The connect between hard times and litigation

You see it every time, yet whenever it happens, it catches people off-guard. Economic sluggishness has a habit of exerting pressure in systems, both professional and personal, as ties come under strain and misunderstandings blow up into the open.

Litigation cases spike regardless of the issue, and litigators capitalise on this phenomena. Often, this comes at a significant toll to the relationship that had exited hitherto.

In this economy, litigation comes as the price that society pays for “modernisation”. Litigators often fall victim to their own imaginations in this process. This is, after all, built into the system when they’re encouraged to write their exhaustive arguments, right from the preliminary expert meetings.

When there is disappointment in this process, there occurs a subsequent period where accusations and counter-accusations are traded, further elongating the process of judgement. Currently, we are going through such an environment, and I see this happen across a variety of industries and disciplines, as the “risk-off” mode that my colleagues often refer to in economic jargon manifests itself in the form of greater litigation.

These negative sentiments manifest itself in the form of law cases. It is not entirely curious at all that such a relationship exists. As one of the members of the profession, I have always argued for the necessity of the discipline and it is heartening to note that within the context of economic, business and its interplay with law, there has been a move towards greater clarity, both in onshore and offshore jurisdictions, civil and criminal alike.

Nonetheless, it is of concern that there appears to be a strong causal relationship that exists between the level of economic sluggishness and the growth of the legal profession. In hindsight, this may actually be an obvious link. Nonetheless my advice to clients has always been to take a deep breath during these times and find common ground.

While there are a number of alternative dispute resolution centres that exist in the country (and I have written at length about these), there is no substitute for positive sentiment. What Steven Pinker refers to as the “better angels” of our nature in another context, but one that is equally applicable here.

Ecosystem of trust

Dubai has been a city that has defied all convention from economists, social commentators and pundits alike to become one of the most well known and visited cities on the planet. Despite this staggering achievement, what is even more astonishing that it has managed to do so with the composition of its economy being dominated by both small and medium-sized enterprises (SMEs) and start-ups, in a backdrop of increasing population that has come from all over the world. At its base level, this continuous process happens because of the level of trust and confidence inbuilt into the system; for every one dispute that I have seen, there have been a multiple of positive stories in terms of joint ventures, agreements, settlements etc. This is not a variable to be taken lightly; in a macro sense, the difference between the development rate of nations boils down to the level of trust that the ecosystem builds within it. In a strong field of exemplary achievements, this is by far the most critical ingredient of success, and is one that I keep reminding my clients on a continuous basis.

My advice is always the same in times of crisis, take a deep breath and return to the process of first principles. The reasons why the partnership (whether business or personal) was conducted in the first place.

Often, this is the ingredient that has been lost, and its re-injection into the process resolves most of the issues. Litigation may sometimes be unavoidable, but it should be the endeavour of all litigators to avoid that outcome at all costs. That should be the primary duty of care, especially when economic conditions warrant otherwise.

(Nasser Malalla Ghanem is senior partner at NM Associates, which has a joint venture with GCP.)