Legal cases involving FTSE 100 companies double in 5 years
The finance industry has come under scrutiny after new research from Thomson Reuters revealed that the banking sector accounts for two thirds of all High Court cases involving the largest companies in the UK.
The claims levied and defended by these FTSE 100 companies have more than doubled in the past five years, hitting a high of 279 cases in 2015/16 – a significant surge from the 114 seen five years ago.
FTSE 100 banks in particular saw a 14 per cent jump from last year with 179 court cases, doubling from the 69 cases fought in 2013/14. Of all of these legal battles, banks were the defendants in approximately 75 per cent of cases.
So what does this all mean for the industry? Raichel Hopkinson, head of the Practical Law dispute resolution service at Thomson Reuters, told the Solicitor’s Journal:
“We are seeing a handful of big banks involved in the majority of High Court claims affecting the FTSE 100. Evidently, the banking sector still has to fight many fires on a number of fronts as the legacy of mis-selling of derivatives and fallout from the Libor market manipulation continues.”
The primary factor driving this increase in cases involving FTSE 100 companies is litigation funders, third-party companies that offer funding for cases through private equity or hedge funds. These litigation funders finance claims that might not otherwise have been pursued, supporting the cost of litigation in exchange for a share in damages received.
However, there is also a wider framework of causation at play. As the researchers at Reuters indicate in their report, the growing complexity of globalised businesses, operating in a wide number of legal jurisdictions, are also a factor.
Those affected, however, are showing resilience in the face of legal doubt. Hopkinson explains that banks “appear to be taking a robust view about their prospects of defending themselves in court, indicating a willingness to fight claims all the way to trial, rather than settle early”. She notes that, whereas before, banks may have been concerned about getting bad publicity from court hearings, now they seem to be less perturbed, perhaps because they have been in the spotlight for so long.
Yet, it is telling that, nearly a decade after the financial crisis, banks are still facing multiple legal cases from issues such as the alleged mis-selling of products such as interest-rate swaps, Libor manipulation claims and loan agreement disputes.
Third-party funding empowers corporate claims
The strides forward made in flexible litigation funding is empowering organisations and individuals to take on cases they otherwise may not have been able to afford. This is something we pride ourselves on offering at Samuels Solicitors, ensuring that those with a strong defence to a claim have access to justice regardless of the cost.
Third party funding, similar to the hedge funds and private equity partnerships used in many of these FTSE 100 cases, are one funding arrangement we often explore for clients. Such financing plans are not just for big shareholders, however, as many different levels of funding can be available for different cases. For example, if the third party funder is confident in a successful outcome, they may pay for everything, or alternatively, they could pay for all of our fees or a percentage as the case progresses, leaving you to pay the out of pocket expenses. Under some arrangements, third parties even agree to pay your opponent's costs if you lose. So, if you feel you have a worthy case, it is well worth looking into the options at your disposal.
Banks pursuing professional negligence claims
However, banks are not merely the defendants in these high-profile FTSE 100 cases. Many companies have also been claimants in various cases against professional services firms including accountants, solicitors and surveyors. The majority of these cases stem from barristers, accounts and other professionals giving inaccurate advice to companies, which may subsequently cause losses, bad publicity or claims being imposed against the company itself.
Due largely to the success of professional negligence no win no fee agreements, large companies, grassroots organisations and individuals alike have been mobilised to pursue claims against negligent professionals who have caused them damage.
Whereas it can be expensive to resolve mistakes made by financial advisors, architects, surveyors and other professionals using company resources, legal claims are often a much more profitable option, as the professional’s insurance often covers the cost of damages and rectifications.
Whether it be shareholders and clients suing companies or businesses themselves placing claims against professionals, flexible litigation funding is providing the leverage for justice to be maintained within the corporate sphere.
At Samuels Solicitors, we have a particular specialism in dealing with these forms of commercial litigation and professional negligence claims. Where a claim has good prospects of success, we are very often able to help clients with fees, by using a conditional (no win no fee) agreement.
Contact us today to find out more about our services in a free discussion about how we can assist you.