UK Law and Practice Contributed by: Ben Morgan, Ali Sallaway, Matthew Bruce and Emily Knight, Freshfields
5.4 Litigation Risk Assessment Companies should assess the potential for claims by stakeholders and third parties at an early stage. There are risks of mass claims where large classes of individuals and/or businesses are affected during a crisis. Listed companies are particularly susceptible to such claims from shareholder and investor groups bringing class actions under specific provisions of the Financial Services and Markets Act 2000. Non-governmen- tal organisations (NGOs) and individual claimants are also increasingly relying on derivative actions and company legislation to establish liability for failure to comply with regulatory obligations. For example, the climate crisis has resulted in sev- eral claims being brought in English courts, such as ClientEarth’s application to bring a derivative action against directors of Shell Plc for failure to address climate change risks; however, these claims have been unsuccessful to date. If any litigation risk arises, organisations should consider a wide range of factors in consultation with legal advisers, including any stay of pro- ceedings pending regulatory investigations, set- tlement offers and remedial measures, the appli- cation of privilege, the preservation of potential evidence and third-party contribution claims. 5.5 Involvement of Lawyers Legal teams should be involved from the outset of pre-crisis planning to implement measures that minimise risks and provide an independ- ent perspective on crisis planning and response. Where an incident is international in nature, a lead counsel team of one firm and/or in one juris- diction may co-ordinate all legal teams to avoid potentially conflicting approaches, especially in relation to communications with regulators, con- fidentiality, privilege and litigation risks (see 3.5 External Advisory regarding privilege).
5.6 Documentation and Evidence Preservation Pre-crisis risk assessments should consist of mapping the location and storage architecture of critical information that may need to be pre- served during a crisis, as well as identifying risks to the preservation of information. Risk preven- tion measures should in turn facilitate the secu- rity of data, which can be achieved by consult- ing with legal counsel and data/cybersecurity experts. The required steps may include: • implementing security safeguards to preserve data; • contacting individuals that control data with appropriate document preservation warnings; • ensuring a central log of communications and documentation related to the crisis is immedi- ately captured and continually updated; and • providing guidance on appropriate document creation and communications during the crisis. Cross-border disputes raise additional issues of complexity and will likely require input from counsel and/or experts in other jurisdictions on document preservation. 5.7 Settlements There may be an opportunity to settle litigation at an early stage to limit the negative consequenc- es of a crisis. The shape of settlement arrange- ments will depend on the nature of the crisis, including the volume of claimants, the potential level of damages, the strength of defences and the legal costs. Where there are related regula- tory investigations and/or enforcement action, organisations often reach more favourable reso- lutions with enforcement agency investigations if they have co-operated voluntarily, and sector- specific regulators can enter into consensual arrangements to resolve enforcement action
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