New research conducted by Stewarts and Solomonic shows an increase in the number of commercial fraud cases being heard in the English courts in recent years, as more claimants are drawn to the courts’ expertise on such matters.
Senior Associate Charlie Mercer spoke to Law360 following the research report’s publication, discussing the upward trend in commercial fraud cases being heard, both in sheer numbers and in proportion to other types of claims.
Analysing trends in fraud claims
Charlie said that the data reflected what he “intuitively felt” about fraud cases becoming increasingly common.
“This is potentially due to the particular expertise that the English courts have in dealing with these types of issues and the remedies they offer, as well as the increasingly specialised nature of this area of practice,” Charlie said. “That, in turn, is reflected in the Commercial Court being the most popular for commencing fraud claims.”
The research looked at new claims issued since 2019 and judgments given since 2014, and found there was an increase of fraud cases in the English courts. Despite a reduction of fraud claims issued in 2022, cases involving fraud have remained between 2% and 3% of claims since 2019 and between 5% and 11% of judgments given since 2014.
According to the report, while bank and finance fraud claims continued to form the majority of claims, 2022 saw an increase in real estate and technology, media and telecom disputes. When fraud claims reach the judgment state, the research found that half are successful, higher than other tort claims.
Charlie said that the drop-off in fraud claims in 2022 partly reflects the overall decrease of claims issued in that year. But he added that it could also reflect other issues, including the fact that there was no insolvency during the pandemic, cutting off a key avenue that typically uncovers misconduct as corporate books get a closer look.
Fraud claims generally tend to increase when there is an economic downturn like the UK is dealing with right now. As companies struggle with liquidity or go insolvent, fraud is discovered, he noted.
Matters of jurisdiction
Another key trend identified in the report is a new jurisdictional gateway that came into force in 2022 allowing courts to serve disclosure orders on third parties outside England and Wales.
“What the court has done here is recognize that they can make the lives of fraud victims easier by creating these specific gateways for these types of issues,” Charlie said.
He noted that while this does not entirely resolve potential problems — as orders will still need to be enforced abroad — the English court has done “what it can to make the process easier.”
The report noted that the British government is currently considering responses to a consultation on whether to ratify the Hague Convention of July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.
“After the end of the Brexit transition period there was no set of rules for enforcing judgments or in relation to jurisdiction between the UK and EU, which is one of the big problem for litigators,” Charlie said.
What could the future hold?
Charlie said the “ideal scenario” for litigators would be for the UK to join the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments, which would bring it back to its pre-Brexit position. But in the absence of that, joining the Hague 2019 convention would provide a framework of recognition of enforcement of judgments with the European Union and other states, Charlie said.
“It will, in part, repair the enforcement problems caused by Brexit,” he added.
Charlie said that in recent years there has been a “striking” drop in international claimants, partly driven by the post-Brexit reduction of EU claimants. But he added that it’s worth noting that the Commercial Court’s own data said that 69% of the cases last year were what the court classes as “international.”
Another key trend highlighted in the report is a 40% increase in fraud cases involving cryptocurrency in 2022. The report said this trend might eventually involve different disputes over crypto assets beyond fraud, such as professional negligence and financial market disputes.
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