The UK government will explore the use of capped fee contracts for legal work following a report into the £2.8m legal fees charged by Freshfields Bruckhaus Deringer after it advised HM Treasury on the sale of Eurostar International.
The firm advised the government during the £585.1m sale of its 40% stake in Eurostar in March last year.
The Committee of Public Accounts (CPA) found the government relied heavily on external advisers and its investments sector ‘needs to improve its understanding of the costs and value of this work’.
Responding to the CPA’s recommendations last month, the government confirmed that ‘where appropriate, [it] will seek capped fees although this will be dependent on the detail of the individual project and the negotiated commercial contract between the government and advisory firms.
The government confirmed it would also seek to require firms to transfer skills to its in-house teams ‘wherever possible and practical, to reduce dependence on external resources in future assignments’.
A report carried out by the National Audit Office in November last year said HM Treasury was ‘concerned about the cost of the legal work and considered re-procuring the legal adviser during the sale process but it decided that a change of legal team midway through the process would have been inefficient and problematic due to the time-critical nature of the work.’
Freshfields’ fees were charged on a billed-time basis rather than a fixed fee, and the legal cost for an internal transfer of shares from the Department for Transport (DfT) to the Treasury was £500,000.
The adviser fees in total and other costs related to the transaction totalled £8.2m, which amounted to 1% of the proceeds of the 40% stake in Eurostar and the preference share. Financial adviser UBS was paid around £3.6m.
The government agreed to sell its share in Eurostar to winning bidder Patina Rail – a consortium made up of a Canadian investment fund, and UK based Hermes Infrastructure.