Commercial disputes perspectives – UK, Spring 2020
We ended 2019 wondering whether Brexit would remain as all-consuming as it had been the previous three years. Cue the COVID-19 pandemic. We hope this newsletter finds you, your colleagues and your family in good health and adjusted to the new 'normal’. We look back at the first three months of 2020, unforgettable in more ways than one, and how current developments may impact our future.
Our personal and professional lives will never be the same as the effects of the coronavirus will exist far beyond the pandemic itself. A large part of this newsletter will inevitably be devoted to COVID-19. We highlight topical developments, point out some of the pitfalls and include a lot of practical advice. We also offer an update on several commercial law initiatives, the Supreme Court’s decision in the Morrisons data breach litigation and cryptocurrency developments. We end the newsletter with team updates and how we adjusted to remote working while continuing to advise and represent our clients. This is about life before and after CV-19.
The pandemic places severe strain on commercial relationships: performance is
either not forthcoming or delayed and contracts are breached. Below, the team offers practical insight into current hot topics such as force majeure clauses in contracts, supply chain issues, the ‘wrongful trading’ suspension and cryptoasset scams.
The recent press around the alleged spat between easyJet’s founder and its Board serves as the perfect case study of the tricky path directors walk at all times, but especially now. We also consider how COVID-19 impacts on international arbitration and has led to the suspension of
non-essential financial services. To end, the team shares its first-hand experience with a virtual court hearing.
Can force majeure clauses remain immune to the Coronavirus?
Disputes are already arising as to whether material adverse change clauses are invoked by the COVID-19 pandemic and whether COVID-19 constitutes a force majeure event. Under English law, these issues will be a matter of contractual interpretation, as detailed in our Hausfeld Perspective.
Contractual and supply chain issues
In our Hausfeld Perspective, we discuss how the unprecedented situation caused by the COVID-19 outbreak places severe strain on commercial relationships and supply chains. Parties are turning to mechanisms, whether contractual or otherwise, which may allow them to avoid liability for breach, renegotiate terms or delay performance.
Could wrongful trading suspension come back to bite?
On 28 March 2020, the Government announced the suspension of s.214 of the Insolvency Act 1986, removing personal liability on directors for so-called ‘wrongful trading’ in order to provide directors with some personal protection to allow their businesses to continue trading through the pandemic. As detailed in our Hausfeld Perspective, there are, however, likely to be consequences arising from the suspension, including for creditors.
How the easyJet example unearths the tricky path threaded by company directors
In what are currently uncharted waters for many, directors discharging their obligations to act in the best interests of the company will be faced with difficult decisions in respect of their duties as directors, potential insolvency and the application of force majeure/ frustration arguments regarding pre-existing contracts.
More details in our Hausfeld Perspective.
Impact on international arbitration
International arbitration is often hailed as one of the most flexible forms of dispute resolution. Despite the challenges of COVID-19, the evidence, as summarised in our Hausfeld Perspective, suggests that arbitration will remain a convenient, practical and accessible method of dispute resolution, for both national and international disputes.
Virtual courts – our firsthand experience with the new ‘normal’
The Court system has been forced to react quickly to the ever-changing circumstances by introducing new protocols on remote hearings.
In our Hausfeld Perspective, we reflect on the Court’s approach to hearings in the midst of the COVID-19 pandemic, and our recent experience of a Skype hearing to adjourn an application listed to be heard in April.
Suspension of non-essential financial services regulation – a risky approach?
The Prudential Regulation Authority, the Financial Reporting Council and the Financial Conduct Authority have released a joint statement which, amongst other things, sets out how some areas of their regulatory work will be either suspended or relaxed during the pandemic. Whilst the decision to suspend elements of regulatory oversight in the current climate is understandable in circumstances where firms are under pressure to devote resources to assisting customers suffering financial difficulties, there may be unintended consequences.
More details in our Hausfeld Perspective.
In AA v Persons Unknown  EWHC 3556, the Commercial Court held that cryptocurrency constitutes property under English law and can be the subject of a proprietary injunction.
Hausfeld continues to keep up to date with developments in this area. You may find the latest in our series of updates on cryptocurrency of interest: “Cryptocurrency: is it property?” Part IV.
The Witness Evidence Working Group’s Final Report
In 2018, a Working Group was established to consider ways in which the current practice in relation to witness evidence could be improved in the Business & Property Courts. On 6 December 2019, the Working Group published its Final Report. Most of the recommendations of the Working Group appear to be aimed at “course correction” rather than a complete re-alignment of the rules, in contrast to the approach taken to disclosure under the ongoing Disclosure Pilot Scheme.
More details in our Hausfeld Perspective.
Disclosure Pilot Scheme
Commercial litigators in England and Wales continue to deal with the impact of the Disclosure Pilot Scheme. Law360 (subscription only) interviewed John McElroy, commercial disputes partner, on his views on the Disclosure Pilot Scheme and its impact on commercial litigation. Speaking about the impact that the Disclosure Pilot Scheme has had on his role, John noted:
“The biggest change is that clients are expected to put a lot more effort into the gathering of evidence, far earlier than under the old system. The administration required means that people are probably taking a bit longer to issue proceedings as a result. As a client and as a solicitor, the last thing you want is to be penalized for costs for not complying with a rule, and so there has been a lot of focus on doing things the right way."
The Financial List, launched in October 2015, is a specialised docket for cases meeting certain criteria within the financial services sector. Each case must be worth more than £50 million and requires judges to have expert and specialist knowledge or raise an important issue for the financial sector. Commercial disputes partner, Lucy Pert, recently shared her views on the success of the Financial List with Law360 (subscription only). Lucy stated that:
“There is a real benefit to having judges skilled in financial services, who really understand the way this world works. It means you don’t have to deal with a lot of education and you can probably get more quickly to the meat of the dispute.”
She also explained that one of the challenges of the Financial List is that many of the judges come from banking defence backgrounds. Furthermore, one of Lucy’s biggest concerns is the lack of diversity among UK senior judiciary more generally.
Hausfeld Commercial Disputes team: Q1 2020 developments
Legal 500 UK recently awarded Lianne Craig, Hausfeld’s head of Commercial Disputes, “Individual of the Year – Dispute Resolution London”. The Legal 500 Awards recognise and reward the best in-house and private practice teams and individuals over the past 12 months. You may also find Lianne’s recent interview with Law360 (subscription only) of interest. In particular, Lianne spoke about what attracted her to make the leap to Hausfeld, how the firm has developed over the last 10 years and what industry trends she is keeping her eye on in terms of social justice and environmental litigation.
On 1 March 2019, Hausfeld opened Hausfeld Advocaten in Amsterdam, its 7th office in Europe and 12th worldwide, consisting of the entire team of lawyers from Zippro Meijer Advocaten.
In London, Eleanor Powell, Samantha Hewitt and Hugh Tait joined the Commercial Disputes team, now comprising 6 partners and 12 counsel/associates working on commercial disputes at Hausfeld.
We continue to be active in the financial services, arbitration and general corporate disputes sphere which included acting for individuals and corporates on a range of commercial and financial disputes. Hausfeld is working on various disputes where technology is being used successfully to keep the proceedings moving forward during the COVID-19 pandemic.
In the financial services sphere, the team remained highly active, continuing to act on behalf of various English regional government authorities against Barclays Bank relating to the bank’s manipulation of the LIBOR benchmark rate between 2005 and 2010 with a virtual directions hearing taking place on 31 March 2020, as discussed in our Hausfeld Perspective.
Given Hausfeld’s depth of experience in financial services disputes and group litigation, we are continuing to investigate potential group litigation claims on behalf of corporates and individuals against banks and other financial institutions.
High Court Employment Trial
On 2 March 2020, we commenced trial on behalf of our client, Dr Philip Comberg, against his former employer VivoPower International PLC and VivoPower International Services Limited, in the Queen’s Bench Division of the High Court before Mr Justice Freedman. Dr Comberg was previously the CEO of VivoPower International PLC and employed by VivoPower International Services Limited. He pursued a claim against those entities arising out of the non-payment of his salary under his employment agreement and three fees agreed under separate oral contracts. The trial concluded on 17 March 2020, which was also the day the UK Government announced social-distancing measures and non-essential travel restrictions in light of the on-going COVID-19 pandemic. It was, therefore, fortunate that the trial was able to conclude, particularly in circumstances where the Court heard from a total of 10 witnesses including a number of witnesses that travelled from overseas in order to give their evidence.
General Corporate Disputes
Since the start of 2020, the firm has continued to represent a variety of clients in various industries on a wide range of corporate and commercial disputes. This included disputes arising from areas of law such as employment, technology, media and mergers and acquisitions.
- Acting for a client in a dispute with the HMRC as to the VAT rating on the importation of an aircraft modified and permanently adapted for use only by disabled persons.
- Advising on a breach of a licence agreement regarding the publication and distribution of certain legal publications.
- Advised on a dispute with a marketing agency regarding payments due under an agreement for services for media planning and buying services.
- Currently advising on a complex potential breach of confidence/unlawful means conspiracy claim.
- Instructed by an insolvency practitioner to assist in the enforcement of the bankruptcy order obtained in his capacity as Trustee in Bankruptcy.
The ongoing FX Claim UK opt-out collective action was featured in the recently revealed “Top 20 cases of 2020” by The Lawyer. The renowned annual list showcases some of the most significant disputes to watch across the globe.
Following a case management hearing on 13 February 2020, the CAT recently issued its first ruling in the claim, holding that it should determine whether Phillip Evans or Michael O’Higgins FX Class Representative Ltd is more suitable to act as class representative during the main substantive hearing in March 2021.
COVID-19 overhauled our personal and professional lives overnight which brings its own challenges and worries. We remain mindful of how this impacts all of us, but the London team have been sharing some of the unexpected silver linings remote working has brought. Let us know how you bring positivity to your day using #RemoteSilverLinings.
 Leeds City Council and Ors v. Barclays Bank Plc and Anor
 Dr Philip Comberg v VivoPower International Services Limited & VivoPower International Plc