Crossing the Pond: Managing Litigation Expectations in Europe and the U.S.

The challenges of navigating complex litigation increase substantially when parties are required to litigate in a far flung jurisdiction. Litigation in an unfamiliar jurisdiction challenges assumptions about how the litigation process unfolds. Expectations on the timing, sequence and a prudent strategy invariably need to be adjusted to the new norms of the jurisdiction that will be adjudicating the dispute. In this episode, Dorsey London Partner Aymen Khoury and Partner/Podcast Host Kent Schmidt discuss key differences of commercial litigation in the U.S. and Europe, as well as how companies sued in an international litigation can be prepared before entering unfamiliar territory of foreign litigation.

This podcast is not legal advice and does not establish an attorney-client relationship or create any duty of Dorsey & Whitney LLP or those appearing in this podcast to anyone. Although we try to assure that the content of this podcast is accurate, comprehensive, and reflects current legal developments, we do not warrant or guarantee those things. The opinions expressed in this podcast are the opinions of those appearing in the podcast only and not those of Dorsey & Whitney. This podcast is considered attorney advertising under the applicable rules of certain states.

Transcript

Voiceover
Welcome to another episode of the SharkCast on litigation Risks Management, where we explore why businesses are so frequently sued and how to mitigate and navigate the dangers lurking in these risky waters. Join us now as we welcome our host, Kent Schmidt, litigation partner at the law firm of Dorsey and Whitney.

Schmidt
Well it’s a great pleasure to welcome to SharkCast for a new episode my friend and partner, Aymen Khoury from our London office.  Welcome Aymen.

Khoury
Thank you for inviting me, Kent.  Delighted to be here.

Schmidt
Well Aymen, as you can tell from that fantastic accent practices in Europe, and particularly out of our London office, and is a talented litigator.  He practices in all types of litigation, much like I do here in the US, and Aymen is a relatively new friend and partner to Dorsey, at least, and just a couple of months ago, Aymen and I spent some time at a conference in Paris, and we enjoyed getting to know one another, and just in the course of going to various meetings around the city, we ended up having conversations in the back of Uber cars and at various cafes that we were meeting at about our different practices, how the US litigation practice compares to the litigation practice in the UK, and I thought it would be a very interesting episode to have him come on and once it sort of recreate and expand on those conversations with a focus on what companies outside the US, who might be accustomed to European style litigation should contemplate if they are named in US litigation, and perhaps to a lesser extent the opposite, US companies that are ensnared in litigation in Europe, including in the UK.  So, Aymen it was a great opportunity for us to get to know each other back in November when we were in Paris together, and I value your insight and your friendship, so I’m so happy that you’re here and thanks for being a guest.

Khoury
Thank you, and obviously likewise, Ken.  I think a real feature of those meetings, and discussions we had were the differences in approach when it comes to litigation, but also expectations of even other lawyers in our profession.  So in that regard, it’s quite interesting to explore this further with you today.

Schmidt
Well, as it is often said, the world seems to be getting smaller, and I think that it’s more likely today than ever before given how global commerce works, that a company on one side of the Atlantic, for example, may be ensnared in litigation on the opposite side, and so this cross border litigation or international litigation is something that companies of all size need to be increasingly sensitive to.  Let’s first start off by talking about the perception of US litigation.  What is the typical perception of someone in the UK, or in Europe as to what US litigation entails? 

Khoury
Trying to put aside the sort of movies, and the soap operas, and the shows we’ve all been growing up watching, I think maybe slightly unfair perception in terms of the difference with, say, England for example.  It’s perceived maybe to be more expensive, more convoluted, perhaps even more aggressive in terms of taking up points.  Maybe more extensive, which I think is probably fairer and we’ll probably come across some of those examples later, but I think they’re probably the headline differences that people perceive in terms of the differences, say, England and the US.  Of course then there are differences between the rest of Europe, and the US, which are probably fairer in the sense that they’re very different jurisdictions in terms of their processes and setups, and I think those differences are largely around time and costs and the sort of nature of the process of litigation, whether it be a civil or common jurisdiction differences.

Schmidt
Now, from your vantage point, you get to look at different types of litigation because you, not only advise domestic companies in the UK and Europe on US litigation, but you do litigation in various jurisdictions and arbitrations in various jurisdictions.  Can you give us a flavor of what your international litigation practice is like, with an emphasis on jurisdiction? 

Khoury
Yeah, so first and foremost, I’m English High Court litigation and international arbitration lawyer practicing English law, but I’m also an Arabic speaker, and I guess as a result of that, I as well as assisting various clients in the UK, my practice has a strong international dimension and includes amongst other things, a focus on the Middle East, acting for clients from or connected to that region, but also act for clients generally in support of legal proceedings in foreign jurisdictions, and over the years that’s involved me in matters across a number of jurisdictions, most obviously in the Arab world such as the United Arab Emirates or Qatar or Saudi, Bahrain, Egypt, Iraq, but also across Europe and in jurisdictions such as the British Virgin Islands, China, and of course the United States as well in particular.

Schmidt
So tell me a little bit about your experience in helping companies outside the US understand what to expect on the US litigation front.

Khoury
Yeah, so, I mean, in that sense, you know a lot of the cases that I’ve worked in over the years have included a US element, so even if I’m thinking of a particular example I could give you more recently of a High Court litigation involving all US parties, but the jurisdiction was England, the choice of law was England, but by its nature involved ancillary disputes, and proceedings in New York and Nevada, in California, and so you get a real stark comparison between what it’s like to run an English litigation or US litigation, not least because they’re sort of happening at the same time, but also you’re working with your US colleagues as well as yourself, running the English litigation and that’s a fairly typical classic example of where we might sort of cross paths, and where we see the differences, and of course, the clients can be either English or US or indeed from a third party, and then there’s a bit of an education piece, both for yourself as the lawyer who’s normally practicing in England, but if you’ve done enough of them, you realize there’s some differences, and of course then for the client themselves.  So that’s sort of the typical way we come across these differences, and in practice, how they sort of unfold.

Schmidt
In advising a company, say based in London or Paris or the Middle East, on new US litigation, what are some of the surprises that you have to prepare those clients for as they enter the fray of US litigation, even if they’re familiar with, for example, the English Commonwealth system?

Khoury
Yeah, I think there’s kind of two sets of differences, whether you’re mainland Europe and whether you’re sort of UK and Ireland or, and when I say UK, I mean specifically England and Wales, ‘cause that’s the real reference to our jurisdiction, but much of Europe is, as your listeners and you will know, minus Ireland and the UK, have civil law jurisdictions and these rely on codified systems, of course, with written core principles, while common law jurisdictions such as England and Wales and the US of course, depend on case law and the development of precedent, largely set by judges in previous cases and that brings various differences, but probably the main overarching difference is between these two systems as what’s I think often described as a inquisitorial in nature, that being the civil law system, while our respective systems of common law, adopts fair to say a more adversarial approach, and that fundamental difference between the adversarial and the trial of fact approach means that, say the US and the UK, myself and yourself as lawyers, probably play a bit more of a central role in establishing the facts, and shaping the client’s case on which judges in court, certainly in England, largely rely on rather than inquire extensively independently.  Whereas in civil jurisdictions, it’s the judges that probably play a more central role, investigators of and establishers of facts and thereby apply relevant legal codes, but I think what’s particularly different, it’s interesting is what you alluded to at the end there is perhaps surprising to some clients is the difference is even between the two common law systems of the US and England, let alone between the US and sort of the civil code systems.  So I mean, for starters, we don’t have a written constitution that you guys have, there are sometimes stark differences, which then can and should influence a client’s approach to a dispute, I mean the strategy adopted, and even in some cases, whether to litigate and push the button at all.

Schmidt
So let me make sure I understand this.  If we’re really comparing three systems, the Continental European system of civil law, the English common law and the US, which is in large part common law, and we’re sort of measuring the adversarial nature both in the sense of how the litigation is conducted as well as the tone and tenor of the litigation that each would be ranked by the US most adversarial, perhaps the UK second, and the civil European system third.  Is that a correct assessment?

Khoury
Yeah, exactly.  So obviously, both England and the US are common law, but you know, more recent history US moved away from the general overarching exact common law system that we currently still have, and as you said, you apply a layer of a federal system and a constitution to that common law system, which we don’t have, and then you’ve got the civil law system of Europe, minus countries like Ireland, which is a much more codified, sort of rigid, if that’s the right word, form of rules and laws.

Schmidt
Do you have views on whether this sliding scale of adversarial nature of litigation has benefits or delivers a more complete package of justice if I could use that word.

Khoury
Yeah, I think they’re definitely advantages and disadvantages to both approaches.  Your listeners and you won’t be surprised to hear, I think both in terms of the litigation processes, but also the effect of how parties carry out business, so even outside of the court process, the system of courts, and the legal system has an effect.  So for example, civil law jurisdictions tend to have more sophisticated models and provisions for contracts with provisions prescribed in law, whereas freedom of contract, for example, is a fundamental principle in common law jurisdictions.  So that’s a key difference, and perhaps I would say for the business minded, the more commercial is more of an advantage in the common law system.  Furthermore, that the adaptability and fluidity of the common law is probably I’d say its single biggest advantage over the civil system.  It’s the system better equipped generally with addressing developments, whether it be in business, and commerce, and of course in social changes.  Largely ‘cause it’s less reliant on legislative law making, you don’t have to wait for the process to change or for law to be passed in order to evolve, but the flip side of that, of course, is that civil law provides more certainty as a consequence, the laws are defined, they’re in detail, and civil law proceedings probably fair to say, tend to be more streamlined and efficient compared to our respective kind of common law systems, I think that’s probably a fair assessment.

Schmidt
Well, that’s very interesting.  One part of your answer that I think is fascinating, is the freedom of contract concept, where in the US we have a great deal of freedom of contract, the exceptions being, of course, certain consumer contracts have to have prescribed language, and then obviously insurance contracts, you can’t just write an insurance policy on your own, you have to be an insurer and write those contracts in, but those are the relatively narrow exceptions to the freedom of contract and the civil law system is much more regulated in that sense.  Is that what you’re saying? 

Khoury
Yeah, I think probably a good summary is to say that less is implied in our contracts than maybe over the civil system in the sense that you can pretty much put in whatever you want subject to, as you said, those kind of exceptions, and if you don’t put in those things, then there’s a kind of a phrase here that the court seldomly interferes in a bad bargain, so it’s kind of up to two grown-ups to decide for themselves what the deal is, and whilst there are things that are implied, not as much I would say is on the continent or civil systems.

Schmidt
I want to go back to your question about the efficiencies and the timeline for litigation being shorter, if it is less adversarial in all senses, what’s the standard expected timeline for litigation to be concluded from the start to finish at least before you get to an appellate level, if it just says pretty standard business dispute, say in London court.

Khoury
I think typically, from issuing serving your claim form, issuing it in court, and serving your claim form, and then the particulars, we probably would expect as much as, I mean, we’re talking about major big commercial disputes, of course, not sort of smaller amounts, so anything in the millions plus, we would normally say to a client, your expectation is you’re not gonna get to try and in essence sort of 18 months to two years, and that would be if things go according to plan, if you like, because there’s a process in which largely like in the US various hurdles have to be overcome with that, be disclosure, stroke discovery, witness statements, etc.  So I think typically we tend to prepare clients for about 18 months to two years before seeing trial.

Schmidt
So I think that’s comparable to a business dispute in the US, ‘cause I think my estimate would be the same, but I’m gathering that given the adversarial nature, that period of time, there’d be a lot more activity on the US side than there would on the UK, which is probably where we should go next in this conversation, which is what happens during that 18 months in a more adversarial system, versus a less adversarial system.

Khoury
I mean in terms of, you know, preparation of witnesses is probably the main difference.  When you get to trial in European systems, they don’t have typically the same cross examination of witnesses, that tends to be left to judges, but that’s sort of, if you like the end, the upshot of what you were asking about that happened before, and I think the main difference is if we take sort of the process of what you call discovery and what we call disclosure is largely a chunk of the preparation, and we obviously share similar requirements, and then when I say we, I’m comparing the US and the UK as opposed to sort of the civil systems, where we have similar requirements, share documents and you know share the information about what exists, and what’s in our control, and both jurisdictions I think fair to say, can be extensive and expensive, and compared to a civil system that largely doesn’t exist there, you don’t have that extensive disclosure, stroke discovery obligations where parties have to reveal and swap documents of that nature, but I think, crucially, the US sort of discovery includes pretrial exchange, not just of documents, and I think this is probably question more for you than for me, but also understand, it’s of all information in the form of depositions, and potential witness statements, and I think, you know, we certainly don’t have that in England and Wales, parties on the whole are only really permitted to seek evidence for use of trial, and not as part of a disclosure exercise.  There is not an opportunity to cross examine witnesses in England until you get to trial, and as such we’ve got no opportunity to explore, under oath, what a potential witness may say under cross examination, when called to give direct evidence, and therefore again, that also limits the potentially the investigation further of what documents may exist through that process.

Schmidt
So perhaps, I can recap what you’re saying by giving a quick summary of the US process, in both state and federal court.  So initial disclosures are due usually at the outset of the case, particularly in federal court, but they’re very, very limited from each side, and then the first thing that usually happens is extensive document requests from either side, everyone wants to see every email, text message, all of the file, everything, and that takes usually a couple months, and now involves third party vendors, and searches for E discovery and so forth, and then the next thing that happens once you have the documents, you’ve digested them, then the process moves to depositions, and the depositions could be anywhere from two or three to, you know, 20 or so and the, but the biggest case I’ve ever had, I think we took 30 depositions per side, I think in that case, and it just went on and on, and you know, the depositions particularly are not just designed to learn the facts, but to set up this witness, to call it trial and to box them in on their testimony, so you can impeach them with contradictory prior deposition testimony, but as I’m hearing you say, that process just does not exist, and by that process I mean deposing someone for the purpose of hearing their story and then being prepared if they’re called as a witness at trial, or if you want to call them as a witness at trial.

Khoury
Yeah, absolutely, I mean that is a fundamental difference, so in England and Wales, witness statements are prepared in exchange before trial.

Schmidt
So what’s a witness statement?  Can you put a finer point on that? 

Khoury
Yeah, so a witness statement is, so each party will have decided, at some point before serving on the other party, what we’re calling witness statements, who their witnesses at trial are going to be, and those are entirely meant to be witnesses of fact, so they’re not experts who will talk about any area, and also they’re meant to be providing evidence of only facts, so they are meant to be stripped out of any submissions or any legal arguments, and those are statements that lawyers prepare, subject to some very stringent rules, which recently I would say about a couple, two, three years ago, have been tightened in the sense that amongst other things, there is now a requirement for the statements to be largely as much as possible in the witnesses own words, so legal speak, and sort of lawyer cute drafting, is largely prohibited, which can provide some challenges to preparing statements.

Schmidt
So you have to be somewhat hands off, so, you want your witness to prepare something in your own words, but there’s a limit on how you can assist them.

Khoury
Absolutely.  Yeah.  I mean, what I particularly have in mind is something called a practice direction 57 AC, I think it is what was introduced, and they brought in three broad principles, which is that a witness statement should serve as written evidence of what a witness is going to say or could say at trial, and therefore should only contain evidence related to the matters within that witness’s personal knowledge, and what that means is, it shouldn’t be used, which was probably the case in years gone by, until we move towards this system, or this particular rule, is that they shouldn’t be used to make submission to argue the case, that’s left for the lawyers at trial, and it also extends to quite tight rules on what you can say in the statement.  So, for example, the classic difficulties that lawyers can get into is that they will show a client a document and say, you know, give your view on this, but of course often these disputes are litigated three, four years after the facts, and it is rare for a individual to remember in detail receiving that particular email in the middle of a million other emails, and what that email said, and what he felt about it, or she felt about it, and what they may have thought at the time, so in previous years, the approach by lawyers was to put that email before the client and effectively take the clients witness testimony and put the best possible presentation of that document in the witness statement. That’s prohibited now because, amongst other things, the witness needs to say whether that was within their personal knowledge, or whether they were prompted, or reminded of the document by the lawyer, which, as you can imagine, is a very stark difference from what the rules used to be like, but also I assume quite different than what your approach is.

Schmidt
Yeah, very stark from our approach.  I mean, we work extensively with witnesses at all stages of the proceedings, preparing them for their deposition, preparing them if they’re going to sign a declaration in support of a written motion, and certainly preparing them when it’s time to testify at trial, and I guess the phrase comes to mind of whether you put words in the mouth of the witness, but you certainly refresh their recollection as to the main themes of the case that, you know, the companies position and what they wrote.  That’s a big part of what US lawyers do, so it’s surprising to think about that being off limits, under some rules of how you operate.

Khoury
Yeah, I think the way to look at it is we similarly spend a lot of time and energy in its fundamental aspect of the case in terms of getting witness statements together, and reviewing the documents, and putting it, but I think the difference is there’s much more, probably transparency is the right word now, in terms of if you’ve done that, if you’ve reminded your client or a witness of a document, as opposed to the other way round, they could remember of their own volition, then there are requirements for you to indicate that, and you can expect that they are going to be cross examined on that in quite aggressive terms if they haven’t.  So classically, you know, someone in their statement might say that they remember how they felt, and what their email said from six years ago, and when it comes to cross examination, the other side will do their best to say that that beggars belief and actually, you know, the reality is your lawyer reminded you of it, because they reviewed your disclosure or their disclosure and you failed to notify the court that that was the case, i.e., your memory of it is not contemporaneous, it is after the event, and so it’s a bit more nuancing.  It still requires a lot of work.  All the steps that you mentioned, but with a lot more restrictions I think.

Schmidt
Well, let’s turn to another aspect of the differences between the jurisdictions, and how cases are determined, and I’m speaking here of jury trials in civil cases.  I’ve had a lot of conversations with lawyers around the world, and this is a recurring theme, so, can you talk about the expectations of companies outside the US and their reactions when they discovered that a multi-million dollar, highly complex piece of commercial litigation is going to be decided by 12 people off the street.

Khoury
Fair to say, a degree of nervousness to put it mildly.  The starting point to make clear is you probably, and many of your listeners may know, is that jury trials in England and Wales are largely limited to criminal cases.  The vast majority of civil cases tried in court don’t have juries other than maybe, say, defamation trials.  They’re the main exceptions that come to mind.  Most often, a judge hears them on their own, deciding them by finding facts, applying the relevant law, there may be argument presented about the facts, and about what the law actually is, but ultimately the system is when the arguments finished, the judge will give a reasoned judgement, and not in anyone else’s hands, you can sometimes be quite good at gauging where the judge is with you over a process of a long trial, so in that sense, there’s a bit more certainty, perhaps, there’s less room for sort of what I would say is erratic sort of rulings, and so clients perhaps are more prepared and happier to trust in that process and say, well, you know, you get the rub either way if the judge is with you, or not with you.  Whereas I think most clients I know would be very nervous about 12, if you’re like lay individuals, not because of anything in relation to their ability, but just more because, I mean if we take the sort of work that you and I do and you know majority of sort of Dorsey does is that we’re looking at sort of commercial disputes.  Often these cases will turn on technical arguments, involving interpretation of a contract or application of a precedent, not necessarily just principally, findings of facts, and whilst judges are certainly not infallible, the fact that they’re solely making the decision on such issues should, as I said earlier, lead to less erratic decisions overall and less variance in decisions overall, and that certainty, of course, is what businesses crave most is certainty, whether it be costs, or decisions, or results, so I think that’s probably what most clients nervousness and fears would be over a jury trial.

Schmidt
Well, again, just in contrast, one of the major strategic decisions that is considered in US commercial litigation is whether to waive jury trial, for all of those considerations, you have to decide is the jury going to be more likely to see things my way, or is the trial court judge, as we say trying the case to the bench, and so you just don’t have that discussion for the most part under your system, so very interesting contract.

Khoury
No, and do you need unanimity in that, I mean, do both parties have to agree to waive, or how does that work?

Schmidt
So each party can demand a jury trial based on the claims that are asserted, not every claim calls for a jury, you know, for example, equitable claims are decided by the bench, and the legal claims are decided by the jury, so we have this division between law and equity, certain statutory claims go to the bench or the jury, and so each side has a right to jury trial, if the pleadings and the causes of action trigger that right, and then at various points in time each side can waive jury, and so you’re also looking at what your adversary’s doing, whether they’re waiving jury or not, whether they’re inclined to waive jury, so there’s a lot of strategy that goes in bench versus jury and, you know, obviously jury is a much more expensive process, it’s a longer process than a bench trial, and so that plays in the consideration as well.  It’s probably a good segue to our next topic that I’d like to tackle, which is litigation cost.  You can’t really talk about complex commercial litigation without talking about costs, which affects the bottom line, and so I’d like to explore a little bit of how the two jurisdictions, as well as any other jurisdictions that you have knowledge of, differ with respect to costs and fee shifting.

Khoury
The question, of course in England, is ultimately the discretion of the core, but there is the general rule, which is costs follow the event, and as you know that means loser pays winners costs.  That’s if you like probably the fundamental difference, I mean as I understand in America, there are examples in instances where costs can be claimed, but certainly not to that degree in terms of adverse costs.

Schmidt
Yes, it’s well, we have two concepts, cost and legal fees.  So costs are like court costs, filing fees, which are usually nominal compared to the legal fees, but you can’t shift legal fees unless it’s provided by contract or by statute, so some consumer statutes for example, have a provision for attorney fees for the prevailing party, and some of those are one way streets, only the consumer can recover fee, so if a company defeats a consumer claim they can’t recover their fee, so it’s what we call a one way street attorney fee provisions, and then you can provide for that also, in a commercial agreement that the prevailing party gets attorney fees, but absent those two, the general rule is, you can only recover your costs, which are nominal, and you can’t recover your legal fees.

Khoury
Yeah, so when I, and when we refer to costs in England, we mean all of those costs, so legal, attorney fees, court filing fees, even photocopying costs, expert fees, so cost is anything that you’ve incurred reasonably connected to the dispute.

Schmidt
So the conventional wisdom is that, that is one of the reasons there’s more litigation in the US than in the UK is because there’s greater pause for a company in the UK realizing the downside than there is in the US, particularly if there’s not a provision under statute or contract, you know, what’s the harm in filing a lawsuit and see what happens.  Do you agree with that conventional wisdom, or do you think that’s not necessarily the case? 

Khoury
I think overall I do, but I think it impacts both whether to issue a claim, and when to issue a claim, but also how you may conduct the claim.  So, I think overall the difference in our cost regime has a massive impact, so pre-action costs cannot be claimed until a party issues a claim in England, this means that until then, the risk of making claims is simply a party’s own cost, as it would be for the entirety of the claim, in the US.

Schmidt
So you don’t get pre filing cost to prepare for the litigation, you just get it from the moment the litigation is filed?

Khoury
Only if you don’t file.  Once a party does file and once the party presses the button and issues, those pre-action costs come into play, so then you look back…

Schmidt
Got it.

Khoury
…and then each side will be on the hook for the other parties costs should they lose the case, and this makes what you’re referring to a party think twice about issuing claim, but it also means, in my view, and experience, is it’s more likely that each party will explore pre-action stages before issuing, because one they know in that stage the risk is just their own costs and they also know, conversely, once they issue, these costs will come into play, so from my discussions with you in the past, my understanding is you do tend to have maybe more of an exploration of the pre-action stage in England than you would in the US, because there is a strong deterrent, if you like from being trigger happy if that’s the right phrase.  Certainly claims just to pressure an opponent into settling are less common in England because of that.  You know, you have to be fairly sure.  Yes, we do have claims that we issue similar to you where there’s protective claims, whether it be for limitation periods etc., but on the whole, the idea of just suing someone then talking is quite rare and certainly most lawyers who are fulfilling their duty to the court would discourage and very severely warn their client against doing that, they would advise them to explore the pre-action stage first.

Schmidt
Again, commonplace in the US to send not just the demand letter, but we filed this lawsuit, but we’re interested in settling the case, so trigger happy I think is probably a good word for that.  As we talk about costs, I think we have to just delve for a moment into the concept of contingency fees which drive US litigation extensively by giving law firms an economic interest in the outcome of litigation.  This ranges from personal injury cases, which are almost all contingency fee driven, you know, slip and falls, someone in an auto accident, to consumer class actions, to large ticket commercial litigation claims in which, you know, two companies are fighting over, you know, tens of millions of dollars.  A lot of those cases are brought on a contingency fee basis.  What is the current status in the UK on contingency fee cases and those variety of litigation matters?

Khoury
Yeah, so I mean, traditionally for years and years and years, the concept of what was referred to as champerty, it’s a variety of maintenance, so when the maintaining party contracts for a sale of the proceeds of an action or suit, which is what we’re talking about, really was strictly prohibited and for many years, contingency fee arrangements between a lawyer and a client were effectively unenforceable at common law because they were considered champertous.  However, the common law position moved on and was substantially amended by statute, and we have a variety of fee structuring, or fee arrangements that we can now enter into with clients.  Conditional fee arrangements where you can have a part of the fee paid by the client with an uplift determined on success of a case, which I think you certainly have from my understanding.

Schmidt
Yep.  Success fees.

Khoury
Yeah, exact, success fees, with an uplift that can be decided with the client, but also I think the biggest development is what you’re probably more referring to as contingency fees is what we call damages based agreements, DBAs and for years, and years, and years they were completely outlawed.  You could not share in the spoils if you like or in the return of your clients’ winnings, and those are now permitted, and that probably takes us a lot closer to a US style contingency fee agreement.  Litigation funding is also permitted and has been permitted for a while and there’s a buoyant market in the litigation funding, but that’s slightly different than obviously DBAs.  I think the DBAs is the biggest advancement and sort of stark difference in years gone by, but having said that, again from what we’ve discussed in the past, my understanding is that we’re still fairly limited in our use of DBAs, whereas I think contingency fees, etc. as you alluded to a minute ago, it’s much more popular and much more common in your cases in the US I think it’s fair to say.

Schmidt
Yeah.  No, I think that’s true.  There are limits on it in the sense of certain, you know, ethics rules that require certain disclosures, and limits on percentages, and fundamental fairness with contingency fees, but there aren’t really limits on the types of cases, things of that nature.  Is the move toward what you call DBAs, also known as contingency fee cases, is there a lot of controversy surrounding that as to whether that’s going to result in the UK being more litigious?

Khoury
Not really, I mean, it’s been around for a few years now.  When it was introduced, and I remembered this very clearly at the time, is that there was this view that it’s going to change everything, we’re going to turn into a sort of US style approach litigation.

Schmidt
And not said in a flattering way of the US I assume.

Khoury
Well, I think in the sense that there might be more litigation, I think in that sense, in the sense that it will allow people to take up cases that otherwise they would be precluded from doing from lack of funds because they can’t pay their lawyers, whereas now, you know, if the lawyer takes the risk of a DBA then more cases can be brought.  My experience, that hasn’t been the case for a couple of reasons.  One is, at the time, although is no longer arguably the case because of a couple of cases that came out since, it used to be an all or nothing, so you couldn’t do a sort of hybrid model.  The lawyer had to accept nonpayment of all their fees, or just a standard retainer which obviously put off a lot of commercial law firms, ‘cause that’s 100% your fees on risk, so wasn’t taken up as much traditionally by law firms, but also even if a hybrid model is allowed, as arguably there is permissible now, where you can say have 50% your fees on the DBA etc., and the rest paid.  The reality is firms would not be very commercially minded if they were accepting DBAs, or agreeing to DBAs for bad cases.

Schmidt
Sure.  It has a gatekeeping component to it.

Khoury
Exactly, exactly.  So that should regulate the fact that it’s not going to necessarily increase litigation, because you’re not suddenly gonna get a wave of let’s try it and see kind of claims, ‘cause it’s obviously you know it’s a kind of no win, no fee, extreme DBA, so I think in that sense it hasn’t massively impacted the way things are proceeding.  Having said that, I do anticipate that they will, and generally the approach to litigation in England particularly is going to adapt and develop because I think amongst other things, the hourly rate might be something that increasingly will be called into question, and therefore the recovery of that, and I think the main reason why that continues to be a strong model, is because the court allows the recovery of it, and I think once the court moves away from it or limits it, and we’ve seen and as we’ve discussed in the US, it’s completely limited, then I think the structuring between lawyer and client will ultimately reflect that change.

Schmidt
Well, speaking of costs and what a dominant theme that is in managing litigation, it often drives parties that didn’t think they were going to be settling a case six months ago to decide no, actually we need to work this out and we need to figure out not a win-win situation, because neither side is necessarily happy with the result, but we need to stop spending money on litigation and figure out how to resolve this.  That’s a major part of US litigation to get a case into the procedural posture, and the strategic position to explore settlement so that you’ll get a favorable settlement.  How does what we call ADR, alternative dispute resolution work in the UK?

Khoury
Probably, this is 1 area where there’s maybe more similarities than differences, I think it’s probably fair to say that most commentators would accept the rise in mediation and has kind of been largely influenced from practices that have been going on for a while in the US, but mediation, which is an example of ADR in England is voluntarily in confidential process.  I suspect largely like it is in America, although perhaps maybe different than America is the court is very vocal and forceful about encouraging the parties to try it, and that includes cost sanctions, I mean there’s cases that are famous for winning parties not recovering their costs because, you know, earlier on in the dispute, they were deemed to unreasonably refuse the offer of mediation, but these can happen at any time mediation, and a lot of cases settle well down the line rather than early on, particularly after disclosure of witness statements are exchanged and often actually even at the eve trial, and I don’t know if that’s difference in terms of timing, but I think if it is, one of the reasons possibly is going back to your point about costs, is that the spectrum of costs consequences as we refer to them, looms quite large kind of in the minds of every litigator in England.  The idea that what are the consequences of taking up a bad or good point, or losing a point weighs heavily in English litigation.

Schmidt
I can see how it’s all interrelated.

Khoury
Yeah, exactly.  So I think you were alluding the fact that you put all the pressure in to try and force a settlement.  Well, we certainly adopt the same approach ‘cause that’s, you know, sort of the obvious tactic, but I think the difference is, we have to be quite careful about what we do in the lead up to that because if I have 10 fantastic points, or if I have 10 pressure points, five of which are not fantastic legally, but are a wonderful pressure point, I may still not choose to adopt them, because there may be cost consequences, whereas in some ways, I guess there’s less to lose in the US because, you know, if you win on these points or lose on these points, there are no cost consequences, so I think that then subsequently has an effect come mediation, and I think, you know, ultimately whether a case settles or not, the issue of costs, and whether that’s factored into a settlement offer, i.e. global, whether it includes your costs or not, tends to be a large point of debate, or a large point of difference between the parties, and sometimes in a quite surprising manner when you think you’re almost close on all the other issues, just you differ on costs.

Schmidt
Well, that’s certainly the case in the US, although in those instances where there’s no attorney fee provision, either by contract or statute, you also have a situation that sometimes occurs where one side knows that, and they know the other side is not able to keep up with the litigation costs, and so there’s sort of a war of attrition, of let’s keep this going, we’ll eventually grind them down, and that sometimes happens, so cost drives so much, you know, as the saying goes, follow the dollar, and here we’re talking about the dollar relating to litigation expenses, and it tells a lot about how litigation is handled, and sort of the economics of litigating these cases.  Well, I think that’s about all the time we have to do our comparison of litigation regimes in the US and in Europe, but keeping with our same theme of your international experience and background, I want to step away from talking about legal issues, but keep a discussion going on how your experience living at various places around the world as well as I suppose, having a international practice, and certainly friends around the world, and contacts around the world impacts you in terms of your cultures, your ideas, your approach to life, your view of this increasingly complex, and in many ways, scary world that we live in.  Can you give us a, sort of a biographical sketch, but culminating in who you are today as a person? 

Khoury
Yeah, sure, I was born in London, but I grew up in Lagos in Nigeria, before returning here for school in university, which is maybe slightly less usual, but also my parents are British Palestinians, and I grew up speaking Arabic to them around the house, but also learning English with them at home, and also from a wonderful Indian teacher in Africa, which brings another layer of sort of cultural diversity.  I spend a lot of time in other countries, including the Middle East, and the US, that brings with it obvious advantages such as, you know, the ability to speak the other languages, like Arabic, but I think for me the biggest influence it has had on me, is the cultural fluency it gives you, most obviously in the Middle East, because of what I’ve just referred to in terms of background, but also elsewhere.  My parents themselves lived in various countries, so we were always international, if you like, quote, unquote, in our mindset, my family, now including my sisters who live in the US and Spain respectively, are dotted around the world.  It doesn’t necessarily always make it easy, but I think it’s an advantage that’s been offered to me and I’m very privileged and love having, it helps with work and maybe explains the natural gravitation towards a more international practice that you’re mentioning and we’ve discussed, I mean really in summary, without sort of generalizing and I’ve got to be very careful to do so, because one can generalize about yourself as well.  I think it’s fair to say that it can require a slightly different mindset to deal with an English client or an English corporate, compared to US individual client or corporate, and then even more so to say, a Middle Eastern individual client or cooperate.  In summary, I think to me it’s sort of that similarity and the ease with different cultures certainly helps with this, no question.

Schmidt
Well, it certainly makes life more interesting than, you know, just having relationships with people in your own county, or your own community, having relationships with people around the world, and there are certain challenges, and crossing cultural barriers, but those challenges are always rewarding to achieve because you start learning different ideas, and exposure to different ways of doing things, and it helps you realize in one sense how small our world is, which is sort of how we began this conversation.

Khoury
Yeah, absolutely, and as you alluded to at the start, we saw for ourselves, both within each other and other people we met in Paris most recently, so I think that’s a very good example.

Schmidt
Well, with that, I think we are out of time for this episode.  This has been a very insightful conversation.  As I said at the outset, I enjoyed our time together in Paris, and I similarly valued this time to compare notes on our various experiences in international litigation.  Why don’t I give you the last word with a take away that you’d like our listeners to think about with respect to litigation in the US, again setting up the question, if you’re advising or talking on the phone with the prospective client that is in the UK, or is somewhere else in Europe, and they’ve been named on a major piece of litigation in California, or Florida, or New York, or Texas, or one of the other US jurisdiction state or federal, what would you say be the one piece of advice you’d want them to take away from that conversation?

Khoury
Certainly compared to European litigation and disputes generally think hard about what US litigation means.  Cost is one thing, but these can be budgeted.  What is less quantifiable is the toll litigation takes on time and energy of you and your business, whether that be preparing for depositions, or the discovery process, all the way to process of jury selection.

Schmidt
Well, thanks again Aymen for being here on the show, and I’ve really enjoyed this conversation.  With that, I’d like to thank you for being here and thank our listeners for tuning in.  As always, I’m indebted to the extraordinary team at Dorsey for making this podcast and episode possible.  For more resources on this and other litigation risk, go to litigationrisk.com, where more information can be found, including a book on managing litigation risks, written by yours truly.  Until next time, my friends, this is yet another reminder that there are a lot of sharks swimming out there in the murky waters, so swim safely.

Voiceover
This podcast is not legal advice and does not establish an attorney-client relationship or create any duty of Dorsey and Whitney LLP for those appearing in this podcast to anyone. Although we try to assure that the content of this podcast is accurate, comprehensive and reflects current legal developments, we do not warrant or guarantee those things. The opinions expressed in this podcast are the opinions of those appearing in the podcast only and not those of Dorsey and Whitney. This podcast is considered attorney advertising under the applicable rules of certain states.