Legal Business

‘Clients are not only seeking legal expertise but also looking for firms that practice what they preach’ – ESG Q&A: Herbert Smith Freehills

Could you share some examples of innovative ways Herbert Smith Freehills is working with clients in the ESG space?

Silke Goldberg: At Herbert Smith Freehills, we are actively engaging with our clients in the ESG space through innovative tools like our Global ESG Tracker and ESRS Navigator.

Legal Business

Political persuasions – what City partners are hoping for from the next Government

On the eve of a general election that looks set to promise a wipeout for the Conservative Party and the first Labour government in 14 years, LB checked in with a range of City partners across a variety of practice area to gauge the temperature of the UK legal industry, find out what they think will change, what won’t, and what to watch out for.

Things can only get better?

‘As of now, the polls suggest that if Labour achieve the same majority as Tony Blair did in 1997, it would be a good result for the Conservatives.’ This from Paul Butcher, director of public policy at Herbert Smith Freehills in London, sums up prevailing sentiment among not just the legal community but the wider media.

Indeed, the BBC’s poll tracker shows Labour poised to secure 40% of votes cast, with the Conservatives languishing at 20% – a stunning reversal in fortunes for the two parties after the Conservatives roared to victory in 2019 with 43.6% of the vote to Labour’s 32.1% and a majority of 80 seats. Now, The Economist predicts that Labour will emerge with 434 seats – more even than it won in 1997.

Polls can of course be wrong. But things do not look good for the Conservative Party – and not a single partner interviewed for this feature expressed any scepticism about a Labour victory.

‘Like everybody else, we’re expecting a Labour government’, says Quinn Emanuel London co-managing partner Ted Greeno (pictured).

Given the near unanimous expectation of a Labour victory, it is encouraging that the market view on the party is broadly positive – if not wildly enthusiastic. ‘I view this election as relatively benign, especially from the perspectives of the financial services and legal sectors’, says Latham & Watkins corporate and capital markets partner Mark Austin. ‘Unlike the last election, we now have two relatively centrist main party leaders and parties.’

Views in the finance community are similar, says McDermott London managing partner Aymen Mahmoud: ‘The usual measure of market reaction to a change in government is any movement in treasury or gilt markets. The fact that we haven’t seen one tells us that whichever party wins the election will be pro-business and, in the case of the Labour government, pro-worker.’

This is at least in part the result of a concerted effort by Labour. ‘Labour has been courting the business community over the last couple of years, really listening to what it needs’, notes Katy Colton (pictured, below), head of the politics and law group at Mishcon de Reya.

Down to brass tax

However, opinions on the Labour manifesto are not unanimously positive, with tax one particular area of concern – and not just the proposals for VAT on private school fees. ‘The Chancellor made a surprise announcement a while ago about cracking down on nondoms, but Labour has committed to going further, whilst at the same time pledging to tax carried interest to income tax instead of capital gains tax, which will have implications for the private equity industry’, says Colton.

These proposals raise the spectre of what Colton calls ‘an exodus of high-net-worth individuals’. Other partners, meanwhile, point to the risk that tax increases could discourage investment into the UK. This would be especially damaging as Labour has acknowledged that it will struggle to finance even its more modest proposals for change, and has placed economic growth at the core of its pitch to voters. The party has spoken too about closing loopholes in the tax regime, but partners are sceptical that there are enough loopholes to close to garner the kinds of revenues that Labour needs.

Still, Butcher points out that the tax issue is ‘heavily derisked for businesses compared to 2017 or 2019’. ‘They will find ways of raising taxes,’ he explains, ‘As under either party they will always find taxes or allowances not subject to promises. However, they are far more pro-business and pro-private sector investment. Their vision involves a more interventionist approach and more co-investing. Nevertheless, they embrace private investment, which will be reassuring.’

Employment is another area where the two parties diverge. Says Colton: ‘There are changes that are going to be interesting for employment lawyers, with Labour promising to increase day-one rights for workers and to remove some of the restrictions on unions, while the Conservatives are saying they’ll increase restrictions.’

Butcher agrees: ‘Concerns are much less acute than they were with Jeremy Corbyn in 2017 and 2019, but it will be a very different government to the current one. They will want to intervene much more in the economy. For example, in employment rights, they propose what they frame as the biggest upgrade to workers’ rights in a generation.’

However, he also makes sure to temper expectations: ‘Admittedly, it would also be the only upgrade in a generation.’

Powering up

Of course, much of what any incoming government does will be dictated not by its ideology or priorities but by its response to long-term challenges. The struggle between energy security and energy transition looms particularly large here.

‘Whatever the make-up of the new government, it seems inevitable that legislation will be enacted to bring forward regulatory change, especially in the energy and infrastructure sectors’, says Vinson & Elkins London corporate head Ben Higson. ‘The new government will inevitably need to continue balancing the need for energy security and the drive to net zero: brought into sharp focus, I think, as real progress will need to be made during the five-year term on both fronts.’

Here, too, though, there is no sense that a Labour government will mean a radical break with the status quo. ‘Labour has a ‘moonshot’ proposal to decarbonise the electricity system by 2030,’ says HSF’s Butcher. ‘This could help focus efforts on issues like planning, as achieving this would be impossible without planning reform. This urgency also means they need to proceed with current plans rather than implementing new reforms. In energy, this is likely positive, as we have a good strategy for encouraging investment. Investors will likely welcome such stability over constant changes. Labour’s emphasis on quick implementation should reassure investors and could facilitate progress if executed well.’

Both Higson and Butcher point to nuclear power as one key area to watch for signals from the incoming government. Butcher expects that Labour ‘will be just as supportive as the current government. They recognise the reality that decarbonising by 2050 necessitates a significant amount of nuclear power; current technologies cannot achieve this alone.’ But he does not discount the possibility of further action: ‘The current government has established a solid foundation. Now, reforms to planning are needed to move forward, offering Labour a great prize if they can seize it. Currently, they appear as committed as the current government. However, I would urge them to go even bolder with the UK’s nuclear ambitions.’

Contentious matters

On the disputes front, Quinn’s Greeno is optimistic that a change in government will not present any unwelcome upheaval for litigators. ‘There’s no particular reason to think that anything’s going to change, at least in the short term’, says Greeno of the commercial litigation market. ‘Hopefully, the legislation on litigation funding pending when the election was called will be picked up and carried through by a Labour government. It’s pretty uncontroversial and in everyone’s interests to assist with access to justice.’

However, the dangers of an underfunded court system remain. Says Greeno: ‘We all know that the criminal justice system is crumbling due to lack of funding. One would have hoped, perhaps, that, as a former Director of Public Prosecutions, Keir Starmer would be alive to the risks of doing nothing to reverse that. None of the parties seem to think there are any votes in supporting a properly funded justice system, but as we see more years long delays and miscarriages of justice, I think this topic will gain more political traction.’

It is unclear what any government could do to relieve the stress on the system without an influx of cash. Increasing court fees would be ‘self-defeating’, argues Greeno, because ‘it would inevitably discourage some litigants from coming to London’, potentially sacrificing enormous funds. ‘Whatever the amount of revenue that would be raised by such a measure, a significantly greater amount would be lost if only one major case went elsewhere.’

The problem may be a hard one to solve. But that does not mean that the new government should shy away from it. For Greeno: ‘All governments are happy to talk about the rule of law, but they continue to take it for granted by underfunding the courts.’

Stable door

The feeling from the City’s corporate lawyers is that pre-election jitters from clients are, to date, relatively limited. The period since Rishi Sunak announced the election on 22 May has seen some businesses hold off on making any major moves until the new government comes in. But most define this as the usual waiting period that comes before any major election.

‘The timing is helpful’, says Austin, ‘because getting it done by mid-July means businesses and investors can confidently plan for the rest of this year and the first half of next year.’

Across the board, observers expect and hope for certainty. ‘It remains to be seen how the new government may impact the M&A markets’, says Higson. ‘But, at the least, a five-year term should provide some stability for businesses and investors going forward.’

A&O Shearman UK managing partner Denise Gibson (pictured) concurs: ‘The UK is in desperate need of substantial investment in this county’s physical, digital and social infrastructure, and its people. The country is also craving stability in decision-making.’

For Colton, ‘Having an election, regardless of the outcome, is a good thing for the business of law, because there’s been so much uncertainty, and an election will give us more certainty in terms of who the next government will be.’

Butcher is encouraged on this point: ‘Stability has become the prevailing trend. Politics seems to be returning to a more normal state post-Brexit and post-pandemic. We are moving to a situation resembling more typical political dynamics, and I hope this leads to improved legislation – but time will tell.’

Legal Business

Passing the torch: HSF’s outgoing arbitration head Hodges looks back on her time at the firm

Herbert Smith Freehills this week announced the appointment of new co-heads of its global arbitration practice, succeeding Paula Hodges KC, who is retiring after 37 years with the firm.

Simon Chapman KC and Andrew Cannon will now co-lead the practice.

The London-based Cannon already holds an array of leadership roles including co-head of public international law, head of India disputes and co-head of the Nordic group, while Chapman, who is based in Hong Kong, is currently regional head of dispute resolution for Asia.

Hodges steps down after a hugely successful tenure at the firm, which she joined in 1987 as an articled clerk, before leading the global arbitration practice for 16 years.

In a 2020 interview with Legal Business, Hodges shared insights into her extensive experience as a litigator, recounting anecdotes about her career journey, challenges, triumphs, and personal reflections. Click the link below to read the interview in full:

Disputes perspectives: Paula Hodges QC – Legal Business


Legal Business

Lead partner: The year the United Kingdom becomes a globally leading life sciences hub?

As part of its ambition for the United Kingdom to become a tech and science superpower by 2030, in 2023, the government announced a range of initiatives aimed at boosting investment and innovation in the life sciences sector. Innovators will have welcomed the R&D tax relief reforms whilst the Mansion House Compact (the largest UK pension providers committing 5% of their assets to unlisted equities by 2030) announced in July has provided some hope of alternative pools of capital to unlisted UK life sciences companies.

Whilst the impact of those initiatives remains to be seen (and of course with a general election looming) the UK life sciences industry is being positioned to play an integral part in the growth of the country’s economy with many recent legal and regulatory developments also seeking to enhance the attractiveness of the UK as a leading life sciences hub. The UK’s offer to prospective investors will be centred around access to innovation, the financial firepower of the City, the introduction of progressive and pragmatic regulation and a robust advisory ecosystem, which it hopes will allow it to differentiate itself from the EU.

Legal Business

Sponsored briefing: Gender equity becomes key focus

Herbert Smith Freehills (HSF) has quadrupled the number of female partners in its London corporate team since 2017, with women comprising 45% of all new partners joining the team since then.

‘We knew we had a problem and we knew it was business critical to fix it,’ says Mike Flockhart, HSF’s London-based global co-head of corporate. Mike credits his fellow global co-head, Melbourne-based Carolyn Pugsley, as an important catalyst for change. ‘Carolyn brought different perspectives to the global leadership team, and was inspirational to a generation of female talent who were looking for leadership. Here we had a successful female partner, managing a career and family and being very authentic about her experience.’ Mike also notes the role that senior male leaders like James Palmer and Stephen Wilkinson played: ‘They were uncompromising about the need to change, and the need to prioritise the development and support of female talent.’

Legal Business

‘Improving growth has not been an easy task’: HSF posts record financials amid challenging conditions

Herbert Smith Freehills has marked a decade of consecutive annual growth with its latest financial results, posting the highest revenue, profit and PEP in the firm’s history.

Revenue has increased by 8% from £1.103bn to £1.186bn, while net profit and PEP are up by a more modest 2% and 1% respectively. PEP moved from £1,163,000 to £1,173,000 for 2022/23.

Speaking with Legal Business, CEO Justin D’Agostino (pictured), said: ‘We are particularly proud of the results this year, especially because there were some significant challenges in all of our markets, including rising costs and tougher trading conditions.’

D’Agostino explained why the firm has fared so well despite the less-than-ideal market conditions: ‘Our clients come from  strong sectors, such as energy, infrastructure, technology and banking. We are also focused on the twin engines of our contentious and transactional practices. That mix results in a very well-hedged global business.’

On the firm’s strategy, D’Agostino elaborated: ‘We launched our new strategy in November 2021, which has been having a positive impact. When we set out our strategy, we set out our choices on the areas we were going to focus on winning market share and grow: private capital, energy transition and ESG. We are seeing significant growth in these areas, and we will see sustainable growth for the next few years.’

Asked which were the firm’s best-performing  jurisdictions, D’Agostino responded: ‘London had an outstanding year, as well as strong, double-digit growth coming from New York. EMEA saw good growth too, with double digits from Milan, Dubai, Germany and Johannesburg.’

He added: ‘The market was tougher than previous years in Asia and Australia. Despite this we still saw double digit growth in Japan and South-East Asia too.

‘On the practice side, our contentious practice did particularly well. We saw increased client demand in class actions, competition and disputes deals. The largest class actions we are seeing are with our biggest clients, such as Google and Meta.’

Probed further on the firm’s US strategy, D’Agostino commented: ‘We have been growing our New York office and we will continue to grow organically there. We are very focused on the US market and real attention will be placed on it by us over the next period.’

HSF’s chief financial officer, Steve Bowers, contextualised the discrepancy between the acceleration in the rate of revenue increase and the reduction of the rate of PEP and profit growth since this time last year: ‘Compensation costs are high because of the intense demand for talent, which remains an issue. We continue to invest and ensure that our employees are rewarded and that we have the right standing in the market for talent compensation.

‘Macro factors such as high interest rates, as well as our investment into digital technology, our core systems, and further investment in our people is the right thing to do with long-term benefits. That means that sometimes there will be a disconnect between profit and revenue growth. You won’t see many firms of our size and scale this year having their best-ever results on those three key metrics.’

He added: ‘The context is important here. If we look at the performance for FY23, you do see client demand soften in a few places, but we are still doing really well. Improving growth has not been an easy task.’

Legal Business

HSF launches Riyadh office in the wake of Saudi legal reforms

Herbert Smith Freehills has announced the launch of its new multi-disciplinary practice in Riyadh following the reforms made to the Saudi Code of Law Practice last year. Managing partner, Joza AlRasheed, will be joined by energy and infrastructure lawyer Alexander Currie and projects and project finance specialist Phil Hanson. They will work in union with HSF’s regional team, consisting of eight partners and 30 associates.

Before last year’s changes to the code, non-Saudi law firms were required to enter into a contract with Saudi-licensed lawyers in order to advise on Saudi law. However, under the newly reformed code, HSF was able to end its alliance with The Law Office of Mohammad Altammami (LOMAT) and reopen as HSF Riyadh.

Qualified to practise law in Saudi Arabia and New York, AlRasheed is a corporate lawyer who provides advice on M&A, joint ventures and regulatory compliance. She is sought by a range of clients including private entities, governments and other public bodies in the energy, mining and infrastructure sectors. Previously an associate at both White & Case and Baker McKenzie from 2014 to 2021, AlRasheed joined LOMAT as a partner in May 2022.

During his 18 years working as a partner at HSF, Currie has been based in offices all over the world, including Moscow, Dubai, London and Sydney. He advises his clients on project development and financing, disposals of energy and natural resource assets, and restructuring distressed projects. His experience includes representing First Ammonia in its unprecedented agreement to purchase 500MW of solid oxide electrolyser cells from Danish decarbonisation-solutions company Haldore Topsoe in September 2022.

Hanson joined HSF’s Dubai office as an associate in 2014, making partner in May 2022. He acts on behalf of sponsors, lenders and procurers across a spectrum of international project finance and projects matters. Hanson is active in the energy and infrastructure sectors with expertise in water, wastewater, power and transport. Key work includes advising the lenders to a joint venture which reached financial close in April this year between utilities company Engie and EDF on the Noor 2 street-lighting project in the UAE.

In conversation with Legal Business, HSF managing partner of the Middle East region, Stuart Paterson, explained the rationale for setting up in Saudi Arabia: ‘The decision to build a regional practice in Riyadh is an evolution of our strategy to support our international clients in the Kingdom.

‘The Saudi vision of diversification also brings a whole host of opportunities in energy and other key sectors for investors and advisory firms like us to get involved in.’

AlRasheed added: ‘Like other international firms, we already had a presence in the Kingdom but had contractual obligations to regional firms as we couldn’t have a direct presence under the previous law. Some firms were fully integrated in the shell of local firms, but now the new law has opened the market, a lot of firms are following suit.’

Paterson added: ‘Up until last year, we were not licensed to open as HSF Riyadh. When the new regulations came out, we planned and implemented a very careful strategy to open our own office. We hired Joza last year to lead what would become HSF Riyadh in due course. We applied for our licence completely separately from the old team.’

When probed about how practising in Saudi, a country not necessarily recognised for its prioritisation of human rights, resonates with HSF’s ESG commitments, Paterson responded: ‘We are a business that takes these matters seriously and responsibly, with policies in place to make sure we are taking on the right clients and mandates in Saudi.

‘We have policies specifically on human rights and how to manage our supply chains to ensure that any ESG concerns are assessed. The ESG challenge in Saudi is different to other jurisdictions which we are astute to, as well as flexible and proactive in our approach.’

AlRasheed summarised the impact of the new legal regulations: ‘The key driver of this law from the Kingdom’s perspective is to transfer knowledge so that the Saudi legal framework is on par with international legal standards.

‘The government is putting a lot of effort into making it easier for international big players to invest and give them the comfort that their investment is protected.’

Legal Business

HSF alliance firm Prolegis launches Singapore disputes practice with Morgan Lewis team

Prolegis, the boutique which struck a formal law alliance (FLA) with Herbert Smith Freehills in 2015, has launched a disputes practice in its Singapore heartland with the hire of a team led by Daniel Chia (pictured) from Morgan Lewis.

Chia, who led the Asia disputes practice at Morgan Lewis, will take on the role of director and head of litigation and will bring with him three other lawyers. Jonathan Tang and Yanguang Ker will join Prolegis as directors, along with associate Charlene Wee.

Prolegis’ new disputes team will work closely through the FLA with HSF’s Southeast Asia disputes practice, led by Alastair Henderson, particularly with the firm’s 14-lawyer disputes team in Singapore.

Chia regularly appears before the Singapore High Court, the Court of Appeal and the Singapore International Commercial Court in major commercial disputes, arbitration-linked cases and restructuring and insolvency proceedings.

The team has experience representing multinational and Singapore companies, private capital funds and technology companies in payments and cryptocurrency services, as well as high-net-worth individuals.

Simon Chapman KC, Asia head of dispute resolution at Herbert Smith Freehills, said: ‘This major investment in the Prolegis practice provides our clients with seamless access to Singapore law disputes advice through the FLA. Daniel and his team’s eminent reputation in the Singapore courts is the perfect complement to our own market-leading Asia disputes practice.’

‘This is a major milestone in our investment plans for this region,’ said HSF Singapore managing partner Fatim Jumabhoy. ‘To meet growing client demand, we will continue to target the best lateral hires, nurture our longstanding alliance relationships and develop our existing talent.’

Legal Business

HSF, Davis Polk and Eversheds act on collapse as market expects FTX fallout

Partners from Herbert Smith Freehills (HSF), Davis Polk and Eversheds Sutherland have secured advisory roles on the administration and £3.4m sale of online furniture retailer to Next.

In early November, filed notice of its intention to appoint administrators, advised by a HSF team led by London restructuring partner John Chetwood and including City corporate partners Ben Ward and Caroline Rae. Since the administration, 320 jobs have been axed as the company collapsed.

Legal Business

HSF names London partner Flockhart as new corporate co-head

Herbert Smith Freehills (HSF) has appointed London partner Mike Flockhart as its new joint managing partner for corporate, succeeding the veteran deals guru Stephen Wilkinson.

Flockhart (pictured), who will assume the role on 1 December, will work alongside fellow co-head and Australian partner Carolyn Pugsley. Wilkinson, well regarded as the firm’s relationship partner for key client Sky, will return to full-time practice after four years in the leadership position.

An HSF lifer and a partner since 2013, Flockhart is an M&A and equity capital markets specialist, recently advising easyJet on its £1.2bn rights issue.

Speaking to Legal Business, Flockhart said: ‘I’ve been here for 20 years and love it. We’ve made great progress under Stephen and Carolyn, and I’m eager to take over and build on the great platform they have established. I’m enthusiastic about the future.’

By all accounts Flockhart assumes the position at a good time for HSF’s corporate division. Refinitiv data for 2021 had HSF ranked number one in the UK, Australia and Asia-Pacific respectively, and third in Europe, for announced M&A deals by value. And in Legal Business’s analysis of HSF from February, disputes managing partner Damien Byrne Hill claimed the corporate team had outperformed the firm’s much-vaunted contentious division that year.

Flockhart added: ‘After back-to-back record years, we have continued in that vein with a strong first half of the year. Markets are now less robust than they were, but we are still seeing a lot of opportunities, particularly in the energy transition.’

In terms of recent highlights for the deals team, Flockhart pointed to HSF advising Capital & Counties Properties in June on its merger with Shaftesbury. The two companies have a combined £5bn real estate portfolio, with assets in many of the capital’s most famous locations including Covent Garden, Carnaby Street, Chinatown and Soho.

HSF fielded a team from the London M&A and equity capital markets groups, including Wilkinson, Alex Kay, Heidi Gallagher and Michael Jacobs.

For more on HSF’s recent fortunes, read our analysis from this year: ‘Between Two Peaks’.