According to the initial findings of Corporate Disputes survey commissioned by Dentons, dispute resolution is having an increasingly important impact on businesses in Poland. However, despite an increased volume of litigation, only half of Polish businesses have a strategy in place to manage litigation risk and take full advantage of the available dispute resolution options.
The Corporate Disputes survey was commissioned by Dentons and carried out by ICAN Institute and Harvard Business Review Polska. It identifies current trends in litigation and arbitration in Poland, including the kinds and number of cases, the dispute resolution methods and the business impact of the disputes.
Disputes are on the rise
A quarter of the executives surveyed say disputes are on the rise in their sector, while a fifth also see a rise in their own companies. Overall, 25% of the businesses experienced between three and nine disputes, one third had between 10 and 25 disputes, and 20% had more than 26 disputes. Disputes are much more frequent in the services industry than in the manufacturing sector.
According to respondents, the increase in disputes can be attributed mainly to the following factors:
Increasing awareness among both institutional and individual customers, who are better educated, read their contracts more carefully and are more eager to assert their rights;
The work of customer protection institutions, such as the consumer ombudsman, the Office for Protection of Competition and Consumers (UOKiK) or consumer associations;
The growing number of specialized law firms active in the sectors that are most vulnerable to litigation, such as tort law firms in the insurance sector or class action law firms in consumer cases.
Wojciech Kozłowski, Partner with Dentons Warsaw and co-head of Dispute Resolution Poland and of Dispute Resolution Europe commented, "The survey shows increasing specialization in disputes within a given area of business, confirming a trend we observed ourselves quite some time ago. For example, in response to increased client demand for construction litigation, Dentons invested in dedicated team of construction industry litigators last year."
Biggest litigation threats
Damages or breach of contract claims are the most feared disputes for a third of the executives surveyed, as are cases involving default or unfair competition claims. These kinds of disputes are also the most frequent. Businesses with a bigger caseload see a threat from disputes involving property interests, IP and title to shares.
Dispute resolution strategy
Nearly two thirds of executives (62%) are aware that success in litigation depends on building a robust case, developing litigation scenarios and analysing related risks. Despite such high awareness, 48% of the surveyed companies do not have any such dispute resolution strategy in place. While 91% of the companies consider financial aspects and 62% consider reputational losses, only 15% analyse the risk of a case lost.
"Even though decision-makers always have concerns about involving their firms in contentious matters, a skilful use of available litigation tools and, above all, appropriate preparations even before the litigation starts can not only make it much easier to pursue claims, but also provide an important instrument for building your competitive advantage," says Patrick Radzimierski, Partner and co-head of Dispute Resolution Poland.
A litigation management strategy can provide an effective prevention tool against corporate crime as well. Of the companies surveyed, one third claim they rarely get involved in criminal proceedings when their interests are infringed. If they do, the cases usually involve customers failing to pay (11%), crimes (9%) and theft (9%).
Partner Agnieszka Wardak, Head of Criminal Proceedings and Internal Investigations at Dentons’ Warsaw office, explains, "Criminal actions against firms or their management, owners or employees, are not a popular topic of conversation, although in reality they occur quite often. These cases range widely from obtaining merchandise without payment, stealing goods or proprietary know-how and engaging in asset-stripping in order to harm creditors to counterfeiting products, etc. A well-designed strategy and a skilful use of protections afforded by criminal procedures are tools which businesses can use not only to recover their losses but also to prevent dishonest conduct."
When developing a dispute resolution strategy, companies should also consider preventative actions as well as alternative dispute resolution (ADR) methods to avoid litigation. Two thirds of the businesses surveyed have dispute prevention processes in place. 69% of them have introduced risk prevention tools and internal procedures. 73% hold periodic procedure reviews and compliance audits while 57% check their suppliers, distributors and other business partners for anti-corruption compliance or conflicts of interest. Policies and procedures regulating compliance, responses to law enforcement actions and criminal risk analysis for management are more frequent among companies with bigger caseloads.
"Despite more and more talk about alternative dispute resolution methods, we are still far behind the US market, where most cases end in settlement. On the other hand, we do see an increasingly important role of efforts to prevent litigation by analysing the market position and credit standing of business partners, by monitoring industry-specific regulations and case law, and by relying on insurance, such as in the construction industry," says Partner Katarzyna Bilewska, Head of Corporate Disputes at Dentons’ Warsaw office.
Dentons commissioned the ICAN Institute and Harvard Business Review Polska to conduct a survey among more than 200 executives, CLOs and business owners in Poland in March and April this year. Quantitative results were verified by means of an in-depth qualitative analysis based on interviews with business representatives.