In Industry Insights

Anyone working in the legal sector will know that commercial disputes are part of corporate life for even the most successful businesses – but they can cause considerable damage when they’re written off.

Prior to the coronavirus pandemic, it was estimated that between £40 billion and £131 billion is written off each year by SMEs, because they don’t believe that there’s a cost-effective solution to resolve their disputes.

Worryingly, the situation is deteriorating further at the moment, as the pandemic drives increased tension between businesses and in supply chains – despite the fact that cashflow is more important than ever in the current economic environment and businesses can’t afford to write-off what their owed.

The problem

High upfront costs, uncertain risk, spiralling legal bills, and lengthy waits mean that many businesses reluctantly decide against pursuing valid claims, even if that means taking a substantial hit to their cashflow.

Even if the client wins, under the ‘traditional’ litigation model, they can expect to recover perhaps 50% of the amount claimed. They’re unlikely to recover all their costs and usually have to pay for all disbursements up front.

That can’t be right. Our job as lawyers is to be problem solvers. Pricing huge swathes of the SME market out of litigation does nobody any good.

The law firms in our network are painfully aware of these challenges, but finding a commercially viable solution has proved a step too far.

That leaves a huge gap in access to justice for SMEs and that’s why we’re committed to finding an innovative solution to unlock this market.

The challenge

Last year, we set ourselves the challenge of making risk-free dispute resolution accessible to law firms, to empower them to offer their SME clients a route to recovery, without the traditional litigation pain points.

The solution – innovate!

The resulting model, powered by Escalate, involves embedding teams of specialist litigators within law firms, effectively becoming their in-house commercial dispute resolution departments.

These teams are able to offer:

  • Robust and quick merits testing – the SME client gets to know whether their claim has good prospects within 48 hours, without charge
  • Fully funded and insured litigation – the client pays nothing upfront and takes no litigation risk
  • Contingency pricing – all successful cases result in the client keeping at least 70% of the damages
  • Prompt recovery – since there is no incentive to enter into protracted legal arguments, and defendants know the claimant is funded to trial, cases move much more swiftly to issue and settlement
  • Client protection – full SRA regulation and insurance
  • Business development – law firms can actively promote a wide range of valuable services (from simple bad debts to complex litigation) to existing commercial clients, without going to the expense of hiring a new team.

When putting this together it became clear that it mirrors the ‘concession’ model used in the retail sector.

We’re confident that this new approach has the potential to hugely benefit law firms and their clients who are dealing with cashflow problems and commercial disputes.  Working together, the legal profession has an opportunity to make a real difference during what is proving to be an exceptionally stressful time for SMEs.

It would be great to learn about other innovative solutions for law firms – contact us here with suggestions.

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