In this article, our partners give their predictions on some of the key litigation and disputes trends for 2025. Please contact us or reach out to your usual Pallas relationship partner if you would like further information on any of these topics or if you have any questions.
Prediction 1:
2025 will be the make-or-break year for the “shareholder rule” (Fiona Huntriss)
2025 should see a “big decision” on the existence (and, potentially, scope) of the so-called “shareholder rule”, i.e. the rule/principle that, it’s been said, prevents a company from withholding privileged documents from its shareholders, at least in certain circumstances.
After conflicting decisions across common law jurisdictions, the Privy Council is currently due to hear the issue in early March 2025 (in Jardine v Oasis). And the UK Supreme Court’s NY to-do list will include considering whether to take a leapfrog appeal of Picken J’s recent judgment in Aabar v Glencore. The decisions went opposite ways, so something has to give…
As well as of interest to all privilege experts, this is practically important stuff. There is real value to shareholders in accessing this material – and to companies in withholding it – particularly with increasing investor and shareholder activism, appraisal rights, and securities litigation.
Prediction 2:
2025 will see a considerable amount of litigation over director duties and board oversight (Shireen Barday)
The incoming Trump administration is expected to impose limited regulation in a number of areas (and to rollback regulation in others). This reduced appetite for regulation likely will limit litigation initiated by the government. In addition, the conservative majority on the Supreme Court is expected to issue a growing number of business-friendly rulings.
As these trends develop, we expect directors to be left with newfound discretion on a range of issues, some of which were previously highly regulated. Left without a regulatory hook to pursue, where those decision turn out to be unfavourable or unprofitable for the underlying company, aggrieved stakeholders are likely to institute litigation to challenge board-level decisions.
How those challenges are adjudicated will focus on disclosure:
- Were the directors fully informed?
- Did they exercise the requisite amount of care based on the information they had?
- Were the risks of the actions taken adequately disclosed to the stakeholders who were entitled to such information?
Prediction 3:
Sanctions (Matt Getz)
This year is going to have some major developments on the sanctions front, with actions and decisions of importance to sanctioned individuals, anybody connected with Russia, and all the banks, accountants, lawyers and corporates who have ever worked, or intended to work, with them.
- The Supreme Court will hear the appeal of NBT v Mints and will determine if all Russian companies should be considered controlled by Putin and thus sanctioned. In so doing, one hopes, it will clear up exactly what Parliament meant in importing a definition of control to sanctions legislation that came from a totally different set of laws (about who can acquire TV and radio licences!). If the Court grasps the nettle, there should be a lot more certainty for all companies doing sanctions due diligence and trying to work out if they can do a deal.
- The Supreme Court will also hear the Shvidler and Naumenko cases, about the government’s powers to designate people and to freeze assets connected to Russia. The Court will determine if the very broad powers granted to the government by Parliament in this field really all stack up. This is a highly important clash between civil liberties and national security/foreign policy, which ultimately has implications for everybody.
- There will be more high-profile criminal and civil enforcement of sanctions breaches. What we’ve had so far has been pretty small beer, but the National Crime Agency in particular is gearing up to bring further actions. There is expected to be at least one important case relating to evasion or circumvention of the Russia sanctions.
Prediction 4:
Whistleblowing in the Trump Administration (Josh Naftalis)
If 2024 was the year of the whistleblower, what will 2025 bring?
In January 2024, the U.S. Attorney’s Office for the Southern District of New York rolled out a pilot program that offers non-prosecution agreements to individuals who disclose corporate crime, with the U.S. Department of Justice (DOJ)’s Criminal Division and other U.S. Attorney’s Offices adopting similar programs throughout the year. In August, DOJ’s Criminal Division launched a pilot program that offers financial rewards to whistleblowers. And DOJ made amendments to its Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) and Evaluation of Corporate Compliance Programs (ECCP), also to encourage voluntary self-disclosure.
So what will all this mean in 2025? Will the Trump administration continue DOJ’s efforts to generate white-collar investigations and prosecutions, or will it rollback these initiatives?
The answer is that DOJ likely will stop promoting these programs at the pace we saw in 2024 and likely will amend them, as DOJ shifts its enforcement priorities away from corporate fraud. Whether the whistleblower pilot programs become permanent will probably depend on whether they bear fruit and attract headline grabbing matters. That still remains to be seen.
Prediction 5:
Enforcement action related to the “Consumer Duty” (Tracey Dovaston)
FCA Principle 12 or the “Consumer Duty” became fully operational in 2024 and imposed a new obligation on firms to “act to deliver good outcomes for retail customers”. It is not as “simple” as requiring firms to deliver good outcomes however as this Principle (unlike the other FCA Principles) cross-refers to another set of rules (the “cross-cutting rules” in PRIN 2A.2) which need to be breached in order for the FCA to establish a breach of Principle 12. These rules provide that firms must:
- act in good faith towards retail customers;
- avoid causing foreseeable harm to retail customers; and
- enable and support retail customers to pursue their financial objectives.
However, during 2024, the FCA has continued to publish summaries of its findings as it conducts reviews of firms’ compliance with the Consumer Duty principle and identified good and not so good practices. Deficiencies include (i) whether firms are acting on the Consumer Duty data being produced and identifying/remedying any issues (ii) customer experience and outcomes for vulnerable customers and (iii) over-reliance on certain types of data and process completion. The FCA has also highlighted its differing expectations depending on the size of the firm. Its Consumer Duty priorities for 2025 are set out in its December 2024 publication, highlighting 4 key areas:
- Embedding the Consumer Duty and raising standards, including 3 cross-cutting projects relating to:
-
-
-
- board/governing body reports and complaints and root cause analysis
- treatment of customers in vulnerable circumstances
- consumer support outcomes and supporting informed decision-making.
-
-
-
- Enhancing understanding of the price and value outcome
- Sector-specific priorities including in respect of consumer finance, payments and digital assets, consumer investments, general and life insurance and sustainable finance
- Realising the benefits of the Consumer Duty (to be published in Q2 2025).
So, will this be the year of a head-lining Consumer Duty enforcement action or is the new principle working to deter breaches?
Prediction 6:
A retreat from ever-expanding restructuring plan litigation (Nick Turvey)
Four years after their introduction, 2024 was a good year for creditor challenges to restructuring plans. Those successes, plus a more emboldened HMRC, have certainly contributed to a landscape of more wholesale challenges to restructuring plans. That, in turn, has led to more and more complex hearings: it is entirely feasible to imagine the possibility for multi-day fairness and valuation battles, perhaps with a day or two extra for the presentation of one (or more) alternative proposed plan.
It is predicted that for 2025, however, the Courts will push back against the ballooning of insolvency disputes. This may be through more active case management or through a deliberate focus on clarifying the areas of law prompting the most challenge, or both. But whatever the route chosen, Judges will likely be hesitant to watch a process designed for flexibility and certainty morph regularly into full-scale commercial litigation.
Prediction 7:
2025 will see further development of the Court’s approach to directors’ duties when a company is in financial difficulty (Neil Pigott)
Last year’s decision in BHS Group showed, on the relevant facts, just how significant a director’s liability could be for failing to comply with those duties.
With continuing post-Covid and elevated interest cost pressures on corporate balance sheets, the Court is very likely to scrutinise these duties further in 2025.
The UK Supreme Court’s 2022 decision in Sequana confirmed that a director’s duty to consider or act in the interests of the company’s creditors, as a whole, is engaged when the company is insolvent or bordering on insolvency (i.e., it is more probable than not) – not merely when there is the emergence of a risk. That duty involves balancing shareholders’ and creditors’ interests, on a spectrum with the latter’s becoming paramount as financial difficulties rise.
Open points for further clarification, however, include:
- when this directors’ duty is engaged, given how the case law qualifies the primacy of cashflow insolvency to include with present liabilities those arising in the “reasonably near future”.
- the approach to whether a director “knew or ought to have known” a company was insolvent or bordering on it.
- balancing conflicting shareholders’ and creditors’ interests with: (a) the possible “light at the end of the tunnel” during standstill negotiations; and (b) concerns for when insolvency “becomes inevitable”, to avoid any liability for wrongful or misfeasant trading.
2025 will likely see new factual permutations testing these and related points further.
Prediction 8:
2025 will see an increase of tech-related M&A disputes (Nelson Goh)
Everyday AI
Artificial intelligence (AI) came to the fore of public consciousness in November 2022 with the launch of ChatGPT. Although AI-driven features were very much a part of everyday technology – this led to the realisation of how much technology can enhance the way we live and work, and the inevitability of it all.
Post-2020 Dealmaking
From about the second half of 2020 – during the so-called Covid-19 M&A valuation boom – investors have been active in the tech space: healthtech, adtech, medtech, generative AI, agentic AI, and more. Indeed, in one report, KPMG notes that technology deals in the first half of 2024 made up about 70% of deal value.
Depending on the structure of the deal, in many cases, 2025 may see the end of earn-out periods, vesting schedules, non-competes, and the like. Overlay that with factors such as interest rates, new headwinds in the form of AI regulations, geopolitical tensions, buyer’s remorse, and the strength of certain deals may be tested.
The Road Ahead?
Every contract is unique. As such, parties to potential disputes would do well to obtain legal advice well in advance of any threatened litigation or arbitration, to mitigate the risk of a full-blown dispute but also in relation to strategy.
Attention should be paid to the dispute resolution clause, including the overall process, the forum, and the availability (and possibility) of injunctive relief, particularly where technology theft may be alleged.
Parties would also do well to keep a good record of any relevant evidence or consider working with forensics teams.
Prediction 9:
Greater Transparency of Enforcement Investigations (Tracey Dovaston)
One might have thought that, given the visceral and vocal reaction of industry and government, the proposed changes to the FCA’s Enforcement Guide to bring an increased focus, pace and transparency in its investigations first proposed in Consultation Paper 24/1 (otherwise dubbed the “name and shame” proposals) would have disappeared.
Instead, the proposals have again reared their ugly head in Consultation Paper 24/2, albeit in a somewhat paired back form, for example:
- Announcements may now occur at various points of the investigation (rather than at the outset when it is most likely that relevant facts and issues are not yet crystallised)
- Firms will have 10 business days to respond to potential public disclosures (instead of the one business day originally proposed)
- The FCA recognises that in some circumstances “an anonymised announcement would be sufficient” or it proposes a “confirmatory announcement” in circumstances where a firm or another regulator has previously announced an investigation (although just because an announcement is public does not make it “in the public interest”)
- The public interest test now specifically includes considering the impact of an announcement on the firm in question (Although this is an improvement, far more of the factors listed appear to be in favour of an announcement).
The consultation will close on 17 February and the FCA Board is expected to decide on the proposals during Q1 2025.
Whatever the strength of dissent, changes will likely be made that allows the FCA to make announcements in more circumstances than is permitted under the existing “exceptional circumstances” test.
Prediction 10:
What does a “greenwashing” claim mean for investors in 2025? (Kimmie Fearnside)
It is likely to mean exploring novel uses of tortious causes of action (to supplement statutory routes) to hold businesses to account for environmental misstatements particularly relating to their roadmap to net zero emissions.
Keep an eye out for the pending judgment in the Australasian Centre for Corporate Responsibility’s case against oil and gas public company Santos Ltd. Whilst the claims are pursued for misleading or deceptive conduct under the Australian Corporations Act and Australian consumer law, similar English law causes in fraud and misrepresentation could be formulated. ACCR argues that Santos made statements that materially misrepresented the environmental impact of its natural gas extraction, and disputes that Santos had a “clear and credible” plan to achieve net zero emissions by 2040 as set out in its 2020 Annual Report and other publications.
As the first ever challenge to the veracity of a company’s net zero emissions plan, the Federal Court’s assessment of how such plans are presented and justified will be a key learning for investors in other jurisdictions.
This is relevant as emissions reductions plans become more widely adopted (within mandatory regulatory regimes, and on a voluntary basis), leading shareholders to take a reputational – and ultimately financial – interest in challenging the accuracy of corporate disclosures.
Prediction 11:
A key year for consumer finance litigation (and compensation) (Fiona Huntriss)
The much-discussed litigation relating to motor finance commission heads to its final conclusion in early April 2025 (1-3 April 2025) before the UK Supreme Court. The UKSC will be considering the implications of both “fully secret” and “half secret” commissions, the Court of Appeal having found that (1) car dealers can owe various duties to consumers, (2) they can breach them in both the case of receiving a fully secret commission and the case of receiving a half secret commission, and (3) that can lead to the lender having liability to the consumer. (A half secret commission is where there is, for example, some mention of the possibility of commission, but not full or obvious detail.)
This has become a political hot potato, with the FCA encouraging the UKSC to take the appeal on an expedited basis, and now intervening into the proceedings. As reported last week, apparently the Treasury is also intervening – which (to my mind) raises some questions around the separation of powers.
In all events, the outcome of the UKSC proceedings is bound to have a much broader impact – both in terms of policy and the impact across other consumer finance sectors. That it’s coming at a critical time for group litigation before the English Courts makes it all the more fascinating.
