‘An increase in life sciences disputes is anticipated but in many cases, only the lawyers win through pursuing a claim all the way to a final hearing or a trial’

Despite the supportive measures introduced by the Government, the pandemic undoubtedly caused supply issues in the life sciences industry. However, generally speaking, there was a spirit of co-operation among businesses and a willingness to find solutions. Many life sciences businesses therefore sought to resolve supply chain issues pragmatically, without recourse to the courts. 

March 2022 marked the two-year anniversary of the first lockdown in the UK. The supportive measures put in place by the UK Government and others across the world are now easing and pre-pandemic expectations are gradually returning.

Inflationary pressures are likely to put further pressure on businesses and exacerbate the problems of those already in difficulty. Additionally, the humanitarian disaster in Ukraine, the worldwide sanctions on Russia and those aiding the Russian state are also likely to cause major business disruption globally. This adds further risk to supply chains.

While the pandemic saw an increased regulatory flexibility and speed to market in relation to medicines and medical equipment, this may pave the way for an increase in product liability claims. Fuelled by litigation funders, the threat to larger corporates from group actions and collective redress is also growing. Finally, over recent months we have also seen developments in English law and procedure affecting the rights on termination of contracts in insolvency cases, and the law relating to force majeure has been reviewed in light of COVID-19 – we have already had three judgments from the Commercial Court on force majeure so far this year.
  
Against this backdrop, it seems inevitable that we will see an increase in a willingness for businesses to confront their counterparties in the short- to medium-term, leading to more disputes.

Life sciences companies may choose to engage in litigation through national courts as a means of resolving these types of disputes. Historically, it has been argued that the UK Courts have significant backlogs, but that is less of an issue now, and the publicity that litigation can bring can sometimes work to enable the parties to find a quicker deal. While some litigants may view this as disadvantageous in terms of confidentiality, there are clear advantages. For example, if a company is seen to enforce its legal rights through the courts, then it may discourage other businesses from acting in a similar way against it in the future. Litigation can also be useful where one party is failing to engage with the dispute – it is very difficult to ignore court-mandated deadlines and it could lead to the claim being decided against the uncooperative party.

Let’s not forget arbitration, which is effectively a private form of the dispute resolution process. Life sciences companies routinely enter into international contracts, which is where arbitration comes into its own since arbitral awards are generally easier to enforce overseas than the judgments of national courts. The arbitral process can also be more flexible than that of court proceedings and it can be quicker. As long as the parties agree, they can choose how the arbitration will work, who the arbitrators should be and which procedural rules should apply. The arbitration itself is confidential. Parties may prefer not to have commercially sensitive allegations and details of their business made public. Confidentiality can be crucially important in the life sciences sector, for example, where patents are licensed to multiple licensees, or on the launch of a new product where sensitive intellectual property or pricing details may arise.

With the growing demands on business and of course court and arbitrators’ time, life sciences companies may turn to alternative dispute resolution (ADR) to resolve disputes. ADR is generally used to describe all dispute resolution methods other than court proceedings and arbitration. This includes mediation, negotiation and early neutral evaluation (where an independent party evaluates a case at an early stage and gives a preliminary, non-binding view).

ADR can be very helpful in circumstances where parties wish to preserve an existing commercial relationship. It can also be less costly than court proceedings, as ADR can be scheduled at any time and is often part of the litigation or arbitration process.

‘While the pandemic saw an increased regulatory flexibility and speed to market in relation to medicines and medical equipment, this may pave the way for an increase in product liability claims’

In its report in July last year, the Civil Justice Council confirmed its view that compulsory ADR is both legal and desirable. This was welcomed by Sir Geoffrey Vos, Master of the Rolls, who emphasised that the dispute resolution process should focus on ‘resolution’ rather than ‘dispute’. The latest edition of the UK’s Commercial Court Guide, published in February this year, now refers to ADR as ‘NDR’, meaning negotiated dispute resolution. The notable change in terminology reflects the judiciary’s view that ADR should no longer be considered as ‘alternative’ but rather a mainstream part of the dispute resolution process. Significantly, the latest version of the guide encourages parties to consider NDR throughout the litigation process.

Mediation is not (yet) compulsory in commercial cases, but this might not be the case for long. The Civil Justice Council published its final report on the resolution of small claims in January 2022 in which it recommends compulsory attendance at mediation for small value claims of £500 or less.

In light of the easing of temporary rules, which were introduced to support businesses during the pandemic and the economic and political climate, an increase in life sciences disputes is anticipated. It makes sense for these disputes to be resolved outside litigation or arbitration if possible, but certain disputes and certain parties will need encouragement to go that way. In many cases, only the lawyers win through pursuing a claim all the way to a final hearing or a trial, and commercial parties need to be aware of that and commercial in their decision-making. This is certainly easier said than done, but that’s part of the skill of a disputes lawyer in finding the right solution for their client.