Commercial litigation involves the formal process of resolving disputes in court, often referred to as a “claim” or “proceedings.” These disputes are civil in nature and typically arise between businesses or individuals who cannot resolve their differences through negotiation or alternative dispute resolution (ADR) methods.

In England and Wales, the commercial litigation process is governed by the Civil Procedure Rules (CPR), which set out the necessary steps and protocols to ensure disputes are resolved fairly and efficiently.

Each stage, from pre-action correspondence to the trial itself, is designed to encourage settlement or, if necessary, allow the court to deliver a just and proportionate decision based on the evidence.

Given that commercial litigation can incur significant costs, it is essential to be informed about funding and insurance options to ensure a cost-effective approach to dispute resolution. At Annecto Legal, we can assist clients in finding funding and insurance coverage to provide peace of mind.

Key steps in the commercial litigation process

Pre-Action Correspondence 

The pre-action stage facilitates early information exchange about a potential claim, helping parties clarify key issues and potentially avoid litigation. Courts expect parties to engage meaningfully at this stage and may impose cost penalties for non-compliance.

• Letter of claim: The claimant must provide a detailed letter outlining the dispute, including the parties involved, relevant facts, legal grounds, losses incurred, and remedies sought. The defendant typically has 14 days to respond for straightforward cases or up to three months for complex matters.
• Letter of response: The defendant’s reply should indicate whether the claim is accepted or rejected (in whole or in part) and provide reasons for rejection if applicable. Requests for additional information may also be included.

Parties often explore settlement during this phase through “without prejudice save as to costs” correspondence. This type of communication cannot be disclosed to the court until costs are assessed at the conclusion of the claim.

By adhering to these pre-action protocols, parties aim to narrow the issues in dispute and encourage resolution without court involvement. 

Issuing a claim 

Sometimes, disputes cannot be resolved during the pre-action stage. In such cases, a legal representative may recommend taking the matter to court by issuing a claim.

The process begins with the claimant filing a claim form electronically and paying the required court fee online. Claims are submitted to either the High Court or the County Court, depending on the value. Claims exceeding £100,000 must be filed in the High Court.

The claimant must also submit Particulars of Claim, which can be:

• Briefly outlined on the claim form itself, or
• Detailed in a separate document providing the factual background and legal basis for the claim (common in complex cases).

If the particulars are in a separate document, they must be served with the claim form or within 14 days of serving the claim form.

Additionally, the claimant must provide Initial Disclosure—key documents supporting the claim—when serving the particulars of claim. Careful attention must be paid to the rules in the Civil Procedure Rules (CPR) regarding how the claim form is served to ensure compliance.

Acknowledgment of service and filing a defence

• Acknowledgment of service: The defendant confirms receipt of the claim and indicates whether they intend to:
• Admit the claim,
• Defend all or part of it, or
• Contest jurisdiction.
• Filing a defence: The defendant must respond to each allegation, admitting, denying, or requiring proof. The defence may include key documents relied upon, particularly in the Business and Property Courts.

Failure to file a defence within the prescribed time allows the claimant to request a default judgment.

Filing a reply 

After a defence is filed, the claimant may choose to file a reply, addressing specific allegations in the defence that were not covered in the particulars of claim. A reply can:

• Respond to new allegations,
• Admit certain facts, or
• Further narrow the issues in dispute.

Filing a reply is optional. If the claimant does not submit one, they are not deemed to have admitted any matters raised in the defence.

In practice, replies are most often filed when the defendant makes a counterclaim. In such cases, the claimant submits a combined Reply and Defence to Counterclaim.

Case Management and Directions 

The court plays an active role in managing the case to ensure it progresses efficiently. Key steps include:

• Case Management Conference (CMC): A meeting where the court sets the timetable for the case, addressing issues like disclosure, witness statements, and expert evidence.
• Directions: The court issues orders outlining the steps and deadlines each party must meet, such as providing documents or preparing for trial.

This stage ensures both parties are prepared for trial and have a clear roadmap for the proceedings.

Disclosure and evidence 

• Disclosure: Both parties exchange all relevant documents, including those that support or undermine their case. The process is intended to promote transparency and fairness. In some cases, disclosure may be limited to specific categories of documents, known as standard disclosure.
• Witness statements: Each party prepares statements from witnesses detailing their knowledge of the dispute. These statements are exchanged before the trial and serve as the witness’s evidence-in-chief during the hearing.
• Expert evidence: If technical or specialist knowledge is required, expert witnesses may be appointed. Their reports are shared in advance, and experts may be cross-examined during the trial.

Settlement discussions 

Settlement efforts can continue throughout the commercial litigation process.

• Without prejudice negotiations: Discussions or correspondence marked “without prejudice” cannot be used as evidence in court, encouraging candid negotiations.
• Court-ordered mediation: Courts may direct parties to participate in mediation or other forms of ADR to resolve the dispute before trial.

Failure to engage in reasonable settlement discussions can result in cost penalties, even if a party ultimately wins the case.

Trial 

If the dispute is not settled, it proceeds to trial.

• Presentation of evidence: Each party presents their case, including witness testimony, expert evidence, and documentary proof.
• Cross-examination: Witnesses and experts may be questioned by the opposing party to challenge their credibility or conclusions.
• Judgment: The judge evaluates the evidence and delivers a binding decision. This may include financial compensation, injunctions, or other remedies.

Choosing the right solicitor

 

When choosing a commercial litigation solicitor, it is imperative to select a solicitor with the relevant specialisation for your case to ensure that they can provide the best legal advice for a favourable outcome.

You should opt for a solicitor with the experience and expertise to deal with your case in the most efficient and cost-effective manner. Furthermore, considering how your solicitor will be perceived by the opposing party is essential.

Moreover, you might want to evaluate your solicitor’s willingness to work on a risk-sharing basis and their experience in dealing with legal funders and insurers. These factors can significantly impact the trajectory and success of your case.

Seeking guidance from specialist commercial solicitors as soon as possible can assist in assessing your eligibility to file a claim and to ensure that the claim is made within the specified limitation period.

Funding a claim

The commercial litigation process can lead to high levels of legal costs. Fortunately, there are funding and insurance options available to assist when conducting litigation in a cost-effective manner. These methods include:

Third party funding

One funding method that is commonly used for the commercial litigation process is third party funding. Third party funding acts as a form of non-recourse financing for litigation. Third party litigation providers take on the financial risk of litigation so that clients can pursue a claim without having to worry about the legal fees associated with it.

In return for taking the risk, the litigation funder will typically seek a share of the proceeds in the region of a fifth to a third of any damages recovered. This means that you keep up to 80% of the reward, having taken none of the risk. If the claim is unsuccessful, the funder will lose their investment.

Damages based agreement 

A damages based agreement (DBA), also known as a contingency fee agreement, is a type of arrangement made between a client and a solicitor in which the solicitor agrees to fund their case and share the risk of litigation. In return, the solicitor will be paid a percentage sum of the damages recovered as long as the client’s case is successful.

DBAs provide that, instead of being paid on a conventional hourly rate, the solicitor’s legal fees are only payable in the event that the case is successful. Therefore, these types of agreements allow clients the opportunity to pursue a case without having to worry about the solicitors’ fees associated with it. In some circumstances, however, fees for Counsel and other disbursements may still be payable by the client.

ATE insurance

After the event (ATE) legal expenses insurance is taken out after the event that has led to a dispute has taken place. ATE insurance can protect you from paying your opponent’s legal costs, should your claim not be successful.

However, ATE insurance is not free, and it is important to remember that if your case is successful, you may have to use some of your reward to pay the cost of the insurance premium, which will be included in the terms and conditions.

The use of third-party litigation funding, CFAs and ATE insurance can sound complicated, but they are simply risk management tools and when used correctly, they can make all the difference to a commercial litigation case.

How can Annecto Legal assist?

In commercial litigation, getting the right advice early without spending an excessive amount on legal fees is the best way to save money and protect your position.

Annecto Legal helps clients realise the value of their commercial disputes. We work closely with litigation funders, insurers and lawyers that seek alternatives to the traditional hourly rate funding model.

If you have been involved in a dispute, get in touch with an expert member of our team to find out which litigation cover is the right litigation funding option for you to reduce your commercial litigation costs.