London provides sought-after alternative

The number of foreign companies bringing private legal claims in London has increased by 60 per cent since the financial crisis hit, providing a shot in the arm for the City’s leading law firms.

Arbitrations and mediations involving international businesses increased from 3,339 in 2007 to 5,297 last year, according to figures compiled by TheCityUK, the financial and professional services lobby group.

The so-called alternative dispute resolution (ADR) methods, which usually take place behind closed doors, have become increasingly popular as an alternative to traditional court litigation, which is seen as lengthy and costly. This has created a lucrative line of business for law firms and barristers. 

Khawar Qureshi, QC, chairman of TheCityUK’s legal and dispute resolution group, said the surge in ADR claims highlighted the capital’s competitiveness as a legal centre.  London has faced strong competition from other international legal hubs such as New York, Hong Kong and Paris.

Arbitration – a binding legal process usually presided over by three independent arbitrators – is especially popular in sectors that involve investments in countries whose domestic courts may not be reliable.  Lawyers claim that arbitration provides investors and lenders with greater flexibility and certainty than conventional litigation, as it allows them to choose which law and location should be used to resolve any disputes.  Proceedings are confidential and appeals cannot be made against judgments. 

Mediation has also become popular, TheCityUK said although decisions are not binding.  It found that the number of commercial court claims in London had also risen sharply since the financial crisis struck.

“The Times”: September 2010