State of commercial litigation after COVID-19 and what you should focus on learning now

As lockdowns are being lifted around the world, with clear indications that they are most unlikely to be imposed again, lawyers are facing unprecedented challenges, especially in the area of commercial litigation.

On one hand, you have millions of high-value contracts that have been breached over the last 3 months. On the other hand, not everyone wants to go to court and fight it out - most people are in a reconciliatory mood! 

Everyone wants to get on with business and leave this behind. 

However, a chunk of those contracts will still end up in disputes because counterparties will not be able to agree on how to move forward.

Courts will be clogged as millions of disputes are likely to come up anyway, and this situation may finally seal the deal in favour of alternative dispute resolutions. 

On top of that, the economy is shrinking in an unprecedented way. Many businesses will go bankrupt. What is the point of driving businesses to bankruptcy given that you are most unlikely to receive your dues? This is keeping many debtors away from litigation.

Banks and NBFCs, for example, are restructuring loans rapidly. 

So what will be lawyers doing?

How should lawyers prepare themselves for what is coming? 

Is there an opportunity ahead? 

In short, we believe that there is a tremendous opportunity ahead for commercial litigators. 

Now let us share the long answer.

Let’s start with what we know for certain at this point. 

Amid many uncertainties, few things are certain:

• Delays in litigation
• Enforcement challenges after getting an award or decree
• Clients on both sides may face immediate money issues, will not have time and money to spend on litigation battles. 
• Willingness to find a settlement or reasonable middle ground is very high
• They will prefer to renegotiate, move forward and maintain the relationship in many cases
• They want a faster resolution to unlock capital and resources 
• Clients will prefer a more collaborative and less adversarial approach from lawyers. 

A plethora of opportunities ahead

Renegotiation of COVID hit contracts

• Creative problem-solving approach
• Less adversarial and more collaborative negotiation
• Clients with large in-house teams will absorb this work,
• Clients with smaller legal teams will have to outsource to law firms
• Notice and reply to notices
• Clients will prefer one-stop-shop in case of negotiation failure

Mediation

• Mediation is mandatory for commercial disputes
• There would be a great demand for legal representation in mediation procedures as well as for mediators
• Clients will need a strategy to find a reasonable settlement during mediation

Conciliation

• Conciliation is preferred to mediation as the outcome is directly enforceable as an arbitral award. 
• If there is a breach of mediation settlement, you have to proceed as though it is a breach of contract

Arbitration

• Arbitration is likely to be last resort for parties
• Apart from domestic arbitration, there would be plenty of international commercial arbitration as well
• There would be a lot of work related to the enforcement of arbitration awards from domestic and foreign clients
• A lot of work will go to cheap online arbitration options - and we are likely to see judiciary acquiescing with that. 

Special mention: Loan restructuring

• Payment schedules will be pushed forward
• Each project or business has to be considered in light of their financial situation and prevailing business conditions. 
• At the moment, it is hard to predict what exactly would happen to most businesses as the economy is slowly opening up. 
• Not only banks will restructure and legally review loans right now, but they may have to do so many times over in the months and years to come.

Recovery for banks and financial institutions

• SARFAESI related work will definitely increase as banks and financial institutions will try to seize the assets before those disappear
•  DRT and criminal proceedings for resisting recovery
• Sale of pledged shares and securities

What are the contracts that would most likely lead to large scale commercial disputes?

• Finance agreements (all manufacturing and asset-heavy industries are heavily financed)
• Services Contracts 
• Delivery of goods contracts
• Works contracts (service and goods - such as construction contract)
• JV, shareholder disputes

What industries will have a lot of commercial litigation, renegotiation, mediation, and arbitration?

Manufacturing - FMCG, Electronics, Automobile, Food & Beverages Industry, industrial tools, and heavy machinery

Service Sector - IT, E-Commerce & Education, Import-Export, Banking & Finance, Real Estate, Construction, Transport, Logistics.