An indicator of business maturity: the Lithuanian business dispute index is decreasing consistently

Last year, Lithuanian courts examined a record low number of business dispute cases – only 0.43 cases per company. This was the lowest value of the business dispute index, which has been calculated since 2010. In 2018, there were 0.45 cases per operating Lithuanian company.

Business dispute index statistics

Year Business dispute index
2010 – 1.14
2011 – 0.92
2012 – 0.77
2013 – 0.72
2014 – 0.69
2015 – 0.66
2016 – 0.67
2017 – 0.72
2018 – 0.45
2019 – 0.43

According to Jurgita Judickienė, attorney-at-law and managing partner at the Business Dispute Law Firm JUREX, the higher the business dispute index is, the more often businesses opt for settling their controversies in court. A low index shows that businesses prefer other dispute resolution methods, e.g. mediation, arbitration, amicable settlement, etc.

“The decreasing number of cases shows that businesses prefer focusing on the management of risks associated with disputes, i.e. that they pay more attention to litigation duration and related expenses, more eagerly and effectively use alternative dispute resolution methods and prefer avoiding disputes in order to retain a good reputation. The number of disputes also decreases thanks to dispute prevention, which includes properly drafted contracts and clearly worded case law rules both in respect of contract implementation and liability,” said Ms. Judickienė.

She noted that the decrease in the number of certain types of cases is also due to other reasons. For instance, some labour disputes are resolved according to the mandatory prejudicial procedure. If none of the parties goes to court in connection with a decision of the Labour Disputes Commission, the decision takes effect and becomes binding. Following entry into effect of the decision, any subsequent litigation in court related to the same labour dispute becomes impossible.

Not all businesses are eager to defend intellectual property rights because the court proceedings in such cases are lengthy and expensive, while any feasible financial benefits are far from immediate.
“In the past few years, we have been observing that parties put considerably more effort to resolve a dispute without going to court. Businesses are increasingly avoiding litigation “for the sake of litigation” and take their decisions to initiate any court proceedings based on lawyer recommendations on the prospects of a potential case. Furthermore, both our law firm and other attorneys-at-law in an increasing number of instances help customers to avoid litigation and resolve disputes at the negotiations stage or through mediation,” said Ms. Judickienė.

It should be noted that the number of cases has decreased in nearly all categories, with the exclusion of cases related to public procurement, competition and consumer rights.
According to Ms. Judickienė, the growth in the number of cases related to public procurement was due to several reasons: the stage of use of the support from the 2014–2020 EU structural funds is ending and the fact that Lithuania will receive considerably fewer EU funds for 2021–2027. This means that businesses are still trying to secure income from public contracts and are still willing to compete with other businesses for these contracts in court. Another reason is the fact that the process of inclusion of suppliers on the List of Unreliable Suppliers has gained pace in 2019: contracting authorities have started to more actively terminate contracts due to material breaches and include undertakings on the List of Unreliable Suppliers, which in many instances has caused disputes. The Supreme Court of Lithuania has been examining a high number of cases related to public procurement for several consecutive years now (more than 20 legal interpretations in cases related to public procurement are published yearly). This shows that public procurements are a priority for the State. The consistent case law of the court of cassation makes it clearer how specific instances of disputes related to public procurement will be viewed and businesses are therefore more eager and secure to go to court in order to have their rights defended.

Nevertheless, Lithuanian businesses litigate considerably more often compared to the other European Union countries. Data for the other countries for 2019 is not yet available due to the COVID-19 situation, but the results for 2018 show that Lithuania was the leader of litigation related to business disputes.

Business dispute index in 2018
Spain – 0.02
Italy – 0.03
France – 0.04
Hungary – 0.08
Estonia – 0.09
Lithuania – 0.45

“In Lithuania, despite the decreasing total number of business disputes, going to court to have a business controversy resolved remains a popular method. This is due to the fact that going to court in our country is relatively cheap, prompt and easy. Litigation in court in other European countries is more expensive, and the services of both attorneys-at-law and other experts are also pricier. Furthermore, in most foreign countries, the examination of cases in court is very slow, for which reason businesses prefer alternative methods of dispute resolution,” said Ms. Judickienė.

“With consideration of the technological advancements, it is also important to ensure the integration of artificial intelligence in court systems and find ways to make extrajudicial methods of dispute resolution (arbitration, mediation, amicable settlement) more accessible to businesses. The current COVID-19 situation, in which the majority of entities and institutions have to operate remotely, may give a positive boost in this direction,” noted Ms. Judickienė.

The business dispute index has been calculated by the Business Dispute Law Firm JUREX based on the statistical information provided by the National Courts Administration, Creditinfo Lietuva, arbitration courts operating in Lithuania, the State Labour Inspectorate, the Public Procurement Office and other institutions.

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