One of the most rapidly evolving areas of the legal services economy is that concerned with contentious work. The challenges facing those engaged in the resolution of commercial disputes are intense. Having seen these challenges from the perspective of the commercial Bar, partnership in the dispute resolution department of a major City firm and now that of general counsel at Threadneedle, it seems to me that three themes emerge.

Firstly, demand is changing. There can be little doubt that domestic demand for commercial dispute resolution services is contracting. The primary drivers of this contraction are improved risk management and improved corporate governance. Corporations in the UK, the US and Western Europe are better able to avoid and contain disputes, and to resolve them promptly. Improved governance means that CEOs of major corporations are no longer at liberty to waste shareholders' money by pursuing commercial disputes against rival concerns in the spirit of personal vendettas.

On the other hand demand for litigation services remains strong from businesses operating in jurisdictions and industry sectors where risk management and corporate governance is weaker. Emerging markets and the energy industry are obvious examples. Those who make their living from dispute resolution would do well to seek out opportunities in these areas.

Secondly, there is the question of funding. Those advising on contentious matters should be in no doubt about the rigour with which their advice is scrutinised. In the modern boardroom, a proposal to pursue a cause of action in the Commercial Court is one that has to compete with all the other investment opportunities available to the company. The size of the bill, the limited ability to control expenditure, the risk of an adverse order for costs and, importantly, the diversion of management time all conspire to make this an unattractive proposition in all but the most unusual of circumstances. One reason for this is the historical reluctance of City litigation practices to take financial risk on their clients' cases.

By way of contrast, litigation makes far better business sense if it is based on the US funding model of conditional fees and no exposure to inter partes cost orders. Litigation funding companies and US firms in London are beginning to close this gap, but there is a way to go yet.

Finally, cultural issues are of importance. The contrast between attitudes to litigation in the UK and the US could not be more stark. In the US, going to court is popularly regarded as a constitutional right, and a key part of the self-help culture. I remember once trying to explain the rules on security for costs to a US plaintiff's attorney and he said that in the US he would challenge any such provision as unconstitutional, on the basis that it deprived citizens of their right to trial by jury. This is very different to the spirit of the Woolf Reforms. One consequence is that in many prestigious US law firms, trial lawyers form a majority of the partnership, this is contrary to the situation in the City, where the litigators are sometimes regarded as merely part of the cost base of the corporate rainmakers. Many of the new class action and litigation funding initiatives discussed at the recent Legal Week Litigation Forum come from US firms setting up in London – it will be interesting to see if that brings about a cultural convergence.

Another driver of cultural change has been the growth of mediation. Mediation provides executives with a dispute resolution medium over which they have far greater control than they do over litigation. In my experience, executives are both adept at and comfortable with explaining to a mediator why they have adopted a particular position in negotiation, whereas they find the witness box an alien environment and see the trial as the risk eventuating.

We are justified in feeling proud of our court system. We have able litigation lawyers and judges who are refreshingly free from corruption. Most businesses would rather be sued in London than anywhere else. We have sophisticated tools for grinding out the truth and a complex legal system for allocating loss and responsibilities. In the longer term, however, I have a sense that modern businesses are growing out of litigation. Their executives have better things to do with their time, better things to do with their shareholders' money and in many cases more effective ways of avoiding and resolving disputes. n