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Employment tribunal worry for firms

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Employment tribunals are the second-biggest litigation fear for UK companies – beaten only by regulatory proceedings, according to a new report.

And the fears could be justified – the number of UK businesses that faced court action over the past 12 months increased to 78 per cent according to international law firm Fulbright & Jaworski’s annual Litigation Trends Survey.

Last year, only 66 per cent of UK respondents faced court action. The percentage of UK companies surveyed who faced more than 50 court actions in the past year tripled from 5 per cent in 2005 to 15 per cent in 2006.

And the future’s looking bleak – 17 per cent of UK businesses expect to see an increase in legal disputes over the next year.

Surveyors interviewed 422 companies worldwide and found that just 11 per cent had no court actions filed against them in the past year, compared to 25 per cent in 2005.

The report reveals that UK corporates are spending more time and money on dealing with regulatory enforcement issues. Over the past year 58 per cent of UK respondents said they had faced a regulatory proceeding over the past 12 months compared to 51 per cent of US respondents.

Regulatory issues were also cited by 40 per cent of UK companies as a primary litigation concern, compared with 21 per cent in the US. This may be explained by the fact 44 per cent of the UK respondents claim to have faced at least one regulatory proceeding where £10 million or more was at stake.

Lista Cannon, head of European disputes at Fulbright & Jaworski, said: “Despite the general consensus that the UK is not thought to be as tightly regulated as the US, UK businesses are experiencing more exposure to regulatory matters and indeed many have faced a regulatory proceeding over the past year.

“All companies, regardless of their size, have to face up to the challenge of working in a complex regulatory environment, and must ensure they are prepared to address current regulatory issues and anticipate future regulatory changes.”

Labour and employment law disputes were cited as concerns by 48 per cent of respondents, up from 26 per cent last year; while 40 per cent are worried about contract disputes.

Litigation is an expensive business, and this year’s survey indicates that corporates continue to show a great deal of concern over the prices they are charged by their law firms, with one in five citing ‘high cost’ over ‘lack of competence’ as the one issue that would make them consider switching supplier.

This concern is unsurprising in light of the £5.7 million that is incurred in litigation fees each year by the average large corporate surveyed. This figure – which excludes case settlement or judgment payments – compares to last year’s £4.2 million.

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