Regulatory matters have been dominating the agenda for businesses involved in legal disputes over the last year, according to the Litigation Trends Survey, published today by global law firm Fulbright & Jaworski International.
In 2010, 32% of employers reported having dealt with a regulatory investigation, up from 9% in 2009.
Globally, the number of regulatory proceedings instigated has also continued to increase with 40% of all respondents reporting involvement in at least one over the last year, up from 37% in 2010.
Nearly half (49%) of all public companies faced at least one regulatory proceeding in the past 12 months.
As a result, businesses are continuing to turn to outside counsel for assistance in handling Government and regulatory investigations. In 2011, almost half (46%) of all respondents reported that they had retained outside counsel in connection with regulatory proceedings, up from 37% in 2010.
Whistleblowing allegations have continued to have a significant impact on businesses. One fifth (21%) of UK respondents have been subject to such claims in the last three years, up from 13% in 2010 and a threefold increase since the 2009 survey when 6% of UK respondents reported having been on the receiving end of whistleblowing allegations in the previous three years.
The consequences of these allegations are serious; 40% of UK respondents stated that whistleblower allegations led to an internal investigation, 20% reported a regulatory investigation and 33% reported that third party proceedings followed.
Over half of all respondents (55%) were subjected to third party proceedings as a result of whistleblower allegations - an increase from 46% in 2010.
A quarter (25%) of all respondents, and one in eight (12%) UK respondents, anticipate an increase in claims or lawsuits brought by whistleblowers over the coming year.
Businesses continue to expect more litigation in the year ahead. One in five (20%) of UK and one third (33%) of US respondents anticipate an increase in the number of legal disputes - a rise in the UK from 16% in 2010.
Large proportions of respondents from this year's survey have been involved in litigation in the last year. Nearly three quarters (73%) of all respondents were sued in the last year, with 23% of all respondents reporting that they had been on the receiving end of a claim valued in excess of US$ 20million.
Almost half (42%) of U.K. respondents brought claims over the last year, compared to 36% in 2010 and 25% in 2009. One in five (19%) of those claims were valued at more than US$20million.
Enhanced regulation is expected to have a significant impact on businesses over the next year. More than one quarter (28%) of all respondents (and 19% of U.K. respondents) expect their legal
disputes to increase as a result of heightened regulatory scrutiny and enforcement - a sharp rise since 2010 when 7% of UK respondents raised concerns about stricter regulation leading to legal disputes.
But the impact of the economic climate on legal disputes is expected to decline over the next year when compared to 2010's results; this year 19% of UK respondents considered the state of the economy as a reason for an increase in the legal disputes they may face, down from 47% in last year's survey.
While identifying the most numerous types of litigation matters that were pending against their companies in the last year, 55% of UK respondents mentioned disputes arising out of contractual arrangements, a marked rise from 32% in 2010 and more than the 48% recorded in 2008. More than one in five (22%) identified employment cases, continuing a steady rise since 2009 and a similar proportion (21%) cited product liability matters.
The exposure of UK respondents to collective action litigation ("class actions") in the UK continues to rise. This year, 13% of UK respondents reported having to deal with class actions in the UK in the last year, up from 11% in 2010 and 6% in 2009. No US respondents reported having experienced class action litigation in the UK.
The overall litigation spend of businesses is increasing with around a half (51%) of all respondents, and 46% of U.K. respondents, recording an annual litigation spend (excluding the cost of settlement and judgments) in excess of US $1million. Last year, 38% of UK respondents had spent more than US $1million on litigation, down from 50% in 2009.
Chris Warren-Smith, partner and co-chair of Fulbright's Global Litigation Practice Group, said: "Businesses expect to experience sustained and increasing exposure to international and domestic legal disputes. They see increasing regulatory activity resulting in more disputes.
"Every day we see clients becoming increasingly sophisticated in managing their regulatory and litigation spend, seeking ever more effective ways to ensure they obtain value for money in purchasing legal services. One interesting conclusion from the results is that the level of disputes is higher than 2009 and 2010 but the legal spend is lower.
"This shows the positive impact alternative fee arrangements and other risk transfer mechanisms are having for businesses and demonstrates that they and their legal service providers are working together in the current challenging environment."
The Fulbright & Jaworski 2011 Litigation Trends Survey is an independent survey of senior corporate counsel. Now in its eighth year, the report surveyed 405 in-house lawyers (from a wide range of industry sectors) and is the largest canvass of corporate counsel on litigation issues and trends.
