Krogerus Disputes Day focused on the topical issues of disputes with distressed parties 

April, 2024 - Thomas Kolster

Krogerus Disputes Day was held on 19 March at Little Finlandia. The popular event gathered dispute resolution and compliance experts to discuss about business disputes with distressed parties. We would like to thank all our speakers and guests for a great Disputes Day and interesting discussions!

This year, Disputes Day's theme was Disputes and Distressed parties. Many companies are currently facing unexpected legal disputes after finding themselves or their contractual counterparties in distressed situations due to the macroeconomic volatility and heightened geopolitical tension of 2023. Our experts dived into this topic together with many distinguished guest speakers from the financial sector, arbitral institutions as well as other law firms. The day included speeches and panel discussions on, for example, the current economic outlook, the impacts of the geopolitical and financial situation on arbitration, asset tracing and enforcement of awards as well as toolkits and strategies in disputes with distressed parties.

During the past year, companies' operating environments have become even more unpredictable than before, making corporates' ability to mitigate risks and avoid potential disputes a significant competitive advantage. "The purpose of this year's Disputes Day was to provide practical insights and expert perspectives to help companies navigate the complexities of legal disputes where the involvement of distressed companies has grown. The participants' feedback confirms that the theme is one of the top-of-mind concerns in a disputes-setting. The economic outlook by Nordea received also much praise in that it set the scene", summarise our conference hosts and Dispute Resolution partners Kirsi Kannaste and Thomas Kolster.

In this article, we will take a closer look into two of Disputes Days' keynote speeches from Robert Spano, the European Court of Human Rights' former president, current Partner at Gibson Dunn, and Mikael Rautanen, CEO and Co-Founder of capital markets analyst company Inderes.

A broader perspective on the definition of distress

Distress is often defined as financial distress, but there are also many other ways of thinking about distress. These alternative ways of defining distress were discussed during an impactful keynote speech from Robert Spano. According to Robert, distress can also be related to, for example, climate change, war, geopolitics and sanctions, cyberattacks or regulation. Climate change may have its impacts on businesses not only through extreme weather conditions but also through decarbonisation measures or international climate commitments that affect multinational companies in many ways. NGO's are, for example, trying to litigate climate change related issues, like decarbonisation, to change laws, which will have a big impact on the evolution of international human rights law.

The past few years have also offered numerous examples of how war, geopolitical tension and sanctions can place companies in distress. Many companies that are not themselves sanctioned may still be indirectly affected by sanctions. Another increasing concern for companies is cyberattacks, that may have temporary or long-lasting consequences on business.

Another way of thinking about distress is through regulation and its effects on business. Regulation has over the past years become massively complex and deep, especially on the EU level. It can impact the viability of business models, for example, through increasing operating costs or disruptions to supply chains. These alternative ways of defining distress are increasing influence of relevance of fundamental rights in both investor state disputes and commercial arbitration, which means that lawyers and businesses need to pay closer attention to these topics.

How do disputes affect company valuations and investor relations?

When discussing disputes, it is important to not only keep in mind the dispute resolution perspective, but also consider the impacts disputes can have on company valuations and investor relations. On Disputes Day, we had the privilege of having Inderes' CEO Mikael Rautanen on stage to cover this topic.

According to Mikael, finance is a business of storytelling, where companies have to be able to provide investors a compelling equity story, that is backed by numbers and financial performance that support this story. In his speech, Mikael emphasised that a major dispute could distract companies' equity stories since disputes and litigation risks can decrease investors' trust in the company, leading to the company's value decreasing. Investors' core competency is in analysing businesses, but they do not want to "bet" on the outcomes of a dispute, nor do they have enough data or visibility to evaluate the impacts of a dispute. This is why companies with many litigation risks or disputes may receive less funding.

Mikael also discussed the gap between companies' investor relations and the legal side. Investor relations are expected to balance between different stakeholders' requirements; the legal side usually wants minimal public attention, regulators have strict requirements on information that needs to be shared without a delay, while management wants positive publicity and investors transparent and real-time information. However, investor relations do not always have the best ingredients at hand regarding, for example, market outlook, operating environment, financials or the legal side. If the narrative that investor relations communicate to external stakeholders is not aligned with the financial reality, investors may end up disappointed.

According to Mikael, collaboration is key in solving the dilemma between the legal side and investor relations since both sides must understand each other's needs in order to provide good investor communication. With good communication, the share price follows business performance, but with poor communication, the equity story may move from hype to disappointments.

Krogerus Disputes Day will be organised again next year

We are already looking forward to organising Disputes Day 2025, which we will release more information of later this year. In the meantime, you can subscribe to our mailing list to receive more information on Krogerus' webinars and events.

See you next year at Krogerus Disputes Day 2025!


Link to article


WSG Member: Please login to add your comment.