Posted on the 17th January 2017

Interest rate swap mis selling

Mark Beaumont looks at the need to address the adoption of new technologies in dispute resolution, in an article that appeared in Recovery magazine’s Winter 2016 edition.

“Technology is the collection of techniques, skills, methods and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.”

The focus on technology in this issue of RECOVERY has me considering the human problem with innovation: We are, for the most part, an inherently conservative species.

We’ve evolved over a long period in challenging environments where there are both advantages and potentially high costs to being an early adopter of new technologies. On the one hand, being at the forefront of change can bring real benefits, but on the other hand, adopting an innovative way of doing something could put you in harm’s way (or at least make you look foolish!).

Innovation is a problem in insolvency dispute resolution because lawyers tend to be more conservative than the average person. New ideas are unlikely to be rapidly adopted by lawyers.

Do you recall the legal communities’ attitude towards email in the mid-1990’s? I think it’s fair to say that the concept was not immediately embraced by solicitors, but as clients became more and more wedded to email, their lawyers had no choice but to eventually catch up.

Now we see the same resistance to change when we look at other new developments, such as technology assisted document review, the use of damages based agreements (DBAs) and utilisation of third party litigation funding to support claims.

Document review has traditionally been a big employer of junior lawyers, but as advances in communications and storage have led to ever larger amounts of data, so technology has offered solutions for managing such volumes. Maintenance of the status quo in this area is simply not possible and yet we still see a conservative mind-set at work: How quickly are weaknesses in the new technology highlighted, whilst simultaneously ignoring obvious issues with the traditional model? Change will only come as clients push for more efficient and cost-effective solutions.

DBAs were introduced in 2013 as an innovation in the funding of litigation, but they have not been widely adopted and many lawyers say “DBAs create a conflict”. This is an attractive argument for lawyers, in that it’s both true and it justifies a maintenance of the status quo. However, the inherent truth of the statement is also what undermines it. Of course DBAs create a conflict, but only because all retainer agreements create a conflict…

A retainer that pays the lawyers for every hour of work they do creates a conflict. Of course, professionalism and integrity mean that lawyers would never drag a case out or do more hours than necessary when paid in this fashion. It seems to me that this professionalism could be extended to DBAs too!

I should just say, there are arguments both for and against DBAs, but I don’t buy the conflicts one for one second. Imagine we’d used contingency fees in litigation for the last two hundred years, and then Lord Justice Jackson came along and said: “instead of aligning the interests of lawyers and their clients, we’re going to move to a new system whereby clients pay their lawyers for every hour of work, whether they win, lose or draw”. I can imagine a legal community up in arms over the change. It seems to me that the real objection here is simply an aversion to any new ways of working.

The final of area we’ll consider is third party litigation funding. In the last two years alone we’ve seen multiple new providers, radical new pricing structures, far more willingness to embrace risk and generally a vast improvement in both speed of delivery and ease of working. Because much of this change has happened in a relatively short space of time, there is a legacy of experience in the market that fails to match the experience of today. This means that insolvency practitioners and their legal advisers are sometimes making choices without knowing the full range of options available to them, to the detriment of all stakeholders. Only when practitioners seek to understand all the options available to them can they make weigh up the genuine pros and cons of all, and make fully informed decisions.

I am of course fully aware that new ideas, ways of working and technologies always come with pros and cons. I am not disputing this. I’m simply saying that exactly the same applies to our current practices too.
Take a current hot topic in technology: driverless cars. Conversation quickly turns to “what if they go wrong?”. That’s a perfectly reasonable question, but only if we also look at what goes wrong with cars driven by people: Since 1951 the number of people injured or killed on British roads is 18 million. Will driverless cars be perfect? No they won’t. But that shouldn’t be the question.

Let’s not let perfection be the enemy of good. My hope is that the rapid advance of technology in our lifetime is matched by an open-mindedness to consider new choices alongside old choices, not on time-served but purely on merit.