Friday, 28 November 2014

Sky High Costs

Burj Khalifa
Photo Wikipedia

In 2010 Hogan Lovells published "At what cost?" , a multi jurisdictional guide to litigation costs. A series of questions was presented to lawyers in each jurisdiction on the amount and recoverability of costs which were defined as
"the costs incurred by a party during the course of litigation in connection to that litigation, and which include, but are not limited to, costs that the party has paid to its lawyers (including solicitors, counsel and advocates) to agents, to courts, to process servers and in respect of disbursements (for example, photocopying, expert witness, travel, translation, notarial services and witness attendance etc.)."
Two of the jurisdictions it compared were the Dubai International Financial Centre ("the DIFC") and the rest of Dubai and the United Arab Emirates.  The information on both jurisdictions in Dubai was contributed by Hadef & Partners.

As I explained in DIFC Courts 7 Jan 2014, the Centre has its own legal system based on the common law where proceedings are conducted in English before judges who have already held high judicial office in the United Kingdom and other Commonwealth countries. The rest of Dubai is a civil law jurisdiction where proceedings are conducted in Arabic. One of the most striking differences between the two systems is costs. In both jurisdictions the unsuccessful party pays the costs of the litigation which are unlimited in the DIFC. In the rest of Dubai they are generally limited to between 1,000 and 2,000 dirhams (£173 to £346 at current rates of exchange).

The high cost of litigation in England and Wales has been a matter of concern in that country for many years. A recent report by the Legal Services Consumer Panel warned lawyers in England and Wales that they are not indispensable and risk being priced out of the market:
"The core challenge ahead is to extend access to justice to those currently excluded from the market because they cannot afford legal services. This need and other forces, including government policy, consumer empowerment, technology and the effects of liberalisation, will combine to result in less involvement by lawyers in many of the tasks that until now have made up their staple diet. Consumers will seek alternatives to lawyers or use them in different ways. In place of lawyers will be greater self-lawyering, online services, entry by unregulated businesses, and also by regulated providers, such as accountants and banks, who will diversify into the law. Calls will grow for more radical solutions that cut lawyers out, such as an
inquisitorial style of justice and online dispute resolution, which are better suited to the new funding realities. The consumer interest will lie in resolving the tension between cost and quality, and determining when a lawyer is needed and when alternatives can safely suffice. Regulated lawyers should be viewed as a small part of an increasingly diverse ecosystem of legal services delivery; improving access will require looking at how the whole system will work in future around consumer need."
Those costs compared to the cost of litigation in the rest of Europe appear to be one of the reasons why the UK lags behind other European countries in the number of applications for European patents (see Jane Lambert UK slumps to Ninth Place in European Patent Applications 25 July 2014 NIPC Inventors Club). It is significant in that regard that the DIFC courts have never heard an intellectual property case (Why has no IP case come before the DIFC Courts? 19 March 2012).

One of the justifications for the DIFC courts is that the adversarial system and the quality of the judges ensure high quality judicial decision making. While that is undoubtedly true where both parties are well resourced, disparity of means can sometimes defeat that objective - at least in England and Wales. For instance, a large retailer facing a copyright or design infringement action by a small company can apply for an order requiring the claimant to deposit money or give some other security for its costs of defending the claim under CPR 25.12. If the claimant fails to do so within the time specified in the order the claim is stayed and any interim injunction against the defendant is discharged. There is a similar rule under Part 25 of the DIFC Court Rules.  According to Hadef & Partners there is no equivalent rule in the rest of Dubai; but if the average award of costs is between 1,000 and 2,000 dirhams there would be no need for one.

Should anyone wish to discuss this article or civil litigation generally, he or she should call me on +44 20 7404 5252 during office hours or send me a message through my contact form.