The Year Ahead Global Disputes Forecast 2023 The Year Ahead: Global Disputes Forecast 2023 Report

The Year Ahead

Uncertainty is the new certainty, as the economic cycle has replaced Covid-19 as the main driver of disputes. Our sixth annual report uncovers the implications these changes have for the global disputes landscape, drawing on insights from more than 600 senior lawyers at large corporations across the globe. Explore key disputes trends around environmental, social and governance issues, cybersecurity, post-M&A, tax and employment, and examine our detailed analysis of sectoral and region-specific developments, to prepare your organization for The Year Ahead.

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The Big Picture

Wider global trends are influencing the disputes landscape:

The economic cycle is now the main driver of disputes. With negative economic indicators and geopolitical tensions, the OECD predicts annual growth in the world economy of just 2.2% in 2023, well below historic trends.

Global trade has taken a knock as governments place greater value on security of supply, and deploy international trade and sanctions as a means to drive political objectives overseas.

New business models and new ways of working have placed corporations under strain. Many are renegotiating deals, forging new partnerships and divesting assets.

Key Resources

Download the report to learn more about the key trends and sectoral and region-specific developments to prepare your organization for The Year Ahead.

Global Disputes Forecast 2023

Economic uncertainty

Global trade shifts

Altered business models

82%

of respondents expect the number of disputes in 2023 to either stay the same or increase

of respondents expect a decrease in the number of disputes in 2023

17%

are fully or very confident in their organization's level of preparedness for litigation

22%

are fully or very confident in finding the right services for litigation or arbitration support

13%

Top disputes presenting risk in 2023

62%

Cybersecurity and Data

35%

Insurance

Key Issues

"Dealing with outdated technology is a huge concern. Legacy systems are a prime target for bad actors."

Head of Risk at TMT corporation, USD 10 billion+ revenue

Key trends

Insights by Sector & Region

Industrials, Manufacturing & Transportation

Energy, Mining & Infrastructure

Healthcare & Life Sciences

Technology, Media & Telecoms

Financial Institutions

70% 60% 50% 40% 30% 20% 10% 0%

Consumer Goods & Retail

The same level of disputes as 2022

Increase in disputes

Decrease in disputes

Prefer not to say

USA

Singapore

Brazil

70% 60% 50% 40% 30% 20% 10% 0%

The same level of disputes as 2022

Decrease in disputes

Prefer not to say

Increase in disputes

Sector

Region

Over half of our respondents said ESG disputes presented one of the top risks to their organizations in the coming year. Concerns over governance disputes overtook environmental disputes for the first time this year.

"Governance disputes start where there is lack of communication and lack of understanding between higher and lower management."

Legal Professional at TMT corporation, USD 10 billion+ revenue

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35%

Governance

31%

Environmental

12%

Social

As many of these disputes will end up in arbitration, or other specialist confidential mechanisms, it can make trends hard to analyze. Our survey asked respondents where they preferred to resolve contractual disputes. This revealed a clear preference for arbitration over the courts in business sale and purchase agreements.

Most commonly-used dispute resolution mechanisms

During the recent M&A boom, many deals were done at speed with limited due diligence. Terms will be scrutinised and many will look for legal answers, leading to disputes.

Domestic commercial contracts

Domestic business sale and purchase agreement

Cross-border commercial contact

Cross-border business sale and purchase agreement

70% 60% 50% 40% 30% 20% 10% 0%

Arbitration institution

Other

Courts

"Tax risk has been reshaped by a changing business environment, fiscal budgetary pressures, and more aggressive enforcement."

Chief Legal Officer at Consumer Goods & Retail corporation, USD 50 billion+ revenue

Marked increase in the value of tax disputes, a direction that we expect to continue this year. Digital transformation is also changing tax exposure and driving a rise in disputes. Changes to business and operating models are likely to affect organizations' tax exposure. The lack of clarity around the proper tax treatment of new technologies increases the likelihood of disputes. ESG considerations are playing an increasing role in the management and resolution of tax disputes. Advance tax rulings and negotiated settlements will continue to gain relevance in dispute resolution. Inherited tax controversy remains a major risk area as fast-tracked M&A processes can mean gaps in due diligence or in the understanding of the target's tax position, leading to potentially costly post-integration restructuring and subsequent investigations. Changes to international tax policy and the implementation of these reforms are a potential source of future disputes. Varying interpretations of international tax rules designed to maximize tax revenue locally are expected to be particularly problematic.

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We are seeing year-on-year increases in the number of tax disputes and audits, representing a significant challenge, and stretching tax resources to respond to wide-reaching policy change.

Key Trends

"Because of Brazilian culture, more than 30% of dismissed employees go to the courts with claims to increase the amounts received with the termination."

Brazilian-based Head of Compliance at TMT corporation, USD 500m+ revenue

Hybrid working looks different everywhere. Tensions between accommodating a desire for flexibility and establishing effective working relationships and culture are a potential breeding ground for employment disputes. Misclassification and related claims are an ongoing risk, as the gig economy grows and governments continue to adjust frameworks for recognizing employment relationships. Disputes relating to dismissals, layoffs and furloughs are likely to increase as more organizations look to reduce costs in the current economic climate.

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Increased employee mobility and hybrid working, together with the intense war for talent and economic climate, are key factors likely to influence employment disputes in the coming year.

Key Trends

Risk peaks for mid to large sized firms

with turnover within the USD 2 billion to USD 10 billion bracket

Cybersecurity and Data

ESG

Post-M&A

Tax

Employment

1 in 5 survey respondents

expect tax disputes to present one of the top risks to their organization next year

As with 2022, cybersecurity and data disputes topped the list of dispute types presenting a risk, with 62% of respondents citing this as a top concern. Cybersecurity incidents involve financial, operational and reputational damage, and they are becoming more frequent.

Attacks targeting non-personal data such as trade secrets and other commercial data. Attacks targeting control systems and critical infrastructure systems, such as power generation, water treatment and food processing facilities. Difficulty of recruiting and retaining suitably skilled security personnel in the current environment. Risk relating to physical access to buildings, disposal of paper records, or discussion of a corporation's details beyond the work environment.

Regarding governance disputes, respondents see the board as a key risk, worrying over its composition, quality, and experience. They have misgivings over remuneration structures and conflicts of interest. Many believe disputes can be prevented by a clear strategy, clear roles, and good systems and controls. Above all, they see good communication within the organization as the key to good decisions. Environmental disputes remain high on the radar. Greenwashing disputes are on the rise and are dominated by concerns over climate change. The number of climate change cases continues to rise, spreading from the US to other jurisdictions. Social disputes remain a risk. Many survey respondents see these disputes as predominantly around discrimination, particularly in the employment context.

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A rise in post-closing contractual disputes based on purchase price adjustments, representations and warranties, indemnities, pre-contractual disclosure and post-closing cooperation. Related tortious claims, which take various forms in different jurisdictions but have at their core a wrongful act against shareholders. A rise in distressed M&A, as the global economy slows. Many of these deals will eventually lead to disputes. Growth in the use of warranty and indemnity insurance. Coupled with high transaction volumes, this will lead to increased claims against these policies. Some jurisdictions have seen the growing popularity of clauses shifting antitrust risk in the deal; these may be effective, but where there is scope for uncertainty they will be subject to dispute.

Key Trends

Overall, do you expect to see the number of disputes in 2023 increase, decrease or stay the same as compared to this year (2022)?

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Learn more

58%

ESG

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To learn more about this trend, register for our upcoming Global Disputes Forecast webinar series

Key Trends

Download our full report

We invite you to join us for a series of webinars across cybersecurity, ESG, post-M&A, tax and employment that will provide a practical and actionable way forward in 2023.

Join our webinar series

To learn more about this trend, register for our upcoming Global Disputes Forecast webinar series

Read detailed industry sector and regional analysis in the report

Download our full report

Join our webinar series

Overall, do you expect to see the number of disputes in 2023 increase, decrease or stay the same as compared to this year (2022)?

Read detailed industry sector and regional analysis in the report

We invite you to join us for a series of webinars across cybersecurity, ESG, post-M&A, tax and employment that will provide a practical and actionable way forward in 2023.

Read detailed industry sector and regional analysis in the report

The same level of disputes as 2022

Decrease in disputes

Prefer not to say

Increase in disputes

70% 60% 50% 40% 30% 20% 10% 0%

Cybersecurity and Data

ESG

Post-M&A

Tax

Employment