Pandemic sees big business focus on conciliation over litigation

A new study from EY has found that British businesses have avoided using litigation to resolve commercial disputes during the coronavirus pandemic, instead turning to negotiation and mediation.

The research suggest that UK companies have heeded Cabinet Office guidance, which called on corporations to adopt a more conciliatory approach to business disputes.

Almost two-thirds (63 per cent) of the FTSE350 and private companies surveyed by YouGov for EY said they had heeded the call.

81 per cent of companies said they had applied reliefs to contract terms since the pandemic’s onset, with 69 per cent granting or receiving time extensions, 59 per cent renegotiating other contract terms, and 25 per cent granting or receiving payments for additional costs.

Seventy-seven per cent of companies surveyed had used alternative dispute resolution (ADR) to resolve an issue during the pandemic.

Mike Scoular, EY Senior Partner for the North East, said: “Economic disruption and contractual performance issues on the scale we’ve seen in the last year would ordinarily be accompanied by a rise in claims as companies look to protect shareholder value.

“However, the exceptional circumstances presented by the COVID-19 pandemic have not led to the rise in litigation you’d expect – so far.

“Almost two-thirds of those surveyed reported that they have taken a more conciliatory approach while the business community grapples with an unprecedented crisis, and this appears to have contributed to a short term move away from companies embarking on litigation.

“While we think some of this is driven by a genuine desire to ‘do the right thing’ during the pandemic, a further and perhaps more important factor is that businesses with claims to bring have spent the last 12 months focused on simply navigating the operational impact of COVID-19.

“Many businesses haven’t had the time or resources to bring potential claims.

“As vaccine rollouts continue, government support ends and attention turns to recovery, that balance is shifting, and a need to protect shareholder value will prompt businesses to become more active in pursuing claims as a potential avenue for recovery in the near future.”

32 per cent of companies surveyed said they had deferred or stopped investigations which they would have pursued beforehand.

Looking ahead, while 48 per cent of respondents said that a ‘continued desire to take a more conciliatory approach to counterparties’ would influence their decision on whether or not to pursue a claim in the next year, 62 per cent said their decision-making would be influenced by a need to ‘maximise the recovery of losses and protect shareholder value’.