Investigations have become big business for the City’s thriving litigation teams although the majority of them happen behind closed doors for valued clients and are not said to offer an ‘independent’ assessment.
A recent exception is the Royal Bank of Scotland’s (RBS) disclosure yesterday (25 November) that it has appointed Clifford Chance (CC) to conduct an independent inquiry into the treatment received by small business customers in financial distress, after allegations that the bank deliberately drove them to collapse for its own gain.
While large City firms are undoubtedly sophisticated providers of complex legal services their close relationship with many of the large banks and financial institutions at the very least raises questions over their ability to give a truly independent viewpoint.
Despite bank panels shrinking over recent years it is still common for them to include a number of the Magic Circle and larger firms, with RBS 21-strong legal roster, unveiled in July, including CC, Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters as well as many of the larger City and transatlantic firms such as Eversheds, Hogan Lovells and Norton Rose Fulbright.
CC itself is on the panel for Europe, the Middle East and Asia, with a mandate to act in most of the jurisdictions where it has offices.
However, when asked to discuss how the inquiry will work given the Magic Circle client’s existing relationship with the bank, a spokesperson declined to comment.
CC’s instruction by RBS comes after independent reports from both the former Bank of England deputy governor Sir Andrew Large and government adviser Lawrence Tomlinson raised concerns over the bank’s treatment of struggling small businesses, with the report by Tomlinson accusing the bank of pushing small firms into its turnaround unit, the Global Restructuring Group (GRG), so it could charge higher fees and take control of their assets.
In a letter published on RBS’ website, group chief executive Ross McEwan noted that changes had already been put in place but added: ‘to ensure our customers can have full confidence in our commitment to them I have asked the law firm, Clifford Chance, to conduct an inquiry into this matter, reporting back to me in the new year.’
On a more general level, City law firms’ investigations practices are highly developed and their ability to provide detailed evidentiary analysis, often alongside accountants, is increasingly being used to show seriousness of intent.
Only recently, fellow Magic Circle firm Linklaters, alongside accountants PwC, entered into an ongoing independent review of client private securities company G4S, following allegations that employees engaged in false billing practices between 2005 and 2013.
As G4S attempts to rebuild its brand the company asked Linklaters to assess whether there was evidence of dishonesty or criminal conduct by employees who billed the Ministry of Justice as part of an electronic monitoring contract.
The firm is also advising G4S in relation to a Serious Fraud Office (SFO) probe on the same matter.