Corporations are battling fewer lawsuits but are engaged in more regulatory proceedings as they contend with growing cyber risks, data protection, and tax issues, a litigation trends survey shows.
Results from the 2018 Norton Rose Fulbright Litigation Trends Annual Survey conducted by legal research firm Acritas were based on responses from 365 corporate counsel.
Two-thirds of respondents across all industries, mostly chief counsel, reported feeling more exposed to cybersecurity and data protection disputes this year, the survey showed.
Only 10 percent named the two areas as the top concern but a quarter of those who did said their company had significant exposure, and nearly as many reported that they were dealing with a current problem.
The growing international nature of business has led to a greater number of conflicts for corporations as they try to balance countries’ differing data discovery and data protection laws and regulations.
Some 53 percent of those responding—up from 43 percent last year—said they were facing balancing discovery obligations in one jurisdiction with data production regulations in another.
“Clients are concerned about being hacked or infiltrated and then being sued by customers if the data is stolen,” Adam Schramek, a litigation partner in Norton Rose Fulbright’s Austin office, told Bloomberg Law.
Schramek said it’s harder to put in controls as companies expand globally.
“Our takeaway is that companies need to invest more in this area,” he added. “This is not a blip on the radar. It is here to stay.”
The report commissioned by Norton Rose Fulbright found a corresponding drop in the level of spending on legal matters along with the retrenchment in lawsuits.
The report found that $1.2 million is the median average a client spends currently on disputes per $1 billion in annual revenue.
The decline in legal spending comes as major law firms are expanding across borders, employing more lawyers, and offering more geographic locations, to offer a full suite of services, especially to multinationals.
That will stand them in good stead if, as more than a quarter of companies anticipate, the number of disputes will pick up in the coming year. Labor, contracts and class action lawsuits are seen as the areas where volume will increase.
The technology and life sciences/healthcare industry sectors are expecting the biggest increases. The technology industry expects an uptick in labor, contracts and patent disputes. Life sciences and health care industries expect more disputes, also in labor and contracts, and malpractice as well.
Regulation is also a major concern of companies as the average number of regulatory proceedings increased from three to four annually. Two-thirds of those responding to the survey felt regulators are becoming more interventionist. This was a slight decrease over the sentiment in the previous two years.
“In the United States our regulatory regime has changed, in some ways for the better … but things aren’t settled in a lot of ways and there’s a lot of public attention and political attention,” one legal officer said.
Another major area of concern are tax controversies, as corporations adjust to the tax changes enacted by law earlier this year, and as they expand internationally and deal with tax regimes in other countries.
About 22 percent of those responding said they spent more time dealing with tax controversies over the past 12-month period, and 17 percent said they expect to spend still more time in the future.
A growing alternative to battling out legal conflicts in courts is to turn to arbitrations, which are up slightly and have a vote of confidence from corporations who say they generally preferred them to litigation to settle disputes.
“The main reason is not cost, but confidentiality,” said Schramek, of Norton Rose.
Litigation costs are expensive but not necessarily more than arbitration, he told Bloomberg Law.
To tackle their legal load, companies reported in the survey that they are adopting more legal technology, including technology-assisted document review (54 percent), along with data repositories (76 percent) and document preservation (72 percent).
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