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Class actions, D&O insurance scrutiny, ESG litigation, cyber- attacks and crypto regulation the top dispute resolution areas to watch in 2022

27 January 2022 | Australia, Asia Pacific
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Experts from Herbert Smith Freehills’ market-leading Dispute Resolution practice have shared their predictions for 2022, outlining some of the key issues and opportunities for Australian businesses and regulators this year. 

Head of the firm’s Disputes practice in Australia Anna Sutherland said: “These predictions highlight many of the issues that are at the top of corporate Australia’s agenda. ESG in particular is creating a range of opportunities and challenges for our clients, as is the evolving regulatory landscape and, of course, the pandemic.”

The top predictions include:

Another busy year of Class Actions – 2021 saw increasing frequency of class actions filings, and multiple claims being brought, and that won’t slow down. Last year was also dominated by policy and legislative debate, which will continue well into 2022. Another area to watch this year is the impending introduction of a state-based class action regime in Western Australia.

Value of Directors’ & Officers Insurance scrutinised – There should be some stabilisation in the pricing and availability of D&O insurance as new insurance capital enters the market. This stabilisation may be assisted by recent legislative reforms affecting the litigation funding market, assuming those reforms pass through the Senate. Regardless, we expect policyholders to continue to scrutinise the value offered by their D&O insurance.

Increased ESG litigation – Climate litigation in Australia is rapidly increasing, and this year experts expect to see more litigation regarding the accuracy and feasibility of companies’ ESG disclosures, including in relation to net zero emissions targets. In addition to energy and resources companies, which have traditionally been the focus of ESG litigation, other sectors including the financial services sector, will also be the focus of activists.

More cyber-attacks – Cyber-attacks are expected to increase in frequency and ferocity, leading to a rise in data litigation. Regulators have shown greater willingness to take action against businesses who fail to maintain adequate cyber systems, and this is likely to continue. While businesses might see themselves as the victim of a cyber-attack, they may still be held accountable for its impact on their customers. To minimise risk, businesses must be proactive in complying with their cybersecurity obligations.

Regulators tackle crypto – Cryptocurrencies and their regulation will continue to make headlines in 2022. Market manipulation, scams, intense volatility and systemic risks are prevalent in this rapidly growing asset class, all of which present challenges for businesses, consumers and regulators alike. “The question for regulators is whether to shoehorn crypto into existing financial regulatory frameworks or to design a new standalone regime. That's likely to be considered at length by parliament this year”, says Harry Edwards, partner and head of the firm’s Melbourne Disputes practice.

Improved governance leading to increased reports of misconduct – We expect to see a continued increase in the number and variety of reports of corporate misconduct due to improving governance standards, the widening obligations to report to regulators, more whistleblowing activity, and an increased focus on ESG. To keep pace with this trend, boards and senior executives should be focused on their internal reporting processes and culture to ensure significant issues are brought to the attention of senior officers.

Financial services regulation to focus on consumer harms – Under Joe Longo's chairmanship, ASIC has had a change in focus, moving away from its previous "Why not litigate?" stance. However, we still expect to see ASIC take action on issues where consumers have suffered harm, and remediation will be a big focus. It will be interesting to see just how much activity occurs in this space and also in competition enforcement.

Advancements in ‘green’ solutions and med-tech driving IP litigation – We expect to see greater patent litigation relating to environmental solutions and also to medical consumer technology — these areas deliver continued innovation as a result of companies’ increasing focus on ESG and the ongoing impact of Covid-19.

New sectors turn to arbitration – We expect to see an uptick in the use of arbitration in the technology sector, as well as other sectors such as consumer products and banking. We think businesses in these sectors will be attracted to a few features of the arbitration process, such as confidentiality and the enforceability of awards.

 

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