Businesses seek out specialist legal advisors to tackle a rise in international disputes, according to PwC survey

The number of businesses recruiting in-house specialist lawyers is set to rise according to a report released by professional services firm PwC today, after a third of respondents taking part in the study reported an increase in the number of international disputes.

The survey report, ‘Corporate Choices in International Arbitration’, shows that 35% of the polled general counsels experienced a rise in the number of cross-border disputes. Twice as many preferred international arbitration to other forms of resolving disputes, such as litigation.

Companies tend to seek international dispute expertise from external law firms but given the economic climate and the rising cost of proceedings, many are likely to start recruiting in-house, says the report. While 90% of companies had a dedicated legal department, the survey disclosed that only 49% had a dedicated in-house disputes team.

Colm Tonge, PwC South Africa’s Head of Disputes, says: “Most organisations use a combination of external counsel they have worked with before and internal capability to deal with transnational legal issues. A key finding of the survey is a move by large corporates towards permanently employing international dispute experts. This suggests that international arbitration will be an increasing feature of the global business landscape in the future and that organisations want more control over the associated costs and delays.

“The survey also identified some trends in funding international disputes and it will be interesting to monitor whether there is an increase in third-party funding, particularly where smaller entities are involved.” Tonge was speaking at an event sponsored by the Arbitration Foundation of South Africa (AFSA) today, at which the findings of the survey were disclosed.

The survey, sponsored by PwC and conducted by the Queen Mary School of International Arbitration in London, breaks new ground as it focuses on industries such as oil and gas, energy, financial services, technology and telecoms, real estate, construction and infrastructure.
Overall 73% said international arbitration was well suited to resolving transactional disputes, with preferences strongest in the construction and energy sectors. When asked to rank various dispute methods in order of preference, 68% of companies in the construction sector said arbitration was their preferred method compared to 56% for energy. In financial services, 82% of companies ranked court litigation as their number one method but over two thirds (69%) of in-house counsel in financial services companies felt international arbitration was becoming more suited to resolving their disputes.

The board of directors or CEO often has the ultimate say over whether or not to initiate proceedings in major cases (54%); and the decision in 25% of cases is made by general counsel or the head of legal. The majority of corporations do not have a minimum threshold below which arbitration proceedings will not be initiated.

Of those that did not have a preference for international arbitration in resolving disputes, 22% said this was because they perceived it to be less cost effective than litigation or other methods, according to the report.
Many businesses opt for arbitration to resolve international disputes due to its speedier process and private nature. There is usually no appeal process and the final decision is binding, unlike litigation.