US legal system 'worse than Russia'
A survey shows that European in-house lawyers would rather face litigation in China and Russia than in America

Michael Herman

Fear of the American legal system has created an atmosphere in which lawyers working for European businesses would prefer to face a major dispute in Russia or China than the US, a study has revealed.

A survey of 180 in-house counsel working in five European countries identified the US as the jurisdiction they were keenest to avoid, with 29 per cent naming it the country they were most concerned about facing a major dispute in.

The US attracted almost twice as many votes as Russia and China. Despite fears of political interference and corruption in their legal processes, both were named by just 16 per cent of in-house counsel as their most feared jurisdiction.

The survey, commissioned by Lovells, the international law firm, noted that “while in-house lawyers are relatively comfortable with managing disputes in their own countries, there is great concern regarding the unknowns in different markets”.

It said the US system, although less corrupt than most, is "filled with traps in which the inexperienced or uninformed may easily become caught”.

Marc Gottridge, Lovells’ US managing partner, said these traps include the complexity of the US federal system, with its "multiplicity of courts, prosecutors and regulators at state and federal levels" and the tradition of targeting corporations as well as individuals in criminal cases.

Although the survey found that businesses were most concerned about disputes with customers, suppliers and employers, the fear of clashing with regulators stands out as an emerging area of concern that will "keep lawyers awake at night”.

In particular, Lovells highlighted the aggressiveness of American prosecutors and their willingness to apply US laws overseas as another factor making European lawyers nervous.

Last week Ian Norris, a retired British businessman wanted on price-fixing charges in the US, secured an important victory in his fight against extradition at the House of Lords. But lawyers said American prosecutors were unlikely to be discouraged by this and would continue to pursue other businesses and executives they suspect of breaking its laws.

Joanna Wood, an extradition expert at Allen & Overy, said: “The risk of extradition in appropriate cases is still a real one and US prosecutors are unlikely to be deterred.”

Overall, the survey found European in-house lawyers indicated a trend towards more litigation with 38 per cent saying they had seen increasing numbers of disputes in the last 12 months compared to 14 per cent who reported a fall in numbers.

Despite widespread fears that Europe was moving more towards a more consumer-oriented litigation culture, less than a quarter (22 per cent) of European in-house counsel said they had been threatened with, or actually faced, a class action lawsuit.