By James Dean


Fresh claims by top business chiefs that escalating litigation costs are hampering companies and hitting consumers across the globe have been dismissed as simplistic by UK City litigators.



The issue has resurfaced in a new report, Directors in the Dock - is business facing a liability crisis?, released by the world's biggest insurer, Lloyd's, this week.



Based on a survey of global business leaders, the report disclosed that most respondents thought US-style compensation culture had spread worldwide, with nearly 40% saying they expected to pass litigation costs on to consumers over the next three years.



Some 58% said they had increased their use of lawyers to manage litigation-related risks during the past three years, and 28% said the size of their company's in-house legal department had increased over the same period.



Sean McGovern, director and general counsel at Lloyd's, said: 'There's a strong perception that a compensation culture is being exported from the US. It's likely that most companies will have to ramp up their efforts in dealing with the shift.'



He added: 'The burden and threat of litigation is becoming greater.'



Around a third of survey respondents said both the number and size of lawsuits brought against their company had increased over the past three years.



Looking ahead to the next three years, two-thirds of respondents in Europe thought they would spend more time on litigation-related issues. Nearly half of respondents thought professional liability claims would exceed those seen during the dotcom crash.



Researchers quizzed 183 board-level executives - half of whom were chief executives, presidents or managing directors.



Graham Huntley, former president of the London Solicitors Litigation Association (LSLA) and partner at City firm Lovells, dismissed claims a US-style compensation culture had spread to the UK as 'an incorrect generalisation'.



Simon Davis, litigation partner at magic circle firm Clifford Chance, said: 'Given present market conditions... the appetite for litigation will naturally increase.'



Michael Burd, committee member of the LSLA and partner at City firm Lewis Silkin, said in-house teams would have grown anyway due to an increasing need for regulatory compliance rather than simply as a consequence of more litigation.



A Law Society spokesperson said: 'According to a report by the Better Regulation Task Force, [the] compensation culture is a myth.'