Scenario one
Pervasive Protectionism
Regulatory fragmentation and increased protectionism
Our first scenario imagines a world in 2035 of increased polarisation in which US-China economic decoupling deepens significantly, global trade becomes fractious and uncertain, and the World Trade Organization (WTO) stops functioning. The context for the following scenario is real; the scenario itself is hypothetical.
The business impact of rising protectionism
Starting the conversation
The steady rise of protectionism and regulatory fragmentation is reshaping the commercial environment in which global businesses operate. Shifting trade policies, divergent standards, and increasingly assertive regulators are creating legal and operational challenges across multiple jurisdictions.
Even minor changes can disrupt supply chains, trigger contractual disputes, and expose businesses to conflicting compliance obligations. A uniform 'one-size-fits-all' approach is no longer sustainable. To safeguard enterprise value and pursue growth opportunities, businesses will need tailored legal strategies, informed by both local expertise and a clear global framework.
of business leaders point to constant regulatory change as one of the key drivers of disputes in the decade ahead.
Key areas of risk
Regulatory and enforcement pressures
- Regulatory fragmentation is intensifying. Companies face overlapping or inconsistent obligations, requiring careful navigation to avoid inadvertent breaches.
- Regulators are more active in issuing pre-enforcement requests and launching investigations. Early, strategic engagement with regulators can mitigate risk and preserve goodwill.
- Enforcement actions carry significant financial and reputational consequences. Boards must adopt proactive compliance programmes and ensure that contentious regulatory advice is readily available to minimise impact.
Commercial and financial disputes
- Supply chain disruption and policy shifts are driving a rise in cross-border contractual disputes, as parties seek to exit unfavourable agreements.
- Labour disputes are increasing as companies restructure operations to adapt to new trade and regulatory realities.
- Market volatility creates scope for financial mis-selling claims and litigation linked to innovative products.
Fraud and corruption risks
- Divergent regulations and gaps in oversight heighten exposure to bribery, corruption, and fraudulent practices, particularly in emerging or deregulated markets.
Litigation and arbitration
- The inoperability of multilateral dispute mechanisms, such as the WTO, has fuelled demand for international arbitration. However, losing parties are increasingly challenging awards in domestic courts, adding a further layer of complexity.
- Divergent product standards across jurisdictions expose businesses to greater product liability and recall risks. Legal foresight and proactive planning is needed to mitigate disputes before they escalate.
Technology and innovation
- Accelerated investment in green technologies and the transition away from fossil fuels is driving new regulation and litigation, with courts increasingly willing to hold global companies accountable for environmental harm.
Regulatory and enforcement pressures
- Regulatory fragmentation is intensifying. Companies face overlapping or inconsistent obligations, requiring careful navigation to avoid inadvertent breaches.
- Regulators are more active in issuing pre-enforcement requests and launching investigations. Early, strategic engagement with regulators can mitigate risk and preserve goodwill.
- Enforcement actions carry significant financial and reputational consequences. Boards must adopt proactive compliance programmes and ensure that contentious regulatory advice is readily available to minimise impact.
Commercial and financial disputes
- Supply chain disruption and policy shifts are driving a rise in cross-border contractual disputes, as parties seek to exit unfavourable agreements.
- Labour disputes are increasing as companies restructure operations to adapt to new trade and regulatory realities.
- Market volatility creates scope for financial mis-selling claims and litigation linked to innovative products.
Fraud and corruption risks
- Divergent regulations and gaps in oversight heighten exposure to bribery, corruption, and fraudulent practices, particularly in emerging or deregulated markets.
Litigation and arbitration
- The inoperability of multilateral dispute mechanisms, such as the WTO, has fuelled demand for international arbitration. However, losing parties are increasingly challenging awards in domestic courts, adding a further layer of complexity.
- Divergent product standards across jurisdictions expose businesses to greater product liability and recall risks. Legal foresight and proactive planning is needed to mitigate disputes before they escalate.
Technology and innovation
- Accelerated investment in green technologies and the transition away from fossil fuels is driving new regulation and litigation, with courts increasingly willing to hold global companies accountable for environmental harm.
Given the increased complexity and costs associated with any disputes, boards should remain mindful of the financial position of the company. Where the financial impact strays into financial stress, boards will want to consider what that means for the appropriate discharge of their fiduciary duties. We can help clients navigate these complex issues.
Amy Patterson Partner, Restructuring and Insolvency, UK
Despite the high level of awareness of regulatory risk, 61% of businesses in our research who have faced disruptive economic policies involving industrial, fiscal, and monetary change over the last 10 years have adopted a ‘wait-and-see’ approach, responding to events as they emerge.
More than half of organisations responded reactively to geopolitical divergence typified by Brexit, frosty US-China relations, treaty withdrawals, and the severing of diplomatic ties. While some organisations adopt this stance strategically, others can struggle with the sheer weight of regulation in play.
Beyond the Horizon: Disputes Reimagined