Major UK companies are spending more on litigation than ever before because circusgold exam  of the stricter regulatory environment, with alternative fee arrangements taking a firm hold among many, a report has claimed.
The ninth annual Litigation Trends Survey by US law firm Fulbright & Jaworski showed that the percentage of UK companies spending more than $1m (£660,000) on legal disputes has steadily increased from 38% in 2010 to 46% in 2011 and 53% in 2012.
At $1.1m, the median litigation spend of UK respondents was at its highest since the survey began.
The results suggest that the increase in regulatory proceedings is a particular factor contributing to the growth in litigation spending.
In the UK in 2012, 72% of companies surveyed retained outside counsel for assistance in a regulatory investigation – a huge rise from 27% the previous year.
Fulbright surveyed almost 400 in-house lawyers across the globe, mainly general counsel,
pass it exam  split between public and private companies in a variety of sectors.
A quarter of those surveyed were based in the UK for companies with annual turnovers of at least $100m. Half of the UK respondents were employed by billion-dollar organisations.
A third of in-house counsel faced regulatory proceedings in the past 12 months and the same number expected an increase in the number of action brought against their company in the next year.
For the largest companies, there has been a significant surge of those who spend $10m or more on litigation to 33% of the sample – compared to just 19% last year. Sectors with significant spending include engineering and construction, energy, healthcare, insurance and manufacturing.
Despite increased litigation expenditure, the steady climb of alternative fee arrangements has stalled – although the UK usage remains relatively high at 63%. Notably, for smaller companies grossing less than $1m, only 13% used AFAs for more than half of external counsel billings in 2012 – down from 36% in 2011.
With such pressure on in-house counsel to keep down cost, respondents were further asked how effective various AFAs were. The survey showed that UK respondents preferring capped fees and blended rates (both 55%), followed by fixed fees and performance/rewards-based fees (both 45%). Only 9% of UK respondents reported using conditional fee arrangements.
However, every single UK respondent judged conditional fees as “effective” and 89% of companies of all sizes were satisfied with the outcomes when using AFAs. That is reflected in the figures on those who expect to increase their use of AFAs in the next 12 months – up to 42% from 29% in 2011.
Other stand-out findings included 18% of UK companies instructing outside counsel for help with a corruption or bribery probe and 32% of UK general counsel anticipating an increase in the number of legal disputes their employers will face in the next year – up from 20% in 2011.
While an overwhelming majority 86% of survey respondents had at least one claim brought against them in 2012 (up from 47% in 2011), 56% filed at least one claim themselves (up from 42% in 2011). Some 45% of UK respondents faced legal proceedings in excess of $20m – up from 25% the year before – showing a growing trend in high-value actions against UK companies, said the report.
In contrast, the number of UK companies which have brought high-value claims fell from 19% to 11%.
Lista Cannon, partner and co-chair of Fulbright’s international investigations practice group, said: “The financial crisis has meant that businesses of all sizes are confronted by a complex and widening landscape of increased regulatory activity.
“Pressure from regulators combined with the growing threat of whistleblower allegations continues to concern respondents of the Litigation Trends Survey. Unfortunately for them, this regulatory pressure is here to stay.”