It is easier to appreciate the stunning architecture of the Bear Garden in the Royal Courts of Justice these days. A few years ago, the room was usually packed to the brim with applicants to the court; if you go in now, you are lucky to find anyone.

Court proceedings and interlocutory applications are down and the amount of work in the High Court has dropped dramatically. But litigators are still smiling: 2003-04 was yet another strong year, with several firms seeing impressive turnover growth in contentious work.

Of course, ‘litigation’ as a term is swiftly going out of vogue. More and more practices are styling themselves as ‘dispute resolution’ practitioners – a trend that reflects the rise in mediation and arbitration, which is a result in part of the Woolf reforms.

Big cases still feature, though, and last year was no exception. It was dominated by the start of the BCCI trial in January, which hit the headlines for several reasons – not least Gordon Pollock QC’s record 79-day opening statement and £3m brief fee, first revealed in The Lawyer.

BCCI, and the related Three Rivers litigation, are significant in legal terms too, with attention focused closely on Mr Justice Tomlinson’s ruling on legal advice privilege in November. Judge Tomlinson had ruled that certain communications between Freshfields Bruckhaus Deringer and client the Bank of England (BoE) were not protected by privilege. The BoE appealed, and the Court of Appeal upheld the judge’s decision.

For a while it seemed that the decision in Balabel, used to define privilege since 1998, would no longer hold – but at the end of July this year the House of Lords overturned the Court of Appeal’s ruling, allowing the Bank of England’s appeal and restoring the balance.

Other important cases featured in 2003-04. In July 2003, the Court of Appeal reinstated Equitable Life’s claim against Ernst & Young and dismissed a strike-out action brought by former non-executive directors of Equitable. Contracts law was examined in Vodafone v Jordan in August, and film finance proved a profitable area for litigation and insurance firms. Indeed, insurance was a steady source of income for litigation departments in 2003-04, offering confirmation that the sector’s success runs counter-cyclical to corporate.

Clifford Chance was once again top of the litigation heap, despite the group’s turnover dropping marginally to £225m from last year’s £229m. The year’s highlight was the successful defence for Deloitte & Touche Singapore in one of the last pieces of litigation arising out of the collapse of Barings Bank.

Mr Justice Evans-Lombe ruled in the autumn that Deloittes was liable for only £1.5m of the £791m losses incurred by Nick Leeson against a claim of £1.3bn brought by the liquidators. Clifford Chance, along with Denton Wilde Sapte, which initially represented Deloitte, reportedly billed £30m for the case.

There is more to Clifford Chance than big commercial cases, however. In June it was appointed as official solicitors to the Hutton Inquiry, with head of public law Michael Smyth supervising. Lord Hutton’s report received widespread criticism, but the work of the legal team was generally praised. Smyth then picked up a role on the Morris Inquiry into racism in the Metropolitan Police, further raising the firm’s profile in this niche area.

The next two firms in the litigation turnover table are both acting on BCCI – Lovells for the liquidators and Freshfields for the Bank of England. Lovells’ dispute resolution practice has had another strong year, contributing nearly a third of the firm’s turnover. The insurance and reinsurance arms in the US have performed well, and the hire of Clifford Chance’s Joe Cyr in April should point to continued growth there next year.

Like the other magic circle firms, Lovells has a broad-based practice crossing all areas of litigation – although the firm features in the big commercial trials, it can also be found acting for smaller companies and individuals.

Last year it faced a different sort of litigation challenge when partner Andrew Foyle found himself called as a witness in Philip Morris v United States of America. With Lovells acting for British American Tobacco (BAT), Foyle was represented by Norton Rose as he appealed against the order on the grounds that giving evidence would breach legal privilege. The Court of Appeal dismissed the appeal in March.

The issue of privilege hung over Freshfields for most of the year as partner John Goddard led the team working to prevent the disclosure of the firm’s own correspondence in Three Rivers. The Bank of England is still one of Freshfields’ biggest clients, but the firm is also the principal adviser for Lloyd’s. Last year Geoff Nicholas worked on an arbitration against six major insurers relating to the New Central Fund.

One of Freshfields’ biggest wins was William Robinson’s work for ABNA – a subsidiary of Associated British Foods – to obtain the suspension of a European directive on compound feeding stuffs for animals. The directive, concerned with labelling requirements, was suspended in England in October and further suspensions quickly followed across Europe. This was the first time a national court has ever suspended a European directive.

The work was reflected in turnover, which rose to £117.8m from last year’s impressive £112m, despite a drop in firmwide income. Average revenue per partner rose too, up by £80,000 to nearly £1.3m.

Boosted by Equitable Life, turnover was up for both Herbert Smith, acting for Equitable, and Barlow Lyde & Gilbert (BLG), which is acting for Ernst & Young). Commentators say that Herbert Smith has lost some of its old edge in litigation, but led by David Gold the practice is still undeniably strong, this year surpassing £100m for the first time.

Herbert Smith’s biggest win was its victory against Jordan Grand Prix for Vodafone, successfully defending a £150m claim for breach of contract and misrepresentation. IP and technology partner Mark Shillito acted for Vodafone, with Fladgate Fielder representing Jordan.

Equitable Life is still the firm’s biggest ongoing case, with a Court of Appeal win in July surely boosting confidence for the trial against Ernst & Young. That is expected to start in April 2005 – until then, expect Clare Canning at BLG and Charles Plant at Herbert Smith to be kept busy preparing the case.

Positioning itself as a litigation firm is clearly paying off, because BLG shot to sixth place in the top 20 litigation firms, with a practice turnover of £62.5m – a massive 80 per cent of total income. Revenue per partner has also risen this year to £1.12m, passing the million mark from last year’s £924,000.

Investment in shipping, with hires at the start of the year of Patrick Foss and Tim Taylor from Hill Taylor Dickinson, should pay off for BLG as more traditionally marine-focused firms try to shift away from shipping.

BLG has also had a bite of film finance litigation, building on its insurance expertise and reputation. Film finance was a major part of Richards Butler’s year, too. The firm’s litigation turnover dipped slightly by £2m, but the percentage of total income provided by contentious work remained steady at 53 per cent.

A major case was acting for Asset Backed Capital and the Hollywood Realisations Trust in their $200m-plus (£110m-plus) claim against AIG. The claims are referred to as Hollywood Funding 4, 5 and 6. The Richards Butler team was led by Lista Cannon, and after the first few days of trial the case settled for an undisclosed amount.

But Richards Butler really profited from picking up work from larger firms conflicted out, particularly in the areas of pension fund litigation and derivatives. For example, the firm has been acting for the pensions funds of the Co-operative Wholesale Society and
Co-operative Retail Services in relation to their claim against Merrill Lynch Investment Managers, alleging mismanagement of pension fund assets.

Simmons & Simmons, whose litigation department is similar size to Richards Butler’s, acted for Merrill Lynch on the same case. The firm saw income rise to £41.1m last year, with clients including Lloyds TSB in an insurance case relating to pensions, and Ofcom in a range of cases, including judicial reviews.

Clyde & Co is another firm doing well from insurance litigation, particularly in shipping, where it is traditionally strong, but also across the board. The £62.4m brought in by the litigation department accounts for two-thirds of Clydes’ total turnover, and with revenue per partner at a solid £843,000, things are looking extremely positive.

Although insurance has been a major profit area for dispute resolution departments over the past year, it has not been the only one. Several of the larger City firms have seen a rise in international arbitration, particularly Allen & Overy (A&O), which has seen arbitration in jurisdictions as varied as Switzerland and Poland. Otherwise, A&O did not have a stellar year, billing just £639,000 per litigation partner – one of the lower figures in the top 20.

Eversheds also saw a rise in arbitration, in particular representing the Iranian government in a dispute with the US government over the sale of military equipment. The firm saw a small upturn in litigation turnover to £56.3m from last year’s figure of £54.1m. Eversheds’ litigation department, headed by John Heaps from Leeds, is named ‘dispute management’ and focuses on early risk assessments – £5m has been invested in training solicitors in case assessment.

The size of Linklaters’ litigation practice continues to be small compared with the firm’s magic circle peers’, with a turnover of £50.4m (7 per cent of the total). But it is still attracting quality work.

Partner John Turnbull advised T-Mobile on the conclusion of the telecoms company’s dispute with Virgin Mobile, which led to a services supply agreement. Towards the end of the financial year, the firm picked up work advising the Law Society on its intervention in the Three Rivers appeal to the House of Lords.

Although the dispute resolution department has just 17 partners, Slaughter and May turned over a respectable £34.7m, pushing revenue per partner above £2m in the process. The firm represented the Barings liquidators in the negligence claims against accountants, which completed last autumn.

CMS Cameron McKenna also saw record revenue per partner figures. Camerons had a stellar year, particularly in insurance, but also in construction, financial services and pensions litigation. Five partners were promoted and the resulting organic growth boosted income to £48.4m and revenue per partner to £1.4m from last year’s £1.2m.

Just above Slaughters and Camerons in total revenue for the department, Hammonds has much lower revenue per partner at £515,000. It has had a good year for construction litigation and should continue to profit from the sector – particularly in the North.

Towards the bottom of the top 20 are some of the smaller specialist insurance practices such as Berrymans Lace Mawer, Kennedys and Reynolds Porter Chamberlain. Berrymans continues to excel in niche areas, with 90 per cent of income from litigation. Last year the firm took over Jacksons in Stockton, providing a base in the North East, and by the year-end saw a turnover rise of £4.1m.

Slipping out of this year’s table were Davies Arnold Cooper (DAC) and Wragge & Co. DAC saw litigation turnover drop by just under £1m, while Wragges’ dropped by £2.5m to £15m.

Other firms showed reasonable litigation turnovers. Addleshaw Goddard, in its first full year, billed £13.7m, or 11 per cent of the total; Berwin Leighton Paisner, just below Addleshaws in the overall 100, turned over £10.2m from its litigation team, with another £10m coming from contentious work in other practice areas.

Next year’s figures will include income from another round of film finance litigation, due to go to trial in October. Camerons is advising HIH Casualty & General Insurance in the case against JPMorgan, which is instructing Morgan Lewis & Bockius. Firms will also see the profits of cases that have been in court since the beginning of the financial year 2004-05, such as Mahonia v WestLB & anor.

And let us not forget that the biggest case of 2003-04 continues in September. The BCCI case will dominate headlines for another year, helping to keep profits and turnover rising. The number of actual cases in court may be fewer, but rest assured – the UK’s litigators are just as busy as ever.