It is not common to produce a forward-looking guide to the law as there are very few sources that consider what lies ahead. The legal community tends to look to the past and present, writing and presenting on recent cases and the current state of the law. And yet the questions we hear from clients are often future-oriented. What trends are emerging? What’s around the corner? How can I position my organization for what comes next ?
In The Year Ahead: Developments in Global Litigation and Arbitration in 2020 we look at the ten big themes set to emerge in 2020:
- The globalization of dispute resolution
- Efforts to improve cross-border enforcement
- Growing use of meditation
- Litigation funding enters the mainstream
- Growth of criminal and regulatory enforcement
- Political risks to investment
- New analytics tools for disputes lawyers
- New efficiency tools for lawyers
- Emerging use of AI in national court systems
- Automated dispute resolution
For the Financial Institutions sector, the global investment surge is driving a rising debt burden that, combined with ongoing economic disruption, is creating the conditions for rising debt defaults. This has potential knock-on effects for disputes. The next default cycle is likely to be exacerbated by the popularity of cov-lite loans. These make up 80% of new issuance in the leveraged loan market, as investors abandon conventional protections in the hunt for yield. When firms deteriorate, lenders will have fewer warnings and fewer options.
From 2022, panel bank support for LIBOR will be discontinued, with other interbank offered rates under threat. IBORs are the dominant benchmarks for financial products, referenced by an estimated USD 370 trillion of agreements. Discontinuation of LIBOR raises many issues including uncertainty as to contractual positions, financial and accounting implications (in which there may be winners and losers) and regulatory risks. The natural consequence of this is likely to be litigation and, in some cases, regulatory enforcement.
Financial regulators and law enforcement agencies are becoming increasingly active and co-operating more closely with other national and global agencies. There is a greater focus on individual accountability regimes for senior managers, for example in Australia, Hong Kong, Singapore and the UK. Sanctions compliance is an increasing issue, especially as organizations try to navigate US secondary sanctions against Iran imposed by the Trump administration, and EU Blocking Regulations introduced in response.
The hiring practices of financial institutions, especially in Asia, have also faced scrutiny. There are at least five companies which have been fined for hiring relatives of public officials to win banking deals or to receive favorable treatment. Governments are under pressure to take action against perceived “bad actors” such as banks. In addition, the financial rewards for governments can be compelling. Globally, regulators and law enforcement agencies impose fines of over USD 20 billion per year – a significant revenue stream for governments. This increasing scrutiny has knock on effects, as banks continue to de-risk customer bases and reduce higher risk products, services and jurisdiction exposures.
The rapid growth of the fintechmarket lays the ground for disputes between new entrants and the established order, and poses regulatory challenges. Recent concerns include the potential for machine learning and AI to erroneously promote mis-selling or other regulatory breaches.
The cryptocurrency market has been volatile over the past three years. Many new currencies have launched through Initial Coin Offerings (ICOs), and many investors have been misled or defrauded, leading to claims. The approach of national regulators to ICOs is inconsistent. Cryptocurrencies are held in virtual wallets and traded on exchanges. Several exchanges have fallen victim to cyberattacks, resulting in claims. Exchanges are also facing increasing scrutiny from regulators and law enforcement agencies over conflicts of interest, market manipulation, and money laundering