The study from Thomson Reuters Sweet & Maxwell found that while the overall number of High Court cases featuring a FTSE100 company fell by 24 per cent to 114 (to 30 June 2012), the proportion of cases involving financial services increased from 56 per cent in 2010/11 to 66 per cent in 2011/12.

Financial meltdown

RBS, Lloyds, Barclays and HSBC accounted for 43 per cent of all FTSE100 cases.
Charles Hewetson, editor of Sweet & Maxwell publication [open itals]Banking Litigation[close itals], commented: ‘When there is a financial meltdown like the one that started in 2008, there is extreme volatility in the financial markets with large and unexpected losses which leads to litigation, often involving financial instruments. These claims are also frequently sold by bank customers and investors holding the financial instruments to third parties for the purpose of pursuing the claims, resulting in more litigation.’

Cash piles

Charles Hewetson, a partner at the London office of US-based law firm Reed Smith, added: ‘Typically you see more litigation in a recession, but this financial crisis has been more severe and prolonged than anything that’s come before it, meaning that parties in default or potential defendants may not have the assets to meet claims. Banks have been slower to foreclose and this is one of the reasons why we haven’t seen the big increase in insolvency related commercial disputes that many commentators expected.
‘The size of the cash piles that businesses are sitting on is a sign of how risk averse they are. Litigation would fall into the “risky” category at the board level, so it is out of favour.’