Global statistics and projections for the coming year reveal a steady rise in the number and value of disputes, putting them in the billions of USD with the average cost to parties in the tens of millions of USD. This comes as no surprise in the aftermath of COVID-19 and its adverse impact on economies, organisations and individuals globally. However, a survey in 2022 conducted by Baker & McKenzie revealed that only 35% of respondents expressed high confidence in their organisation’s level of preparedness for litigation.
At the heart of most disputes is a fight for control – over companies, assets or outcomes. Such disputes manifest in myriad ways, from joint venture and partner fallouts, board tussles, fraud, shareholder activism, to ultra-high-net-worth inheritance or divorce feuds.
In our experience, getting control often involves a combination of negotiation and legal means. Underpinning both is the need for information and expert analysis – to string together the factual matrix, find evidence of wrongdoing, assess financial position, identify assets, find pressure points and exert leverage, or inform legal and negotiation strategies. In general, the party with the highest chance of success is the one with the best information early on in a dispute.
Information falls into two categories: internal information and external information.
Internal information: What do you have and how to find it? Most parties have more relevant information internally than they think. The challenge is knowing what to look for and how to efficiently locate it. Forensic accountants are often adept at identifying and developing search parameters for documents and data relevant to financial issues and/or claims of financial malfeasance. Expert analysis of historical financial statements and accounting data can often reveal where suspicious activity or losses are hidden and/or help hone in on the entities and transactions that are of most interest. Combining this with IT forensic and e-discovery expertise allows parties to effectively define and identify information relevant to a dispute from the array of hard copy and electronic data available to them. This can be completed far quicker with the help of e-discovery experts from the outset. Advances in AI and analytics capabilities within document review platforms have also made it possible to get an early read (often with visualisation) on the evidence, including the connections and relationships between parties, key custodians/potential witnesses, and main themes arising from communications and documents. This in turn enables a more focused and cost-efficient review of documents and data, particularly when e-discovery experts work closely with internal or external counsel to carefully design data interrogation and document review workflows.
External information: What is out there and how to get it? In addition to internal sources of information, valuable insight is often obtained from external sources – via public-record research, market enquiries and site visits. However, the quality of this information is largely driven by the experience of the investigator in parsing useful information, often nuanced, from a large amount of data, and their access to the required documentation and human sources, often across multiple jurisdictions, in an ethical and legally permissible way. This requires a large network of trusted sources in local jurisdictions. Whilst information from discreet source enquiries may not be admissible as evidence in court if the source is not willing to go on the record, the value is in informing internal information searches and legal or negotiation strategies. Anecdotal information also allows reverse engineering to identify specific conduct or transactions. Seasoned dispute resolution specialists and in-house counsel increasingly ask for this information at the early stages of a dispute.
Expert analysis: The value of expert analysis on collected information is undeniable. In the context of a dispute, the most useful analyses are typically on:
- The money – including an early assessment of the value of the claim, key assets, how they are held and by whom, other potential claims on the assets and potential recovery.
- The counterparty – motivation, reputation, previous modus operandi in similar disputes, financial standing, beneficial ownership, political connections, current operations and priorities, negative media, indication or evidence of wrongdoing.
- Other stakeholders – mapping of key stakeholders and decision-makers, providing clarity on complex or hidden relationships and corporate structures, information on the credibility of factual and expert witnesses.
- Accounting and quantum issues – including independent and defensible assessments of the true position on revenue and profits, related-party loans and transactions, interpretation of contractual clauses on accounting, application of accounting standards, financial modelling, or valuation of businesses and damages.
- Gaps in documents and data – what documents and data are required to substantiate or defend a claim on quantum or merit? What is missing?
For example, during a multi-jurisdictional inheritance dispute, we worked closely with the head of our client’s family office and its counsel teams to support each stage of litigation. We were involved extensively in claims formulation including conducting multi-jurisdictional asset searches, mapping relationships, opaque corporate structures and key counterparties, and assessing the value of key assets. We also provided expert accounting support on the true position of alleged charitable distributions made by certain family trusts and helped analyse and reconstruct the factual matrix on the formation and financial position of asset-holding companies within the trusts. During discovery, we helped assess, analyse and identify key financial documents that our client should obtain from the opposing parties, and during trial, we conducted research on more than 15 key witnesses to assist counsel with cross-examination. We also supported counsel teams with modelling financial outcomes and changes in asset values during global mediation between the parties.
Unleashing the power of information and expert analysis
Working with experts from the start not only ensures timely access to the best information but increases the utility of that information through early subject matter expert analysis. A key advantage of knowing the motivation, pressure points and financial standing of counterparties, having expert analysis of likely financial outcomes, and identifying evidentiary or documentary gaps, is the ability to use this knowledge to shore-up your position. This gives you time to plug gaps, craft counter-narratives and devise the right legal and commercial strategies. Ultimately, this gives you control over the pace and outcome of a dispute.
Accordingly, we recommend that legal teams and their principals understand the different expert analysis, internal and external sources of information potentially available in a dispute, engage with experts early to identify and obtain the right information and analysis, in order to maximise your advantage.