With the economies of the world becoming ever-more intertwined, it should perhaps be no surprise that there has been a corresponding growth in global disputes. Sometimes, this trend can be difficult to detect since the majority of such disputes are resolved by arbitration and hence protected by a cloak of confidentiality. I was therefore interested to read a recent study conducted by American Lawyer Magazine and an article written by the New York Times suggesting that there are 120 actions pending at international tribunal centres each worth in excess of US$1bn.
That is an eye-catching total even allowing for the usual claim inflation in which lawyers like to indulge. Of even more interest is that a number of foreign governments are parties to these disputes. The United Nations Conference on Trade and Development names the countries which appear most often in claims brought by dissatisfied parties:
- Czech Republic
- The United States
That is not a list of countries which one often sees lined up next to each other in any context.
It highlights the fact that arbitration, unlike regulation, often occurs below the parapet. Indeed, arbitration disputes could be said to be the polar opposite of regulatory liabilities and exposures for corporates about which we hear so much more. Regulators tend to have a specific public agenda desire to publicise both the investigations and the outcomes. That does not mean that their impact is insignificant.
This growth trend in arbitration is obviously good for the lawyers. International arbitration practice seems to be booming and indeed it is now included as a graduate course in its own right in certain law schools although I don’t remember it being an option when I trained as a lawyer!
Is There any Other Relevance for Directors of Companies in this Growth Trend?
I suppose an obvious lesson here might be that winning a large and seemingly lucrative international contract may not always be the best long-term outcome for a company. If a company is unlucky enough to become embroiled in a large international dispute the possibility of laying off some of the litigation risk and cost with the lawyers themselves or with professional funders might also be worth exploring.
A startling example of the size of the risk appetite of litigation funders was provided by the recent judgment handed down by the English Court in a $1.6bn claim brought by Excalibur Ventures LLC against Gulf Keystone Petroleum Limited in Texas (Keystone Inc), two oil and gas exploration companies over interests in oil fields in the Kurdish region of Iraq. Excalibur which lost the claim was it seems backed by litigation funding companies which may end up nursing very significant losses.