Litigation risk
August 2012

1. Does the business have internal procedures in place to manage a potential rise in litigious matters (e.g. defaults/disputes under key contracts)? 
2. What will be the business strategy for key contracts (renegotiate, refinance, enforce)?
3. Will Courts be equipped to cope with a high level of disputes?

1. Does the company have internal procedures in place to manage a potential rise in litigious matters (e.g. defaults/disputes under key contracts)?

To manage a potential rise in litigious matter, businesses should employ a contingency plan and keep this under review. This plan must include reviewing key euro-based contracts associated with an exiting member state to assess:

• if there are current and/or potential breaches of contractual obligations;
• whether disputes have already arisen and if so to preserve documents;
• the level of risk in continuing with such contracts (see Contracts risk and Counter-party risk sections).

For further ideas on contingency planning see the Risk Management section.

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2. What will be the company strategy for key contracts (renegotiate, refinance, enforce)?

A business should also be ready to employ a strategy dealing with problematic key contracts to include termination, renegotiation, refinancing or commencing litigation. A 'one size fits all' approach to contracts is not recommended. Some contracts should be terminated and others affirmed. Special rules will apply, for example, to the closing out of derivatives contracts.

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3. Will Courts be equipped to cope with a high level of disputes?

If litigation is chosen, whether the Court will be equipped to cope with expected increases in case volume depends on which Court has jurisdiction to hear the claim. English Courts are recognised for handling influxes of high level disputes, but court proceedings generally are time-consuming and expensive.

It may of course be necessary - or desirable - to bring certain claims to arbitration. This may have advantages, particularly if confidentiality is key and/or it will be necessary to enforce against assets in a jurisdiction which does not readily recognise or enforce English judgments. Whether a claim is litigated or arbitrated, the commencement of proceedings may focus minds, leading to settlement negotiations or a more formal means of alternative dispute resolution in the form of mediation.

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View Eurozone risk matrix

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