Tougher economic conditions led to a 25 per cent surge in the number of commercial court cases filed in the UK last year, reversing six years of steady decline.

The number of civil lawsuits — considered a barometer of business appetite for litigation — reached 61,691 in 2006, up from 49,442 in 2005.

It is the first time the number of civil cases has increased since the Woolf reforms, instituted in 1999, triggered a gradual fall in litigation. It comes as lawyers in the City prepare for a wave of new court battles following the recent collapse of the credit markets.

Cases filed in the Companies Court saw the strongest rise last year with numbers up 54 per cent to 23,215, according to figures from the Ministry of Justice.

The Companies Court, a sub-section of the Chancery Division of the High Court, deals predominantly with company liquidations, including winding-up petitions by creditors in addition to cases in which shareholders or creditors push for a change in company management.

According to law firm Reynolds Porter Chamberlain (RPC), the figures also indicate that concerns over the future direction of the economy are encouraging businesses and creditors to fight more aggressively to recover debts and enforce contracts.

Lawsuits related to debt filed in the Queen’s Bench Division of London’s High Court jumped by 14 per cent to 988, while claims for breach of contract rose by 22 per cent to reach 700.

The overall rise in commercial litigation reverses six years of decline triggered by the Woolf reforms, which encouraged parties to settle their disputes outside the courts system.

The number of commercial cases filed dropped each year from 1999 to the end of 2005.

Jonathan Wyles, a senior solicitor at RPC said: “The Woolf reforms have been highly successful but they are now facing their first real economic stress test.”

Mr Wyles said added that since the reforms — masterminded by former Lord Chief Justice Lord Woolf — were introduced “the real economy has been robust.

“However, in the last year or so before this summer’s ‘credit crunch’, signs of tightening had already started to appear in the market. Financial squeezes always tend to cause an upturn in disputes and litigation, and these statistics suggest that this time it’s no different.”

Significant increases in court fees introduced in 2005 do not appear to have curbed business appetite for litigation, the statistics show, although whether further fee increases introduced last month will have any impact is uncertain.

Mr Wyles also believes that the introduction of litigation funding, where a third party finances some or all of the costs of a dispute in return for a share of the winnings, has also boosted the number of cases.

In the same way as the introduction of “no-win, no-fee” claims has increased the numbers of personal injury claims by individuals, Mr Wyles said “similar, albeit more sophisticated" products available to companies are lowering the barriers to litigation.

Mark Harding, general counsel at Barclays Group, is one of a number of senior lawyers who have predicted a coming surge in litigation.

He said: “Are we likely to see more litigation in the next few months and years as a result of what’s happening in the markets? I think the answer to that is probably yes.

“If you just look at what history tells us, it tells us that at times when dramatic things happen in the markets it is usually followed by an increase in litigation.”

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