In 2022 global crises, inflationary pressure, regulatory scrutiny, and judicial clarity have driven activity in international arbitration, competition litigation, and class actions and will continue to do so in 2023. David Dearman, Gary Davies, and Rob Jones of Ankura highlight these key developments.
At the outset of 2022, Covid-19 continued to dominate everyday life, and many expected a number of new disputes to arise from the economic disruption caused by the pandemic. However, in February 2022 Russia's sudden and devastating invasion of Ukraine triggered a global crisis and conditions that will lead to disputes for many years to come.
The international reaction to the invasion of Ukraine was swift. Companies worldwide announced a cessation of Russian operations and withdrawal from the country, facing the complex issue of unwinding years of Russian investments and contracts. It has also had a profound impact on companies with Russian investments, and the impact of sanctions has been widespread. Russia's response to western sanctions has been to threaten and impose counter-sanctions restricting the flow of funds, withholding stocks and securities listed on the Russian stock exchange, and nationalizing foreign-owned assets and businesses.
With the consequential impact of rising energy prices, high inflation, and a weakening of all major currencies against the U.S. dollar leading to rising interest rates, the international arbitration community is likely to be busy in 2023 with these continuing themes:
- Contractual non-performance
- Sanctions issues
- Force Majeure
- Dissolution of Joint Ventures
- Supply chain disruption
- Government / investor protection measures
- Regulatory changes
- Complex financing and refinancing structures
- ESG related disputes in commercial and investment arbitrations
- More third party funded claims
The forum for international dispute resolution may also continue to evolve if the Ukraine's petition for a war claims commission 1 is successful. It is thought that U.S.$300 billion in frozen Russian central bank assets could be targeted for enforcement to resolve claims against Russia for financial damages arising out of the war.
Competition disputes are also likely to arise from the twin supply-side crises of Covid-19 and the conflict in Ukraine, both of which have impacted supply chains and prices for businesses and consumers. In 2021-22 the UK's Competition & Markets Authority (CMA) used its powers to identify market imbalance, recommend reform, and impose fines on companies involved in illegal behavior.
CMA investigations into anti-competitive behavior have resulted in fines totaling £404 million in 2021/22 2. This is a record level of fines since the Competition Act came into force in 2000, albeit primarily focused on fines on pharmaceutical companies supplying important medicines to the National Health Service. The CMA is also paying attention to market factors affecting the cost of living, which could indicate an area of future penalties. These include fuel, food, and digital markets (privacy, app purchasing, data, online reviews, music streaming, and mobile ecosystems), which increasingly underpin all consumer engagement, leading to potential vulnerabilities.
Focusing also on the green economy and de-carbonization the CMA has coupled policy advice with market intervention, notably by enforcing competition law to support the electric vehicle charging market and publishing market guidance in relation to 'green' claims on products.
Where authorities find violations of competition law, the risk of follow-on litigation is heightened. Merricks v Mastercard 3 in the Competition Appeal Tribunal (CAT) and the various international collective and private enforcement claims against truck manufacturers 4 continue to dominate the competition litigation landscape.
The OECD has called for better cooperation and information exchange between international competition agencies 5. This combined with the long tail from competition investigation to damages awards presents a high cross-border risk to in-house counsel. Reviewing internal policies and adherence to them remains a high priority. Internal investigations, assessments of supplier and customer relationships, and regular testing of dawn raid response procedures help businesses to stay on the side of the angels.
However, businesses that have suffered loss at the hands of a cartel are continuing to recognize and pursue their recovery interests as a source of income. Sometimes the most expedient way of doing so is by bringing their claims to other institutions. Globally, such class actions continue to grow.
Claimant or plaintiff lawyers are utilizing the full power of the internet, big data, and international horizon scanning, to shine a light on complex matters which affect ordinary people and businesses and demonstrate a significant will to litigate matters that may otherwise go unnoticed.
Outside of the U.S., Australia, and Canada, many European jurisdictions have busy mechanisms for collective redress. The Netherlands leads the field and is closely followed by its neighbors across the EU in countries like Germany and even Portugal.
In the UK, the greatest traction has been gained in relation to complaints where the class and the harm suffered have been relatively clearer to establish. Cases involving products, services, and the recovery of quantifiable sums – such as in the worldwide Dieselgate claims and Merricks – are clearly growing in number. In England and Wales, thanks largely to a favorable Supreme Court decision in Merricks 6, the Collective Proceedings regime in the CAT is seeing more cases and making swifter decisions in areas such as financial services, infrastructure, transport, technology, retail, and cryptocurrency.
Conversely, the Supreme Court created an unsettling ripple for privacy cases in Lloyd v Google7. Compared to the Netherlands which seems privacy-friendly, there remains some doubt as to whether CPR 19.6 is the right procedure for bringing all types of data-breach claims. However, the guidance offered by the Court showed how same-interest claims can succeed and it is a matter of when, not if such cases will get over the line. The persistence and ingenuity of the claimant bar and funding organizations make it highly likely that well-structured meritorious cases will be filed and make better progress where Lloyd seemed to fail.
Delivering redress brings a number of practical challenges which have not been fully examined in less mature jurisdictions. Approaching case management issues in order of the procedural timetable means that settlement matters are likely to take center stage in future judgments.
In the meantime, organizations like the Collective Redress Lawyers Association are considering early reforms which can improve access to justice for claimants. Likewise, defendants are making direct settlements as a way of avoiding the long stretch of costly litigation. Perhaps in these two areas, we may yet see the biggest leaps of learning and progress in class actions.
Now more than ever, the mix of economic and geopolitical conditions with growing jurisprudence seems to indicate that 2023 will be a very busy year for all involved in disputes and investigations.
Footnotes
1. https://globalarbitrationreview.com/article/ukraine-pushes-war-claims-commission
3. Case No: 1266/7/7/16, Competition Appeal Tribunal
4. For example Road Haulage Association Limited v MAN SE and Ors. Case No: 1289/7/7/18, Competition Appeal Tribunal
5. OECD (2022), International Co-operation on Competition Investigations and Proceedings: Progress in Implementing the 2014 OECD Recommendation https://www.oecd.org/daf/competition/international-cooperation-on-competitioninvestigations-and-proceedings-progress-in-implementing-the-2014-recommendation.htm
6. [2020] UKSC 51
7. [2021] UKSC 50
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