Credit Crunch: The Impending Litigation Wave

Author:Mr Kieran Cowhey
Profession:Dillon Eustace
 
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When a client hears from a corporate or financial services

partner the words "You need to talk to a litigation

partner", shivers usually are sent up their spines. For a

long number of years that sense of unease was caused by the

client getting involved in a process which they felt was

foreign to them, took up too much time, was governed by, in

their mind, arcane rules and was financially onerous. It was

perceived to be a rollercoaster ride that one could not get off

until the end.

The ten years up until August 2007 witnessed unprecedented

economic growth and accumulation of wealth in Ireland. This

growth has brought an increased confidence in Irish business

and financial institutions. The curve was forever upwards. In

that period, the need to call on litigation partners in law

firms lessened. Entrepreneurs were too busy moving on to the

next deal and profit to worry about breaches of agreements and

disputes. These problems were bought off. To stand and fight

only stalled the process to doubling and trebling your money.

It was always onwards and upwards.

Then suddenly the markets wobbled. Market turmoil in August

2007 led to changes in funding terms and costs. People began to

talk of lack of liquidity, subprime contamination, rating

reviews for lenders, banks not lending to each other and,

suddenly, we had the "credit crunch". Allied to this

slowing in economic growth and higher inflation, both

domestically and internationally, has led to a less optimistic

view of the future. Now everyone is scrutinising their

contracts, their financial instruments and their business

relationships. So could the litigators be back?

There is no doubt that litigation is the great

countercyclical discipline in law firms. History has shown that

where large loses are suffered, litigation usually follows. In

boom times no one wants so sue but in poorer times litigation

not just becomes an option but perhaps an essential. We have

already seen the effects of the "credit crunch" in

the Courts. Last August Structured Credit Corporation went into

examinership with substantial debts incurred in a very short

time space and caused by market volatility. In February of this

year International Securities Trading Corporation was the

victim of similar market difficulties and subsequently went

into examinership. Whilst no litigation as such has arisen out

of these two examinerships yet, they did keep litigators and

insolvency practitioners busy. There certainly weren't

enough...

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