuit of derivative claims in climate change litigation

In two separate cases, the High Court and Court of Appeal have refused applicants permission to continue derivative actions against company directors regarding their climate change strategies and decision making. These decisions show how difficult it is likely to be for environmental and other campaign groups to use the derivative action procedure to challenge directors' strategic or long-term decision making. That is in part because the court will not generally interfere in company management decisions, particularly where they require directors to balance competing considerations – including decisions as to how a strategy should be implemented as well as what strategy should be adopted. The judgments also show that the court is unlikely to grant permission for a derivative action where it considers that the action has been brought for an ulterior purpose – which may be a ready inference where the applicant is a campaign group with a small shareholding. For more information see our blog posts here and here.

Withdrawal of test case asserting strict liability for non-executive directors

On the eve of a 13-week trial this autumn, the Insolvency Service (IS) discontinued disqualification proceedings against five former non-executive directors (NEDs) of Carillion plc. The IS had been seeking to disqualify the NEDs from being involved in the management of any company on grounds that they did not know the alleged true financial position of Carillion (in particular alleged fraudulent misstatements of group accounts) at all times, ie, strict liability for directors. If the claim had succeeded, it would have subjected directors, particularly those appointed to large and complex companies, to an almost impossible standard – akin to omniscience extending to every aspect of a company's business. For more information see our blog post here.

Litigation involving Russian-sanctioned parties

The courts have continued to grapple with various issues in litigation involving Russian-sanctioned parties. A Court of Appeal decision has confirmed that UK sanctions do not preclude the court entering judgment in favour of Russian sanctioned parties. The decision also held that the Office of Financial Sanctions Implementation (OFSI) is entitled to license a sanctioned party to pay an adverse costs order, security for costs or damages on a cross-undertaking in damages and can also license payment of a costs order in favour of a sanctioned party. See our blog post here.

Anti-suit injunctions have become particularly important in respect of Russian parties, because of a Russian law which allows its domestic courts to take exclusive jurisdiction over cases which involve sanctions. Accordingly there have been a number of cases in which parties have sought anti-suit injunctions from the English courts to restrain parties pursuing proceedings in Russia in breach of dispute resolution clauses in their agreements. In one case the court granted both an anti-suit injunction and an anti-anti-suit injunction, where there was a London-seated LCIA arbitration clause (see our blog post here). In other cases, the courts have considered whether it is appropriate to grant an anti-suit injunction in support of foreign-seated arbitrations, granting the injunction in two recent cases and refusing it in one as discussed in our blog post here.

Court decisions relating to crypto assets

The English civil courts have continued to contribute to the development of the law in relation to crypto and other digital assets, in particular in the context of claims by victims of digital fraud who seek to trace and recover misappropriated assets. Such claims have required the courts to consider not only the substantive legal rights and duties that apply to digital assets (including for third parties such as crypto asset developers and crypto exchanges/custodians) but also how the courts' traditional practices and procedures need to evolve for crypto fraud victims to be able to exercise and enforce those rights. Of particular note this year were decisions where the courts:

• Considered the appropriateness of an interim proprietary injunction against a crypto exchange requiring it to preserve allegedly stolen cryptocurrency (as distinct from an injunction against the wallet/account owner, brought to the attention of the exchange). See here.
• Ordered a crypto exchange to transfer into the jurisdiction a defendant’s cryptocurrency (to then be converted into fiat currency and held by the Court Funds Office), to facilitate the claimant’s efforts to enforce against those assets (see here).

Changes to status and interpretation of retained EU law

The Retained EU Law (Revocation and Reform) Act 2023 will make significant changes to the status and interpretation of retained EU law (to be known as "assimilated law") from the end of this year. The changes are not so sweeping as originally planned, however, as the government dropped plans to abolish all retained EU law that was not specifically saved before the end of the year. Still, the Act contains broad powers to amend, restate or revoke retained EU law, as well as changes to how retained EU law is to be interpreted (with the revocation of the principle of EU supremacy and other general principles of EU law) and provisions encouraging courts to depart from retained EU case law. See our blog post here.