News focus: Commercial Court

The London Commercial Court and the litigation community must take action to safeguard the court’s international pre-eminence, a report for the lord chief justice has warned.

The report’s author is Khawar Qureshi QC, a part-time deputy high court judge, leading commercial silk and chair of lobbying organisation TheCityUK’s legal services and dispute resolution group.

Completed on 24 February, the report is the result of a discussion with the Lord Chief Justice Lord Thomas in late December 2013. It draws on the views of senior litigators in 39 law firms, including all the magic circle, and 10 commercially focused chambers.

The 16,000 sq m Rolls Building off Fetter Lane opened (late) to a great fanfare in 2011. The largest specialist centre for the resolution of financial, business and property disputes anywhere in the world, it brought together under one roof the Chancery Division of the High Court, the Admiralty and Commercial Court, and the Technology and Construction Court.

Pre-eminent choice

Just over two years later however, and drawing on the findings of the survey, Qureshi cautions that a degree of ‘complacency’ has grown up about the position of the Commercial Court as a forum of choice.

He points out: ‘For decades, the Commercial Court has been seen worldwide as the pre-eminent choice for international dispute resolution – whether in terms of litigation before the court, or the support provided to the arbitral process. Moreover, English law is the main choice of law for commercial contracts.’

Qureshi and other observers stress that this pre-eminence is heavily reliant on the court’s reputation for a fair and consistent judiciary. This is certainly the view of Robert Musgrove, former chief executive of the Civil Justice Council and now chief executive of the Qatar International Court and Dispute Resolution Centre. Musgrove has corresponded on the findings with Qureshi and for him, reasons  to use the London Commercial Court are ‘the judges first, second and third. Nowhere else can provide the quality, independence and consistency’.

Wired

It is, however, the concerns of a significant minority of respondents that Qureshi contends should ring alarm bells. Disclosure, the cost of litigation, case management issues and the court’s use of IT are among them.

The court’s IT has long been cited as a shortcoming. Commercial courts in Dubai and Qatar now use the INTERCOMM system originally designed for the London Commercial Court, and it costs a fraction of the court’s attempted in-house solution. The product is now virtually ‘off the shelf’ and can be used by parties ‘very easily’. Its funding is flexible enough to enable pay per use or pay per user to offset the outlay.

As Musgrove observes: ‘It is obvious the Rolls Building should never have gone live without the necessary IT in place.’ Use of technology before and during trial in the Rolls Building was deemed ‘unsatisfactory’ by almost a quarter (23.5%) of Qureshi’s respondents. It is not possible to file or receive many documents electronically.

One Essex Street’s David Wolfson QC also identifies the building’s IT deficiencies as a problem, including its Wi-Fi provision, which is reliant on BT Openzone. He describes it as ‘peculiar in a public building in the modern age’.

Litigators contacted by the Gazette also indicated that breadth of disclosure allowed by the court requires attention. Some argue that the ‘Rolls Royce’ service (no pun intended) so often attributed to litigation in the court seems to extend to disclosure norms that are wide and, in consequence, expensive.

Gibson Dunn & Crutcher partner Philip Rocher notes that although ‘it’s not the same as in the US, where the inclusion of deposition is an open cheque for the lawyers’, the advent of e-disclosure, and the sheer volume of documents the electronic conduct of business has created, has made the process ‘open to abuse’.

He adds: ‘A balance always has to be struck if you represent a party, between what is reasonable and pushing the boundaries. [But] the court can and should take a tighter grip.’ Efforts should be made, Wolfson notes, to restrict disclosure to the ‘factual matrix’ that is supposed to apply to the process when the issue is the meaning of a contractual clause.

Qureshi agrees: ‘More than 20% of respondents expressed concern that the disclosure process needs to be subject to greater control. The suggested response was proactive use of case management powers by the judges.’ As matters are currently handled, Rocher adds: ‘The cost is less a function of the court, and more of the lawyers.’

One cost that could be controlled by a central ‘directing mind’, others suggest, arises from overly frequent changes to the rules of litigation. This adds to costs, as rule changes generate satellite litigation.

One interested party notes: ‘Policy officials, ministers, and judges never seem able to outwit the lawyers’ ability to find loopholes or uncertainties. The best that can be done is to avoid change unless it is absolutely necessary… not to fiddle with an imperfect rule to try and make it better. The latter never seems to work.’

The threat

But is Qureshi sounding a false alarm? After all, as Rocher contends: ‘The Commercial Court’s soundness, reliability and its history together make it a powerful institution – tough to compete with.’

Such an ‘edge’ is not a licence to continue in the same vein forever, of course. Litigators searching the horizon for ‘shipwrecks’ to use as ‘sea marks’ should be turning their gaze to a one-time competitor court – New York’s Southern District Court.

‘This was the other major judicial competitor for London’s crown,’ Musgrove notes. ‘You only have to take a look at judicial arbitration and mediation services (JAMS) in New York to see how much work has been diverted to mediation, because of underlying complacency in the courts.’  

He adds: ‘Interestingly it’s the judges of the SDC that fill the corridors of JAMS as mediators.’ Wolfson, speaking from the SDC, notes that the ‘uncertainty’ provided by a jury trial was one reason businesses preferred forums other than the SDC.

Musgrove and others point to the approach of Singapore, where government investment in the Commercial Court and arbitration centre has been significant. ‘The overall package on offer is now arguably superior to that of London,’ he says. ‘London is still comfortably placed, but what would happen if the Saudi or Russian clients found somewhere more to their liking?’

Arbitration

The main competition for the Commercial Court comes from arbitration: complacency may lead the court to lose ground to arbitration centres.

But Rocher says: ‘Some clients prefer the formal wrapping of the court to arbitration. The Commercial Court can often be quicker.’ Musgrove goes further: ‘With case management and government investment in place, the Commercial Court should knock arbitration out of the water.’

Wolfson, though, sounds a cautionary note: ‘The Commercial Court could be as “cheap as chips”, but the fact that this is public justice would still stand in its way. Arbitration is frequently chosen because it is confidential – people don’t like doing their dirty washing in public.’

Still, the cost of litigation has to be looked at, others note. Changes currently under consideration include government proposals for daily court user fees, and the scope for application of the Jackson cost budgeting reforms to be applied to the Commercial Court.

The latter has been opposed by a variety of powerful City lobby groups. But if disquiet over case management and costs grows beyond a significant minority of litigators, and if clients are shown to be dissatisfied, that will require attention, even if Jackson’s controversial costs budgeting principles are kept away from the high value cases the Commercial Court hears.

Absent voices

Qureshi’s research covers the experience of ‘frontline’ commercial litigators. But knowledge about the views of other stakeholders needs to be sought for the Commercial Court to be sure of its place, and the efficacy of the service it provides.

He tells the Gazette: ‘The report recommends further areas of research, including feedback from general counsel based in the UK and elsewhere who are likely to use international dispute resolution processes. The anecdotal evidence received so far indicates that any complaints are levelled at lawyers, specifically legal fees, but not the court itself. This is an area where further investigation appears to be necessary.’

‘There is a danger in focusing too much on the views of lawyers, and not enough on the needs of clients,’ Musgrove adds. He also urges Commercial Court judges to spend more time talking to their counterparts in other jurisdictions. Just because the London Commercial Court is the best, does not mean that it is superior in every respect.

‘Previously, so much was learned by Woolf and Jackson, but they had to travel across the world to do it,’ Musgrove observes.

‘So much was gained. With technology, it is now possible to keep in touch far more regularly. It just takes the effort.’ He notes that other major jurisdictions are ‘far more happy to fund judges to come on study visits or exchanges’.

Wolfson urges a closer look at the views of corporate lawyers too, in order to improve the understanding of the court and commercial litigators regarding how and why certain forums are chosen. ‘They are involved right from the get-go,’ he notes.

Understanding their perspective would fulfil the court’s need to ‘keep up to date, know what is going on, and how its services are viewed’. It may also, he adds, highlight whether corporate lawyers have an up-to-date view of the pros and cons of the various dispute resolution forums.

The Commercial Court – even with indifferent Wi-Fi, a concerning degree of disclosure costs, lack of investment relative to a jurisdiction such as Singapore, and with all proceedings held in open court – is hardly ‘in a bad place’ currently.

But the case made in Qureshi’s report, and in private by experienced users of the court, is that the institution needs to evolve in response to valid criticisms of its operation. That is important for London’s wider business community.

The court ‘undoubtedly enhances the attraction of the City in terms of the business environment’, Qureshi concludes. ‘However, it is vital that we are not complacent and ensure that the court maintains its position in the years to come.’