Geopolitical tensions, stagnating economic growth and the disruption of entire industries: it is primarily external factors that worry risk managers and heads of legal departments in corporations.

In a survey of more than 600 global corporate executives, 81 percent expect litigation for their company to increase in 2024.

Marcus Jung

Editor in business.

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    As the “Global Disputes Forecast” survey commissioned by the major international law firm Baker McKenzie shows, representatives from the energy and infrastructure (39 percent), consumer goods and retail (36 percent) and manufacturing industries (31 percent) take a much more pessimistic view of the situation coming months as, for example, risk managers from the life science sector (24 percent).

    Overall, only one in five respondents assumes that the number of risks and processes in which their company is involved will decrease.

    From the perspective of Heiko Haller, partner in Baker McKenzie's German conflict resolution practice, the forecast increase has two very opposing drivers.

    “On the one hand, after the corona pandemic and many wars, we find ourselves in a destructive and conflict-filled environment.

    On the other hand, there are positive developments that are driven by technical progress, such as artificial intelligence and cybersecurity,” says the lawyer in an interview with the FAZ

    Significant increase in climate disputes

    However, the biggest challenge is seen in resolving disputes related to environmental, social and governance (ESG) issues.

    For 73 percent of those surveyed, ESG disputes are a top priority.

    The study justifies this, among other things, with the significant increase in climate disputes, in which the plaintiffs' focus is shifting beyond greenhouse gas emissions to the loss of biodiversity.

    In addition, internationally active companies are generally confronted with an increase in regulatory requirements and stricter national laws.

    “ESG disputes have become a real litigation risk,” says Peter Tomczak, who is co-head of Global Investigations, Compliance & Ethics at Baker McKenzie.

    Companies should therefore expect more litigation related to human rights and social issues and continue to review their policies and reports on ESG issues.

    Those affected and non-governmental organizations are increasingly complaining

    In this country, the implementation of the Supply Chain Act was particularly important for companies - which is likely to increase with the planned, politically controversial EU Supply Chain Directive (CSDDD).

    Haller expects a similar situation to the climate lawsuits, where those affected from developing and emerging countries, supported by non-governmental organizations, are increasingly suing companies in German courts.

    But he sees the actual legal and cost risks elsewhere.

    “One of the biggest problems is the incredible regulatory requirements that companies face.

    “Companies are forced to set up entire departments for this without knowing how to do it – and this also applies to those who already comply with the rules today.”

    Employees take a closer look

    Labor law disputes move up to second place in the risk ranking at 53 percent.

    What is striking is the range of topics, which, in addition to measures from the corona pandemic (home office), the implementation of guidelines (wage transparency), are also a direct consequence of weaker economic growth.

    “In recent years, many companies have put diversity, pay transparency and equality on their agenda.

    Nobody could escape that,” emphasizes Haller.

    “Employees are now looking much more critically at whether these requirements are actually being met by their own company.”

    In addition, restructuring and reorganization of companies, combined with cost-cutting measures, led to more conflicts “like any destructive event.”

    The increasing use of artificial intelligence (AI) also brings with it legal risks.

    As such, respondents cite, for example, bias in internal decisions (bias), discrimination against applicants or questions of AI misuse and data protection.

    Within the EU, the specific risks arising from the AI ​​Act legislation will probably only become apparent in a few months, the study authors predict.