Commercial litigation in the UK

Commercial litigation in the UK
Par Ray Rushe, Solicitor – Avocat à la cour

When engaging in litigation the outcome is inherently uncertain and will depend to a great extent on factors which are outside the control of the parties. Furthermore litigation is expensive and time consuming; therefore, in most circumstances it will be advisable to try firstly to resolve the dispute through a commercial solution.

It is by no means a sign of weakness to approach the other party in order to explore the possibilities of a settlement. In fact litigation should always be viewed as a last resort and negotiations with a view to
settlement may continue to be attempted at any time and even during the litigation process.

Several forms of dispute resolution are available, including negotiation, expert determination and mediation (see below). Whatever the form of dispute resolution, legal advice should firstly be obtained in order to ensure that discussions are conducted within the framework of ‘without prejudice’ negotiations. Working within such a framework allows the parties to discuss the dispute freely so that any concessions or admissions made by the parties during such proceedings will not adversely affect the parties’ positions should the resolution process fail.

When embarking on litigation the following points should be considered:

How much is the claim worth?
Can your adversary pay if you win?
What are the costs involved in bringing the claim?
What are the implications for your business should the claim fail?
Could the dispute cause any problems in terms of bad publicity when your firm is looking for new business?
Could the dispute affect your business reputation?
How much time commitment will be involved in instructing lawyers and generally managing the dispute?
Is there any commercial advantage for your business in suing your adversary? eg. by showing competitors that you are serious about protecting your rights.

Initial steps when a dispute arises:

You may receive official documents from the court indicating that a claim has been made against you; alternatively, an incident may occur which appears litigious. For risk management purposes, take legal
advice as soon as is practicable. Avoid at this stage talking to the other side. You may say something which can be used against you at a later stage. Do not make any admissions or agree to settle without first
discussing the situation with your lawyer. Do not procrastinate; you may need to comply with certain time limits. Ensure that any employees who are in contact on a business level with your adversary are aware
that a dispute has arisen.

Before Commencing Proceedings

Before commencing proceedings, the parties must comply with certain pre-action protocols (procedures).
Depending on the type of case, the appropriate guidance is set out in the relevant pre-action protocol and practice CPR direction.

Such protocols usually impose upon the claimant a duty to send a letter before action, which will be followed by a reasoned reply from the defendant as to why the party denies liability. Furthermore, the
parties are generally required at this stage to exchange any essential documentation to prove their respective cases; to consider whether their dispute could be settled by way of mediation or any other

Alternative Dispute Resolution (ADR) mechanism; to consider whether the dispute may be resolved by making a Part 36 offer (an offer to settle for a certain fixed amount, which, if rejected can lead to certain
adverse cost consequences if the final award at trial is less than the amount offered in the Part 36 offer of settlement); and to consider whether they could appoint a joint expert in case expert evidence is required.

Limitation periods

Under the law of England and Wales various limitation periods are set out by statute, the most important of which is the Limitation Act 1980. The limitation period for contract is six years, with the time running from the breach of contract, and generally from the date on which the cause of action arose. In some circumstances i.e. in cases of fraud or concealment, the limitation period may be extended.

Litigation in England and Wales

The English legal system is based on the common law tradition. The English courts are bound by the principle of precedent. Civil court procedure in England is governed by the Civil Procedure Rules (CPR)

The UK legal profession is divided between solicitors and barristers. Solicitors primarily have case management functions and have direct contact with clients on a day-to-day basis. Barristers (known in
court as ‘counsel’) are normally instructed by solicitors for any advocacy before the higher (senior) courts. Solicitor-advocates, who are solicitors with the same rights of audience in the senior courts as barristers, may also represent the interests of a party in court.

Contractual disputes in England and Wales are heard in the County courts or the High Court, both of which are courts of original jurisdiction (trial courts). Cases which are more, complex, sizeable and of higher value are exclusively dealt with by the High Court, which is divided into three divisions:

  • the Queen’s Bench Division (QBD) ;
  • the Chancery Division (ChD), and
  • the Family Division. (FamD).

The QBD deals with all commercial matters and is the most appropriate forum for claims in contract. The ChD deals, amongst others, with corporate matters and intellectual property. Appeals lie to a divisional
court of the High Court, Court of Appeal and the Supreme Court in the last instance, but only if the issue appealed is of ‘general public importance’.

There are various specialist courts within the High Court, including the Administrative court, the Technology and Construction Court, the Commercial Court, the Admiralty Court, the Companies Court and the Patents Court. The Commercial Court forms part of the High Court QBD in London, and is generally regarded as the most appropriate forum in England to resolve contractual disputes.
The main steps in commercial law proceedings before the courts of English and Wales are:

  • issue of a claim form in the court;
  • service of the claimant’s claim form and statement of case;
  • service on the defendant of a claim form and (usually at same time statement of claim);
  • service of the defence;
  • service of claimant’s reply;
  • allocation of the claim to a case management track;
  • disclosure of documents;
  • exchange of witness and expert evidence;
  • listing for trial;
  • trial; and
  • assessment of costs.

The CPR lays down strict time limits and procedural requirements for the various stages. The overall average duration of commercial proceedings (excluding appeals) varies between one and two years.
Appeal proceedings can take substantially longer, especially if the appeal is taken to the highest and last instance in England and Wales, the Supreme Court.

Costs in commercial proceedings vary considerably depending primarily upon the size and complexity of the case and the level of fees of the solicitors and counsel instructed.

In the courts of England and Wales there is a long-established common law principle that “costs follow the event”, whereby the loser generally bears the costs of the proceedings.

Unless agreed by the paying party, costs will need to be assessed at a detailed costs assessment hearing once the case is over. A substantial proportion of the costs incurred will generally be recoverable after
assessment, but this is unlikely to amount to a full reimbursement.

The legal system in England and Wales allows conditional fee arrangements between lawyers and their clients (“no win no fee”). However, these are limited to a percentage on top of the fees payable, known as an ‘uplift’. No contingency fees are allowed in contentious proceedings, so that lawyers cannot share in the damages awarded.

Once proceedings have commenced, defendants may apply for security for costs against a claimant company if there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so.
An application may also be made if a claimant is resident outside the EU, but only for the additional amount of costs that would be incurred in enforcing the judgment in the claimant’s jurisdiction.

Article 6 (1) of the European Convention of Human Rights (ECHR) has made it increasingly difficult to obtain security for costs. The reason for this is that requiring a party to provide funds that it is unable to raise may amount to a breach of its rights to a fair trial.

Commencing Proceedings

Commercial proceedings are commenced by issuing a claim form, which is sealed by the competent court. The required steps for service of the claim form must be taken within four months of issuance. A claim form for service out of the jurisdiction must be served within six months of issuance.

The claim form sets out:

  • the names and addresses of the claimant and the defendant;
  • the nature of the claim;
  • the relief sought; and
  • the value of a money claim.


Methods of service under the CPR include:

  • personal service;
  • leaving the document at a place specified in the CPR;
  • first-class post;
  • by fax or other means of electronic communications.

Service abroad is effected pursuant to the corresponding rules of service applicable in the country where service is sought. The 1965 Hague Convention on the Service Abroad of Judicial and Extra-judicial

Documents in Civil and Commercial Matters and the EU Service Regulation (Council Regulation (EC) No.1348/2000) provide guidance on service in the countries which are party to these instruments.

Permission of the court is required to serve proceedings on defendants outside the EU. Leave is not required for service on defendants in the EU, but a form must be lodged at court with the claim form
indicating the grounds on which service outside the jurisdiction is permitted.

The preferred method of service of foreign proceedings in England and Wales under the Hague Convention is by way of personal service.

Defending a Claim

The defence must state:

  • which allegations made in the particulars of claim the defendant denies;
  • which allegations the defendant admits;
  • which allegations the defendant is unable to admit or deny, but on which he puts the claimant ‘to proof’ ie. the defendant wishes to see proof of the matter alleged;

The defendant may also issue a counterclaim provided the party has a cause of action against the claimant and that the parties to the counterclaim can be sued in the same capacity in which they appear in the initial claim.

Where the defendant issues a counterclaim, the claimant must file a defence to counterclaim.

Third parties

Under Part 20 of the CPR a defendant may bring a claim (a “Part 20 claim”) against a third party for an indemnity or contribution or some other remedy within the context of the existing proceedings, rather than
commencing separate proceedings against that party. Once served with the Part 20 claim form, the third party becomes a party to the original action.

Allocation to a ‘track’

The courts of England and Wales apply a track allocation system, according to which commercial claims are allocated to one of three case management tracks:

  • small claims track
  • the fast track, or
  • the multi-track

The small claims track provides a speedy, informal and inexpensive procedure for simple claims worth no more than £5,000 and is dealt with by a District judge in chambers ie. not open court, in the County Court.

The fast track aims to provide an equally streamlined procedure for resolving disputes valued between £5,000 and £25,000 and is dealt with by the County Court. Fast track cases must be heard within 16 weeks
of filing and will be dealt with by way of a maximum one-day trial.

The multi-track caters for the resolution of more complex disputes whose value exceeds £25,000. However, claims worth less than £50,000 which have been commenced in the High Court will generally be transferred
to a County Court, unless there is a specific requirement for them to be heard in the High Court.

Claims brought before the Commercial Court are automatically allocated to the multi-track.

Under the CPR, the courts of England and Wales are under a duty to manage cases actively with a view to minimising costs incurred. Active judicial case management includes:

  • encouraging the parties to co-operate in the conduct of the proceedings;
  • identifying the issues that require full investigation and trial and deciding summarily on those which do not;
  • encouraging the parties to enter ADR if the court considers this appropriate;
  • facilitating the settlement of the dispute in whole or in part; controlling the process of the case in a cost-conscious and efficient manner by setting procedural timetables and giving other appropriate directions;
  • reducing the parties’ need to attend court to a minimum; and making full use of technology.

A range of interim applications are available to the parties. These include:

  • security for costs ;
  • interim injunctions (such as search orders and freezing orders);
  • orders for specific disclosure;
  • amendment of a statement of case;
  • costs sanctions and other constraining measures against a party who does not comply with the court’s previous procedural directions.

Under the CPR, the courts of England and Wales have powers to compel uncooperative parties to comply with its orders and directions, including the power to award cost orders. The courts are also empowered to
make a strike-out order whereby the courts are empowered to strike out the whole or any part of a statement of case on their own motion or upon application by one of the parties. Furthermore, the court may strike out a statement of case if it appears to the court that:

  • the statement discloses no reasonable grounds for bringing or defending a claim;
  • the statement constitutes an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or
  • there has been a failure to comply with a rule, practice direction or court order.

Normally, an application for an order striking out a statement of case will be made during the pre-trial stages of proceedings, and often together with an application for summary judgment. However, a court can
exercise this power before trial or even during the course of trial.

Summary judgment

Under the CPR, the courts of England and Wales may enter summary judgment in favour of the claimant without holding a full trial. This may occur where a claimant can show that the defence has no real prospect
of success and there is no other reason why the case should go to trial.

Summary judgment procedure may also be invoked by defendants against weak or unfounded claims that lack any prospect of success and there is no other reason why the claim should be brought to trial.

The courts may also enter summary judgment of their own motion in order to prevent weak or unfounded cases from proceeding. This power is generally available for the benefit of claimants and defendants.


Disclosure is an exercise which obliges the parties to reveal their cases at a relatively early stage thus encouraging settlement. Disclosure must be treated seriously because it can impact heavily on the
outcome of proceedings. The credibility of a party at trial may be adversely affected if that party fails to give proper disclosure because documents have been destroyed or overlooked. The court may impose severe sanctions on any party not complying with its disclosure obligations. Furthermore, a lawyer owes an independent duty to the court to ensure that proper disclosure is given.

Under the CPR disclosure rules, the parties to the proceedings are under a duty to give advance notice to each other of any material documentation in their respective control. This process is known as “standard
disclosure” and usually consists of exchanging a list of relevant documents which are or have been in each party’s possession or control.

Disclosure is followed by inspection, where parties can request copies of documents appearing on the other party’s list or physically inspect the original documents at the other party’s solicitors’ office.

Standard disclosure requires the parties to disclose the following documents:

  • those on which a party relies for making its case;
  • those which adversely affect its own case or another party’s case; and
  • those which support another party’s case.

Documents that are not material to the case do not require disclosure.


There are three categories of privilege in commercial proceedings:

  • legal advice privilege, covering any confidential communications between a solicitor and client for the purposes of giving legal advice;
  • litigation privilege covering confidential communications between a client and a third party or a lawyer and a third party provided that litigation was contemplated or pending and the information was for the purposes of the litigation; and
  • ‘without prejudice’ privilege, whereby any ‘without prejudice’ communications made orally or in writing with the intention of settling of the dispute are privileged and may not be disclosed to the court.

Documents that are classified as privileged must be disclosed by listing the existence of such documents. This is often done in a generic fashion, rather than by specific reference to the particular documents.
Privileged documents are not made available for inspection by the other side.


Under the CPR, the parties are required to make advance disclosure of all material documents before trial. Moreover, court directions may require the parties to exchange expert reports and statements of witnesses of fact they seek to rely on at trial. Hearsay evidence is admissible at trial if advance notice identifying the hearsay evidence is given to the other party. Hearsay evidence is evidence which a witness gives of facts they have not personally experienced for the purpose of proving the truth of those facts.

Admissibility of evidence

Admissible evidence includes:

  • expert evidence;
  • witnesses of fact; and
  • hearsay evidence.

Permission of the court is required to adduce expert evidence and such evidence will be restricted to that which is reasonably required. A court may control expert evidence by giving directions as to the issues on which it requires evidence and the nature of the evidence which it requires to decide those issues.

Witnesses of fact

Written witness statements for each witness of fact are usually exchanged by the parties before trial and stand as evidence-in-chief of the witnesses to be called so that there is no oral examination–in-chief of
witnesses by their lawyer. However, witnesses giving evidence at trial are cross-examined by the lawyer acting for the other side.

Types of judgments

The court may make a summary judgment or a judgment by default. Judgment in default is a speedy way for claimants to obtain judgment without a trial. In most cases a defendant served with a claim form and particulars of claim must acknowledge service and then file a defence. If no acknowledgement or defence is forthcoming the claimant may ask the court to give it judgment in default.

The judgment can award damages e.g. for lost contractual profits, and/or an order e.g. for specific performance so that the court orders that a defaulting party performs its outstanding obligations under a contract and/or any other form of declaratory relief.

The courts of England and Wales are empowered to make a wide variety of orders, including:

  • injunction orders, compelling a party to perform a particular act (mandatory) or prohibiting a party from doing a particular act (prohibitory), or consent orders evidencing a contractual agreement between the parties;
  • Tomlin orders (a consent order in the form of a stay of proceedings on terms agreed between the parties and recorded in a confidential schedule); and
  • provisional damages orders which are normally confined to personal injury cases.

The courts of England and Wales may award damages for loss suffered, including economic loss. Where the loss suffered is negligible, the court will award nominal damages only.

The courts of England and Wales are not allowed to award punitive damages.

The courts have the power to award costs of the litigation in accordance with the ‘costs follow the event’ principle, whereby the loser usually pays the costs (see above).

There may be a departure from this principle if the winner has displayed unreasonable behaviour during the course of the proceedings. Cost orders are generally discretionary.
The courts may award interest on both damages and costs awarded.

Enforcing a domestic or a foreign judgment

Domestic judgments

A domestic money judgment may be enforced:

  • by means of a writ or warrant of execution granted by the court against the debtor’s goods;
  • by a third party debt order against the debtor’s bank account;
  • by attachment of earnings against the debtor’s salary; or
  • by obtaining a charging order whereby the debt is secured against the judgment debtors real estate.

Non-money judgments are enforced in accordance with their own specific enforcement procedures, as provided in the relevant legislation.

Foreign judgments

The direct enforcement of foreign judgments in the courts of England and Wales is governed by the bi/or multi-lateral conventions to which the UK is a party, and which have been transposed into English law. The
UK is a party to Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (formerly the Brussels Convention), which provides for the
enforcement of judgments throughout the European Union. The relevant provisions may also be found in the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933.


Under the CPR, an appellant is required to apply for permission to appeal. Permission to appeal may only be given if:

  • the court considers that the appeal would have a real prospect of success; or
  • there is some other compelling reason for which the appeal should be heard.

Alternative Dispute Resolution (ADR)

Apart from litigation, the most commonly used methods of ADR in England and Wales are arbitration and mediation.


Mediation is a widely accepted alternative dispute resolution mechanism which is recognised by the CPR. Mediation usually requires the agreement of the parties to mediate. Under the case management powers of
the CPR the court does have the power to order the parties to attend mediation however it has no power to oblige the parties to settle.

The mediation process is confidential and benefits from the ‘without prejudice’ privilege rule, so that any communications made during the mediation proceedings where no settlement was reached may not be
disclosed at a later date without the express agreement of the mediating parties (unless there is a dispute as to whether a settlement was actually reached). The mediator is not empowered to adopt any interim
measures or make any type of orders. Mediations are usually facilitative only, so that the mediator merely assists the parties in finding a commercially viable solution to their dispute, instead of actively evaluating the merit of the parties’ respective positions. If the mediation is successful, it is concluded by a settlement
agreement, which is an enforceable contract.

Expert determination

Expert determination is often used for disputes relating to complex financial matters such as price adjustments on take-overs, the valuation of shares in private companies, information technology and
construction contracts. Expert determination is final and binding with no availability of an appeal. Unlike arbitrators, expert determiners deliver ‘non-speaking awards’, i.e. awards that do not set out detailed reasons for the final decision delivered. An expert determination may only be challenged on the grounds of a ‘manifest error’, or for breach of the principles of natural justice or due process.


Arbitration proceedings in England and Wales are governed by the English Arbitration Act 1996, which applies to both domestic and international arbitration. Depending on the parties’ arbitration agreement,
various institutional arbitration rules may be applied e.g. the Rules of the London Court, or those of the London-based trade associations.
The two major arbitration institutions in England and Wales are the London Court of International Arbitration and the Chartered Institute of Arbitrators. Other more specialised arbitration institutions include:

  • the London Maritime Arbitrators’ Association;
  • the Federation of Oils, Seeds & Fats Association;
  • the London Metal Exchange.

Arbitration is a technique for the resolution of disputes outside the courts where the parties to a dispute refer it to one or more persons (the arbitrators) whose decision the parties agree to be bound by. The
arbitrators review the evidence and impose a decision that is legally binding for both sides and enforceable. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions.

The aim of arbitration is to obtain a fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. Arbitrators in principle have more flexible schedules than judges and there is less likelihood of there being a delay. Parties have greater control over the timing of the arbitration proceedings.

Arbitration also leads to faster resolution because the proceedings are less formal than a court case. Furthermore, there is a limited right of appeal against arbitration awards thereby ensuring that disputes are not prolonged by long appeal processes which can mean speedier enforcement and less scope for a party
to delay matters.

However there is an ongoing debate concerning whether the cost of arbitration is lower than the cost of going to trial for more complex cases. Arbitrators’ fees can be relatively high and there are other incidental costs such as hire charges for the venue, transport and hotel costs for the parties etc. Therefore, costs may no longer be a relevant factor for consideration by the parties in their choice of whether or not to use arbitration as a means of dispute resolution.

Arbitration is less formal than court proceedings. Parties are attracted to this less formal approach which encourages a speedier and less costly way of settling disputes. This flexibility extends to the freedom to choose the venue of the arbitration whether in the arbitration agreement set out in the contract itself or at a later stage. This decision allows parties from different legal jurisdictions and different legal systems to pick a neutral venue or a venue that is convenient for them.

The parties may also decide on the seat of the arbitration i.e. the legal jurisdiction to which the arbitration is tied. The seat dictates which national law governs the procedure. The seat of the arbitration is important since it will normally determine the procedure or rules which the arbitration adopts, and the courts which exercise jurisdiction over the seat will have a supervisory role over the conduct of the arbitration.

Agreeing to arbitration also allows the parties to choose the language in which they would like the proceedings to be conducted.

There is an implied right of confidentiality in the arbitration process whereby matters arising in it remain private between the parties involved (court litigation falls into the public domain). Therefore in arbitration, outsiders do not get access to sensitive information and the parties do not risk the possibility of damaging publicity arising out of reports of the proceedings.

In terms of enforcement, the provisions of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) make arbitration awards generally easier to
enforce abroad than court judgments. There are more than 140 signatory states to the convention which recognise and enforce awards made in other signatory states.

For further information on litigation in the courts of England and Wales or ADR: