Legal Business

Revolving doors: Paul Hastings takes three Americas partners from Allen & Overy

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Strategic recruitment Allen & OveryPaul Hastings
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Paul Hastings has made a rare move on a UK firm in its own backyard, with news that is to hire a trio of US and Latin America-based partners from Allen & Overy.

The recruits are New York-based Robert Kartheiser, who serves as co-head of A&O’s Latin America practice; capital markets specialist Cathleen McLaughlin, who serves as head of the New York office’s international capital markets group; and banking partner Bruno Soares from A&O’s Sao Paulo office.

Kartheiser specialises in project finance, restructurings and infrastructure development, with a significant focus on emerging markets, particularly Latin America and the energy sector.

McLaughlin’s capital markets experience includes varied transactional and advisory securities transactions relating to SEC-registered and unregistered debt and equity offerings by US Latin American and other foreign issuers. Leading the New York office’s international capital markets group, she founded the Latin American practice and has been focused on building A&O’s finance practice in Latin America.

Located in Sao Paulo, Soares was a partner in A&O’s banking, projects, energy and infrastructure group.

The trio departed the magic circle firm today (6 March) and an A&O spokesperson said: ‘We would like to thank them for their contribution during their time at Allen & Overy and wish them all the best for the future.’

Other major hires by Paul Hastings to its New York office this month include Fried Frank’s co-head of M&A David Shine, as well as Shearman & Sterling M&A partner and co-chair of intellectual property Samuel Waxman.

sarah.downey@legalease.co.uk

For the latest on developments in the Manhattan legal market, see our analysis The blessed – unheralded, Wall Street’s elite comes roaring back

Legal Business

Spring hires: KWM and A&O bolster core City teams with notable recruits

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Strategic recruitment Allen & OveryKing & Wood Mallesons
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International heavyweights King & Wood Mallesons (KWM) and Allen & Overy (A&O) have ushered in spring by today (2 March) unveiling notable new recruits to their London operations from Global 100 rivals.

KWM has secured the hire of two experienced projects partners in London, adding Linklaters’ James Douglass and DLA Piper’s Ian Wood to its ranks.

Douglass leaves Linklaters after 16 years as a partner in its global projects group. He returns to London from Beijing, where he has spent the last three years leading the development of Linklaters’ China energy and project finance practice. He has also worked for the Magic Circle firm’s Hong Kong office.

He is well known for his work with Sakhalin Energy Investment Company, a consortium owned by Gazprom, Mitsubishi and Shell, extracting gas off the east coast of Russia. He returns to the firm after having previously been an associate at Mallesons. Linklaters confirmed that Douglass had requested to return to London in the summer of 2014 and continue working with his Asia-based clientele but the request was turned down.

Wood joins after eight years as a partner at DLA Piper, where he founded the firm’s nuclear practice. Previously he was in-house counsel at British Nuclear Fuels for six years and a tenant at 8 King Street Chambers. He is one of the UK’s most respected nuclear energy specialists and his longstanding clients include Uranium Asset Management, British Nuclear Fuels, Sellafield, Magnox and Westinghouse.

Neil Upton, head of projects, energy and resources for KWM in London, said: ‘Ian will help us grow one of our areas of focus – power – and nuclear power in a carbon-constrained world is key to this. The nuclear market – waste management, decommissioning and new build – has massive potential, growing in the UK and in a multitude of other jurisdictions, particularly the Middle East.

‘James joins us to focus on oil, gas and power projects globally, with a particular emphasis on our banking clients. As we continue to help our Chinese clients invest globally, and our global clients invest in China and with the energy market in China opening up to foreign investment at a rapid rate, James is joining us at a perfect time.’

Meanwhile, Allen & Overy has boosted its European high-yield practice with the hire of counsel Matthias Baudisch from US firm Cravath Swaine & Moore as a partner. Matthias joins the group, headed by Kevin Muzilla, as the practice looks to grow its leveraged finance bond and loan products offering under both English and New York law.

Baudisch leaves Cravath after 13 years, first joining the firm as an associate in 2002. He was made a senior lawyer in 2010 and then European counsel in 2012. He has experience in both London and New York, although he was based at the Cravath’s London office. He has previously represented underwriters including BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and Nomura, as well as private equity houses, including EQT, Lindsay Goldberg and Permira as issuers.

‘Matthias is an excellent hire for us,’ said Muzilla. ‘We’re seeing positive developments unfold in the high-yield space, relating to both new issuers and existing issuers’ financing requirements. As European issuance is moving at a faster pace than in the US, we are ensuring we have the necessary resources and expertise to deal with an unprecedented level of client demand.’

Stephen Kensell, co-head of A&O’s global banking practice added: ‘His experience will complement our growing practice, putting us in the advantageous position of being able to offer the full range of leveraged finance bond and loan products under both English and New York law. This is a requirement our clients are looking for and our experience tells us that it will become ever-more important in the coming year as market participants look to high yield as a viable financing option.’

Baudisch is the latest lateral hire for A&O’s European high yield practice, which recently added partners Marc Plepelits, who joined from Shearman & Sterling in January in Frankfurt; and Jake Keaveny, who joined from Cahill Gordon & Reindel in May last year in London.

jaishree.kalia@legalease.co.uk, tom.moore@legalease.co.uk

Legal Business

Hunting Titans: RPC fails to convince judge to order BNY Mellon to release Argentinian bondholders

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Litigation Allen & OveryLatham & WatkinsRPC
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The battle between Argentinian bondholders and the South American government rattles on after RPC failed to convince a High Court judge to order the trustee, The Bank of New York Mellon (BNY Mellon), to release $257m to four holdout investors.

George Soros’s Quantum Partners, Knighthead Master Fund, RGY Investments and Hayman Capital Master Fund had been seeking to have the judge declare that BNY Mellon pay the holdout investors, confirm that Argentina’s English law bonds are governed by English law and request that he tell the bank to show a copy of the judgment to a US court currently stopping Argentina from paying out the bonds.

Mr Justice David Richards said ordering the BNY Mellon to pay the holdouts would ‘would be in breach of trust’ and ‘serves no useful purpose’.

While the judge did rule that the bonds in the trust are governed by English law, he refused to order the bank to show his judgment on the matter to the US court.

He explained: ‘The claimants are critical in some respects of the conduct of the trustee in the US proceedings. I do not propose to enter into a discussion of those criticisms. I am in no doubt that the trustee is conscious of its obligations as trustee but equally it is conscious, as it must be, of the delicate position in which it finds itself as a trustee subject to the personal jurisdiction of the US courts’

He added: ‘I am not satisfied that the trustee’s conduct of the litigation has been outside the reasonable range of possible approaches.’

Tom Hibbert, a partner at RPC, and Latham & Watkins‘ former vice-chair of global litigation John Hull, were representing the four holdout investors. They instructed Mark Hapgood QC of Brick Court Chambers and David Quest QC of 3 Verulam Buildings.

Andrew Denny, a London litigator at Allen & Overy, advised BNY Mellon on the proceedings and instructed Robert Miles QC of 4 Stone Buildings.

The bondholders said in a statement: ‘The Honourable Mr Justice David Richards today made an important Declaration in the Chancery Division of the High Court in London that the sum of €225 million transferred by the Republic of Argentina to the account of the trustee (BNY Mellon) with Banco Central de la República Argentina on 26 June 2014 is held on trust and that the trust is governed by English law.’

‘The Claimant Euro Bondholders are very pleased with the English Court’s decision, which represents a significant step forward in the defence of their interests under the English law Trust. They have been deeply concerned that their legitimate English law proprietary interests in the payments have not been taken into account in the on-going US litigation. They now hope that this declaration can be brought to the attention of the appropriate Courts at the first available opportunity and that those courts will have regard to the decision of the English Court.’

tom.moore@legalease.co.uk

Legal Business

Q&A: Heath Tarbert, US banking partner at A&O, talks competing for regulatory work and if US regulators are setting the pace

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Regulatory Allen & Overy
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A year on from his move to Allen & Overy (A&O) from Weil, Gotshal & Manges, US bank regulatory head Heath Tarbert talks to Jaishree Kalia about the expanding influence of US regulators and why it’s easier for Magic Circle firms to compete for regulatory work.

Are US regulators setting the tone and pace for financial litigation across the world?

For better or worse, I think so. Enforcement actions have long been a part of the US regulatory environment, particularity in securities and economic sanctions. The big difference in the last few years has been the enormity of the fines and penalty amounts. We are now starting to see regulatory authorities in other countries bring sizable enforcement actions as well.

Many New York law firms have hugely benefited from the avalanche of high-stakes financial litigation, but many are expecting these cases to slow this year. What in your view will take its place?

It’s always difficult to predict the future, but we’ve seen a real uptick in banking and capital markets transactions in the last 12 months. And this is a good thing. I would hope these sorts of matters – for which clients are actually pleased to engage law firms – would keep lawyers in the financial regulatory field busy for the next couple of years.

Roughly how much does your banking regulatory practice contribute to the firm’s overall revenue in the US?

I can’t disclose exact numbers, but we’ve been pretty busy as a team and are actively looking to fill open associate slots. In terms of measuring our contribution, the key thing is that there are dozens of client transactions going on all the time – and not just in the States – that require US regulatory expertise. It’s not unusual for a partner on my team to have worked on more than 75 different matters in a single year. In many cases, our expertise is fundamental to getting the deal done and so I think that’s the ultimate value of a regulatory practice – how critical you are to the rest of the firm’s business getting done.

How has client demand changed over the last 6-12 months?

One thing that has become particularly apparent in the last 12 months has been that clients are keen to cut costs by de-coupling more routine, regulatory compliance work from high-end legal analysis. That has meant that projects that likely would have gone exclusively to law firms a decade or two ago are now split between consulting and other niche service firms on the one hand, and traditional law firms on the other. Given the deluge of regulatory compliance work and complexity of the legal issues involved, the changes make sense.

Last year saw regulatory work being pushed to the forefront of many leading New York practices. How will A&O compete with this, given it is a Magic Circle firm and is yet to break into the New York market?

There’s no question New York is a challenging and entrenched market for outsiders – not only for the global elite as the Magic Circle firms are better known as, but for other US firms as well. It’s particularly tough in the transactional space. But regulatory is different, since federal regulations ultimately come from Washington. Post-financial crisis we’ve seen a trend in clients wanting their regulatory lawyers to have ‘inside-the-beltway’ Washington experience – meaning they don’t just know the black-letter laws but also understand how a particular regulator is likely to think about a tough issue or what big trend is around the corner. Although New York firms have been beefing up their Washington regulatory teams as well, I think it’s a lot easier for firms like A&O to compete in this space.

What is keeping your practice busy?

A few different things. We’re still busy with Dodd-Frank, including resolution planning issues and Volcker Rule compliance for dozens of clients around the world. In addition, we’re starting to see an increase in Basel III work. Apart from these post-financial crisis work-streams, there’s the hodgepodge of matters that have come to banking regulatory lawyers for decades – setting up new branches and representative offices, clearing and custody agreements, assessing legal risk for new financial products, and enforcement and investigations work.

What do you have planned for the group this year?

We’ve got a number of interesting projects to tackle in the next year – a number of which involve our regulatory colleagues in the UK, Continental Europe, and Asia. One example is our efforts to set up and get regulatory approvals for a new international derivatives suite of products and services. On the policy side, we are advising on advocacy efforts in shaping further regulatory developments due to emerge in the next 12 months such as the total-loss absorbing capital [TLAC] proposal by the Financial Stability Board and the Basel Committee’s longer-term liquidity standards.

jaishree.kalia@legalease.co.uk

Legal Business

Trainee retention: Reed Smith, A&O and HSF keep on over 90% of spring 2015 qualifiers

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Trainee retention Allen & OveryHerbert Smith FreehillsReed Smith
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Allen & Overy (A&O), Herbert Smith Freehills and US firm Reed Smith have helped to quash the nervousness among trainee lawyers across the City, with each keeping over 90% of their recently qualified trainee intakes.

HSF has kept on 39 of its 42 trainees as newly qualified lawyers, giving it a retention rate of 93%. All 39 trainees offered a permanent job at the firm accepted, with one trainee having chosen not to apply.

Last year, the firm posted a 90% retention rate with 24 lawyers of the 38 successful trainees qualifying into corporate and disputes.

Given the returning workloads at City law firms, early indications are that firms’ much-shrunken trainee intakes are more likely to be offered a job as a newly qualified lawyer than in previous years.

This is true in the case of A&O, which kept on 43 of its 46 qualifying trainees from its spring intake, also giving the Magic Circle firm a 93% retention rate. All but one of its spring intake applied.

This is markedly up on the 82% retention rate A&O posted with its autumn 2014 cohort, when just 41 of 50 qualifying trainees stayed on, and the 84% kept on six months earlier. However, the trainee intake has fallen sharply over the last four years in a bid to cut costs.

Plugging that gap left by the Magic Circle are the US firms rapidly gaining market share in the City, with the likes of Akin Gump Strauss Hauer & Feld having launched trainee schemes.

Reed Smith is keeping 12 out of 13 trainees on as newly qualified lawyers this spring. That gives the firm a 92% retention rate, with the firm not having fallen below 90% for over a year.

The NQs will be split between multiple practices areas with two each in corporate, finance, real estate and shipping plus one each in commercial disputes, employment, energy and media. All will be based in London with one shipping secondment to the Athens office for 12 months.

Lucy Crittenden, Reed Smith graduate recruitment manager, said: ‘We’re pleased to maintain a high trainee retention rate this spring. The quality of our trainees has been consistently high and the retention rate reflects both that and our philosophy of recruiting the best talent to retain on qualification.’

tom.moore@legalease.co.uk

Legal Business

Dealwatch: Freshfields, A&O and Travers act as Asia’s richest man buys UK rail group for £2.5bn

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Corporate Allen & OveryFreshfields Bruckhaus DeringerTravers Smith
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Travers Smith, Freshfields Bruckhaus Deringer and Allen & Overy (A&O) have won roles advising on the sale of UK’s leading rail leasing company Eversholt Rail Group for £2.5bn.

Asia’s richest man Li Ka-shing, owner of two investment vehicles Cheung Kong Infrastructure Holdings (CKI) and Cheung Kong Holdings (CKH), will purchase the rail group from its majority stake holder – a consortium that includes 3i Infrastructure, Morgan Stanley Infrastructure Partners and STAR Capital Partners – with a 50% share going to each vehicle. The deal has an equity value of around £1.1bn, giving an enterprise value of £2.5bn, and is expected to close in March 2015.

Travers Smith advised management on the sale of Eversholt Rail Group, which owns around 28% of the current UK passenger train fleet, led by corporate partner and head of private equity Paul Dolman, alongside tax partner Kathleen Russ.

Freshfields acted for the sellers with Richard Thexton leading the team alongside corporate partner Claire Wills. Partner Helen Lethaby provided tax support alongside partners Alastair Chapman on antitrust, competition and trade issues and David Pollard on pensions issues, while partner Simon Weller advised on the Hong Kong Listing Rules aspects.

Thexton said: ‘Following on from our role advising the selling consortium on the successful disposal of Porterbrook Rail in October 2014, this second deal in the sector in a short space of time clearly demonstrates our capabilities as the go-to firm for complex infrastructure M&A.’

The Porterbrook deal saw Freshfields act opposite Linklaters which advised the buyers – a group of investment funds including Alberta Investment Management Corporation, Allianz Capital Partners, EDF Invest and Hastings Funds Management.

A&O’s team consisted of a cross-border, cross-practice team of lawyers led by partners Richard Evans from London and Bernardine Lam from Hong Kong, for issues around corporate, regulatory and anti-trust.

jaishree.kalia@legalease.co.uk

Legal Business

Clashing titans: Taylor Wessing acts as MetLife sues A&O client JP Morgan for $107m

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Litigation Allen & OveryTaylor Wessing
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Two giants of the US financial services market, insurer Metlife and investment bank JP Morgan, have begun a legal battle in the UK High Court over a $107m sum the insurance firm says it is owed after ‘breaches of contract’.

Metlife is suing its banker for not paying what it says is the true value of Argentine inflation-linked bonds, purchased in 2007, after the state rigged data to distort inflation figures.

The insurer’s Argentinean unit claims JP Morgan is using a figure it ‘knows to be false and distorted’, with the investment bank’s Buenos Aires managing director Facundo Manujin having acknowledged the state’s ‘falsification’ of inflation measurement the consumer price index.

Metlife has instructed Tim Strong, a disputes partner at Taylor Wessing, and John Taylor QC of Fountain Court to bring the claim. Metlife’s legal team will argue that the losses were caused by JP Morgan’s use of an index that economists argue only accounts for a third of true inflation levels and is not in good faith of the deal. The insurer is also seeking interest and costs.

JP Morgan’s own economist admits that inflation levels were over double that of the consumer price index but the investment bank argues that there is ‘no event, no matter how grotesque the restrictions or limitations placed on the calculation’ that could alter the level of return on the bond.

Allen & Overy partner Calum Burnett and David Wolfson QC of One Essex Court have been instructed by JP Morgan. Hearings are set to conclude by 30th January.

tom.moore@legalease.co.uk

Legal Business

US-Russia relations: A&O, Skadden and V&E win roles as oil company EDC delists and sells $1.7bn stake

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Corporate Allen & Overy
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Despite the volatile economic conditions in Russia, Allen & Overy (A&O), Skadden, Arps, Slate, Meagher & Flom and Vinson & Elkins (V&E) remain active in the region after having scored roles on Eurasia Drilling Company’s (EDC) delisting and subsequent minority stake sale.

Announced in the early hours this morning (20 January), the Russian publicly-traded company agreed with members of its management team that EDC will combine with EDC Acquisition Company for a transaction structured under Cayman Islands law and valued at $3.2bn. In the process EDC will be delisted from the London Stock Exchange with its minority shareholders paid $22 per share. The company’s board of directors formed a special committee advised by V&E to negotiate the terms of the merger while Skadden represented EDC Acquisition Company.

A&O-advised Schlumberger has then agreed to acquire a minority stake in EDC for an estimated $1.7bn for a 45% of total shares at completion. Schlumberger also has the option to buy the remaining 55% of shares under a ‘call’ option within the next five years. The deal is subject to a number of conditions and is expected to close in the second half of February 2015.

The V&E team was led by London corporate partner François Feuillat alongside corporate partners Natalya Morozova in Moscow, Kimberley Wood in London and Steve Gill in Houston. The special committee is also being advised on Cayman Islands law by Maples and Calder corporate head Jack Marriott out of London.

EDC Acquisition Company advice was led by Skadden partner Danny Tricot in London along with the firm’s co-head of Moscow Alexy Kiyashko and assistance from Walkers on Cayman law aspects. A&O corporate partner Jeremy Parr and Moscow’s head of corporate Anton Konnov represented Schlumberger, alongside Appleby.

The move represents an unusually large investment by US-listed company Schlumberger in Russian headquartered EDC during a period of rising tensions between Moscow and the US, and will play a large role in the development of Russia’s oil industry after the completion. This follows the reduction in oil prices by half since last summer which is set to bring increased consolidation in the oil and gas sector.

jaishree.kalia@legalease.co.uk

Legal Business

Online service take two: Allen & Overy re-launches e-business

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Innovation Allen & Overy
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Allen & Overy (A&O), which recently has set the pace for providing alternative service delivery models such as its PeerPoint flexible lawyer initiative, has re-launched its online derivatives service in a bid to appeal to a broader set of clients.

The online service, now dubbed ‘aosphere’, will offer compliance and risk management solutions and cross-border legal information as more clients globally are facing regulatory obligations. The re-launch comes as the firm aims to improve previous attempts of creating an online service that offers generic, low cost and accessible advice.

The re-branded site aims to tap into the firm’s wider client base, including asset managers and corporate clients, as well as financial institutions, and offer a wider range of services including G20 reporting requirements, derivatives clearing, shareholding disclosure, marketing restrictions and cross border data transfer.

‘US asset manager clients is where we are growing the fastest as compliance with regulatory frameworks outside of the US grows,’ says Marc-Henri Chamay, chief executive at aosphere. ‘In the last two to three years, we have also seen a rise in the number of sovereign institutions, banks and funds buying services in Asia.’

The team of 25 lawyers and support staff are based in London and Belfast and the service itself runs on an annual subscription fee paid by the clients. Over 50% of the subscription revenues come from non-derivatives products while the overall average subscription renewal rate stands at 97%.

A&O first launched the Derivatives Services in 2001 to sell a generic service that focused on the over-the-counter derivatives market with products such as netalytics and CSAnalytics but it wasn’t until the financial crisis that the service started to develop. Now, over 200 clients use the service compared to just 40 in 2008 – this mainly includes financial institutions but the firm is seeing a growing number of funds and asset managers take up the service.

‘Some clients used to do this themselves in-house. And then, the financial crisis hit and with it the pressure on budgets. People now want better solutions and the idea that “I can do this internally” has disappeared,’ Chamay added.

A&O is one of the most active from its peer group to experiment with new models, with the firm particularly getting noticed for challenging orthodoxy when it launched high-end contract service Peerpoint in 2013.

Other innovative models that seem to be paying off include the firm’s Belfast legal and support services centre, which helped reduce the firm’s operating costs by £15m through greater efficiency savings.

jaishree.kalia@legalease.co.uk

Legal Business

First claim of the year: Allen & Overy selected by energy giants to sue Spain in large arbitration claim

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Litigation Allen & Overy
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Nine investors in Europe’s largest solar power plant, including German energy giant RWE, have instructed Magic Circle firm Allen & Overy to sue Spain at the World Bank’s arbitration court following cuts to solar energy subsidies.

In what is the first to be made at the International Centre for Settlement of Investment Disputes (ICSID) in 2015, eight German investors, including RWE, Ferrostaal and the city of Munich owned electricity supplier Stadtwerke München, together with a Spanish consortium owned by the triumvirate called Marquesado Solar, have filed an arbitration claim worth ‘hundreds of millions of pounds’.

The group are investors in Andasol power plant, a two square kilometre solar plant in Andalusia, southern Spain. They are entering arbitration under the Energy Charter Treaty, which 54 states including Spain have signed, giving investors of those countries the right to sue signatories if their investments are not protected or illegally damaged through state legislation. London-based arbitration partner Jeffrey Sullivan has been instructed to lead on the claim while Jose Luis Gomara Hernandez, head of investment arbitration at the Spanish Attorney General’s Office, is leading the country’s defence.

RWE’s renewable energy unit RWE Innogy reported in November that its operating profit fell from €111m for the first nine months of 2013 to €29m for period in 2014, in part due to ‘the reduction in subsidies for renewable energy plants by the Spanish government’.

The claim is the tenth pending against Spain at ICSID following the country’s decision to cut tariffs that had allowed investors to recover the cost of installing solar power infrastructure by charging above-market prices for electricity. Allen & Overy is handling six of the claims, including a multimillion pound claim from Paris-based private equity house Antin Infrastructure, with Sullivan combining with London-based partner Judith Gill QC and Madrid disputes head Antonio Vazquez-Guillen to bring billions of pounds worth of claims against the state, most of which are still being quantified by the accountants.

Allen & Overy’s arbitration team has experienced a bumper 2014 after being selected by Nokia to represent the Finnish phone maker in two claims worth a combined $775m against India in a tax dispute that has seen the company’s assets frozen. It is also defending Pakistan against two claims at ICSID.

London-based arbitration partner Mark Levy told Legal Business: ‘The past two or three years have been incredibly busy for us in London and globally. The Spanish work has been fantastic and there are similar issues across Europe which look as if they’re going to give rise to similar claims.’

tom.moore@legalease.co.uk