This article is written by Parth Chhatrala, Senior Legal Executive, Symphony Limited. In this article, the author mentions the concept of preventive petitions.

“…the parties agree that the non – prevailing party will bear the cost of expenses incurred towards litigation” well, this is a line which you all must be acquainted with. 

Introduction

Let us see how, in today’s world, the corporates are undergoing a shift in their approaches while handling the litigation troubles. 

There are three analytical approaches to handle litigation in my terms. 

1. The Traditional Approach;
2. The Pro-Active approach; and  
3. Preventive Litigation.

In the current research I will be closely presenting my study on the third i.e., more or less not so used term “Preventive Litigation”. The preventive litigation intends to prevent various issues like Bad Debts, Non – Compliances, bankruptcy, difference of opinion etc. into a legal battle. 

The corporates, irrespective of their size or nature of business no longer presume the litigation hurdles coming across their dividends and average return on investments. They either themselves or on advise of their legal cell, prefer to limit the litigations to the maximum extent possible even before there is a slightest chance of one. In other words, they do not and also cannot owing to cut-throat competition, afford to minimize their net profits especially when they are earning business but losing revenue in silly unwanted, niggling and annoying court cases. Whereas this not use to be the case earlier. 

Earlier, the in – house counsels of the company use to merely manage an ongoing litigation and ensuring that it does not create a hurdle on the smooth transition of a going concern. To simplify, business was given priority and to the maximum extent possible, legal implications were not given much weightage (but not neglected) in order to secure the business at the first place. 

It has been observed as a current matter of practice that, the corporate has always maintained a balance between the opportunity of business and chances of litigations. During the course of negotiations between the two prospective corporates willing to collaborate, give profound consideration of even slightest chances of litigation or disputes between them. 

History

Louis M. Brown 

The concept is not, as such, new to the fraternities of the legal society. However, the implementation of the same has been always moderate over the period of time depending upon the practitioners of law. Louis M. Brown in his work “The Law office – preventive Law Lab” throws some light on the subject of preventive litigation in the year 1870. He came out with the concept of “Cold” and “Hot” facts playing an important role in preventive litigation. Where Clod facts included court papers on record, invoices, supporting evidence etc. and hot facts included show-cause notices, legal notices, warning letters, defaults and non – compliances capable of curing within a certain time. This involved briefing the counsels about the facts before they become Hot or say while they are Cold, which have potential to become Hot. A reasonable foresight of future Legal Consequences was all that was required for being prepared for litigation, just in case. 

This would cover a process of planning, in-depth analysis of Non-Legal Matters relating to business specific targets.

Helena Haapio

He is a Finland based commercial contract expert is of the same view. She came out with the term “Proactive Approach”. She believed that legal knowledge is at its best when it is applied before something goes wrong. In her words, the “proactive litigation” involved comparison of Disputes with mines which shall be proactively searched, hidden in the source of business relationship (Contracts) which shall be prevented from explosion. Apart from the contractual relationship, the compliance of law also played a prominent role to reduce to litigations. With the passage of time, the emphasis shifted from compliance to governance and then to managing the corporate reputation. Creating a culture that encourages ethical conduct and enables employees to make better-informed decisions, not leading to show cause notices/public banns, become the goal. Achieving business objectives while meeting current and future legal and regulatory demands required a well-informed workforce and a new approach to practicing business law: a proactive approach. 

Lawyers have been the epicentre of all the theories on and about preventive litigation. Louis Brown explained the role of a lawyer before and after the facts have become cold. While Helens went a step further and opined that the process of preventive law did not only involved lawyers but instead it began with the clients being proactive and their own ‘self-care’

Christopher Columbus Langdell 

He elaborated in his study about the growth of legal profession and widening its scope enough to now cover the ‘preventive litigation’ and emphasis on ‘case’ studies (suggested by the legendary Christopher Columbus Langdell, the then Dean of Harvard Law School) in the techniques in the imparting legal knowledge in the education institutes. That began the ‘case’ method in the study of law. It also marks the beginning from law office apprentice training to professional law school. In this manner, he created a masterpiece by blending the subject of preventive litigation and the need of proper teaching techniques. Which in my personal opinion is very unfortunate and today’ modern school of law is missing.  

Tools Used

Looking to the current scenario, it is observed that today’s curriculum of law in the law schools need to know the importance of a bare minimum education of the “preventive litigation” if not a separate subject altogether then a part of “Training”. The said curriculum shall involve the tools of preventive litigation and ways to achieve the same. Let us throw some light on the tools of preventive litigation that must be a part of syllabus in law schools. 

• Identifying the source of possible dispute. 

While negotiating any deal, a “professional preventive litigators” must be hired to look in to even slightest chance of litigation in future. There are many points which may be given specific importance like, in a contract for supply of products, the purchasing party must not over ambitiously commit to any specific minimum order of the quantity. As doing it would oblige it to life the same and pay for it even if there is no requirement at the time of actual implementation of the contract. 

Obligations precisely defined so as to avoid any confusion with regards to specific role of the parties in case of any quality issue in a perishable business contract. 

• Investing time, resources and money on compliance and SOP’s 

HR department have nowadays understood the importance of a strong legal team and depute more and more resources into the legal task force in order to leave no scope for legal cases hindering the company’s revenue. 

In a world which is on the verge of surrendering to technology with the revolutions like ‘artificial intelligence’, there have been many tools available in the market to reduce the human involvement. The help of independently developed software may be taken to keep an eye on compliances of various laws, which of course is costly affair but at the end of the day it saves money in the terms of salaries of many compliance resources. If the so called machine language is not able to cater the needs of compliance of procedural laws, the importance is at par with law compliance, the help of (S.O.P) is taken. The standard operating procedures must be prepared to ensure proper adherence to lawful procedures to avoid legal disputes. 

• Proper and effective negotiations. 

One should not compromise on legal needs in order to attract/fetch business. 

• Post Mortem of previous disputes. 

A wise decision would be to introspect and look into the mistake that one did which lead to the menace of various court visits to either defend or fight for the rights. A deep interrogation in the areas where the company could have saved the litigation. 

• SWOT Analysis. 
• Due diligence. 

Legal due diligence involves investigation of the history of the other party’s legal records, non-compliances, approach towards balancing between business relations and safeguarding the self from suits. 

• In house training and workshops. 

Training is almost inevitable for a robust and dynamic legal department handling a various composite legal issues. Time to time workshops on legal updates and changes and amendments in laws must be held for employees in house at company’s expense so as to enable to learn without any menace of permissions for eternal lectures and seminars. 

• CMS/Management.

CMS standing for Contract management systems are software built specially for in–house contract life cycle management and renewal process. Information pertaining to existing contracts can be easily accessible through a mere automatic notification from the system helps to remind the business process owners to continue the relationship by a formality of addendum/amendments to the contract. It can also store scanned contracts which are executed easily extractable when required capable to store for eternity. 

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