Legal Business

Guest comment: Covid-19 and City regulators – The limits of forbearance

Guest comment: Covid-19 and City regulators – The limits of forbearance

Forbearance is something of a dirty word in UK financial regulation, at least with regulators themselves. It describes a situation where watchdogs voluntarily exercise their discretion not to enforce rules or other requirements on the regulated. And that’s why they don’t like it – no regulator has ever prospered by giving its industry a free pass. Long-term pain for the regulator will outweigh any short-term gain to the industry as a whole.

Even so, you’d be forgiven for thinking the coronavirus crisis presents an ideal breeding ground for regulatory forbearance: a world-wide pandemic with seismic economic effects, stock markets tumbling, staff working remotely, and huge potential consumer detriment lurking around every corner.

So, if now isn’t the time for a little forbearance, when is?

But what’s interesting is how UK regulators are fulfilling their mandates. They’re walking a tightrope between two roles every parent will find familiar: allowing activity and setting expectations. Or, to put it another way, taking positive action to protect the industry and the economy, and ensuring firms meet their responsibilities. In that context, any forbearance is likely to be limited.

On the prudential side, regulators have taken steps aimed at giving firms more freedom to manoeuvre in financially testing times. In March 2020, the Financial Policy Committee (FPC) set the Counter-Cyclical Capital Buffer at 0%, freeing up capital for banks to lend, and the long lead-in period for implementing increases in the buffer mean that banks won’t need to hold capital against it again until March 2022 at the earliest.

And then comes the pro-active parenting, and it’s all about setting boundaries. Shortly after the FPC took its decision, the Prudential Regulation Authority (PRA) made clear that it did not expect banks to use the additional capital freed up to pay dividends. And it noted any proposals to use those funds in bonus pools should be discussed, documented and (if necessary) challenged by boards and remuneration committees. Building on this stance, a joint letter from the Treasury, the Bank of England and the Financial Conduct Authority (FCA) dated 25 March encourages banks to keep lending.

The FCA has adopted a similar approach, making it clear that it is sympathetic to the impact COVID-19 will have on firms. It recognises that new modes of remote working are likely to place significant strain on compliance frameworks, and has asked firms to contact it to discuss matters if they are having difficulties.

But as with the PRA, the FCA’s approach also reinforces its expectations, and – consistent with its role as a conduct regulator – carries more dire warnings. In guidance issued to mortgage lenders, the FCA notes that any consumer who might have difficulty paying their mortgage due to coronavirus should be granted a three-month payment holiday. It goes on to say that lenders will likely breach rules on treating customers fairly if they start or continue possession proceedings, or seek to enforce a previously-obtained possession order against a consumer. Failure to follow the guidance, the FCA notes, may be relevant in an enforcement context.

Insurers are expected to take account of the changed circumstances in the way they write new business, process renewals and deal with claims. So, the FCA notes that in some cases a firm might not treat a customer fairly if it refuses to renew a policy, even if the product is being suspended. Likewise, the FCA does not expect motor and home insurers to reject claims that arise as a result of the new paradigm for home working.

Sitting behind this is the threat of enforcement, particularly at any suggestion of firms taking advantage of the current situation. Given the positive steps the authorities have taken to combat the crisis, the regulators will be on the look-out for poor behaviour that should be punished. If they find widespread misconduct then their approach may well become more directive. Parliament and society will expect no less.

We would all do well to remember that – as any parent will tell you – sympathy rapidly dissipates when confronted with wrong-doing. And in a regulated industry, arguments around forbearance won’t help if you find yourself on the wrong end of an intervention.

Robert Dedman is a partner at King & Spalding and former head of enforcement at the Bank of England/Prudential Regulation Authority

For more legal analysis on the coronavirus crisis, see ‘Guest comment: HSF disputes chief assesses the City litigation market’s Covid-19 response’ and click here for our latest coverage

Legal Business

Quinn breaks £100m City revenue barrier as King & Spalding hikes London revenue 15%

Quinn breaks £100m City revenue barrier as King & Spalding hikes London revenue 15%

Disputes heavyweight Quinn Emanuel Urquhart & Sullivan has continued its impressive growth in the City, with revenue at the firm’s London office increasing 20% to £100.6m.

The US-bred firm also saw profits rise 11% to £67.2m, putting the office’s profit margin at 66.7%. The results cement Quinn’s place as ‘unquestionably the market leader in litigation-only practices in London,’ according to senior partner of the London office Richard East.

The revenue increase is an improvement on the firm’s impressive showing last year, when turnover increased 16% to £83.6m. However, profit growth was marginally ahead for 2018, growing 13% to £59.3m. The firm counts 19 partners in its London office and had 69 associates/of counsel at the end of 2019, up from 54 at the beginning of the year.

‘This has been another year of fantastic growth in London revenues with all areas of our practice contributing to our success,’ said Quinn co-managing partner Alex Gerbi. ‘We remain very ambitious and believe that we can continue to grow our market share and further entrench our position as the ‘go-to’ disputes firm.’’

The firm’s City performance has been driven by a number of standout disputes over the last year, including high-profile group action claims such as the Merricks v Mastercard dispute and the truck cartel investigation.

Meanwhile, fellow US outfit King & Spalding has also produced strong financial performance in the City. The firm increased London revenue 15% to $55.7m, an improvement on last year’s growth of 12% in its UK business. Firmwide revenues also saw growth, up 6.1% to $1.34bn, while profit per equity partner was up 5.4% to $3m. The global growth rate is down on last year, when the firm upped revenue 9%.

So far in 2020 US firms have disclosed robust financial performances for 2019. Morrison & Foerster kicked off the reporting season last month, when the firm revealed a 25% uptick in City revenue and a 10% revenue rise globally.

Legal Business

Sponsored briefing: Insight – The arbitration market

Sponsored briefing: Insight – The arbitration market

Partners in King & Spalding’s London disputes team discuss their thoughts on some of the current trends and issues within the litigation and international arbitration markets

The disputes market

How has the disputes market changed in the last 20 years?

Legal Business

King & Spalding posts stronger year globally with UK revenue up 12%

King & Spalding posts stronger year globally with UK revenue up 12%

US outfit King & Spalding notched a 12% growth in its UK business for 2018, with London revenue rising to $48.3m, up from $43.1m last year.

Meanwhile, firmwide revenues rose 9% to $1.26bn from $1.14bn in 2017, while firmwide profit per equity partner rose 9% to $2.85m. The results in London in particular mark a stronger performance for the firm, after only managing to inch revenue forward 1% last year from $42.6m to $43.1m.

Commenting on the results, King & Spalding’s London managing partner Tom Sprange QC said: ‘The firm identified London, alongside New York, as a key office for expansion so our figures, with increases in both revenue and headcount, show we are developing some genuine traction. The numbers are encouraging, of course, but expansion is an ongoing, evolving process – especially in a competitive legal market such as London. We are continuing this momentum into 2019 and beyond with further investments and quality additions across our transactional, disputes and investigations practices. It is a long-term strategy.’

The results mean between 2013 and 2018 the firm has recorded a 106% increase in London revenue. In 2018 the firm made three lateral partner hires in London with former Hogan Lovells partner Derek Meilman and ex-White & Case partner David Cox the standout transfers. London lawyer headcount for the firm currently stands at 54, while City revenues make up approximately 4% of the firm’s global turnover. It is not simply in size where the firm is gaining traction – in 2018 the firm acted on LCCG’s £1.8bn deal with Equitable Life, fielding a London-based team on the mandate.

‘We added high-quality partners across our international network in 2018, including in the UK, Europe, the Middle East and Asia,’ said King & Spalding chairman Robert Hays. ‘We have good momentum but take nothing for granted.’

These results extend the narrative of US firms performing well in the City further, with White & Case scoring a 7% revenue increase to $350m in London while Milbank Tweed Hadley & McCloy recorded a pacey 25% uptick in City turnover.


Legal Business

Freshfields and King & Spalding secure mandates as Equitable Life completes its turnaround with £1.8bn sale

Freshfields and King & Spalding secure mandates as Equitable Life completes its turnaround with £1.8bn sale

Equitable Life put pensions at risk when it nearly collapsed in 2000. But 18 years on it has completed its turnaround with Life Company Consolidation Group (LCCG) agreeing to acquire the UK’s oldest life assurer for £1.8bn.

Equitable Life turned to Freshfields Bruckhaus Deringer, which fielded a team led by corporate insurance partner George Swan and included restructuring and insolvency specialists Neil Golding and Craig Montgomery.

Legal Business

Revolving Doors: Akin Gump and King & Spalding boost London benches while international lateral hiring continues apace

Revolving Doors: Akin Gump and King & Spalding boost London benches while international lateral hiring continues apace

In a week dominated by European and international partner hires, US firms Akin Gump Strauss Hauer & Feld and King & Spalding were among four firms to add to their London benches with strategic additions in project finance and white-collar crime respectively.

After the coup of hiring former Financial Reporting Council (FRC) heavyweight Gareth Rees QC last September, King & Spalding has underscored its ambitions of being a serious corporate crime firm in London with the appointment of Aaron Stephens from Berwin Leighton Paisner (BLP).

Stephens had a 10-year stint as BLP’s head of corporate crime and investigations, representing various clients who were under investigation by regulatory bodies including the Serious Fraud Office (SFO) and Financial Conduct Authority (FCA).

Rees QC told Legal Business that the firm aims to recruit a five-strong team by the summer with the addition of an of counsel and a more junior associate. He commented: ‘We want to become recognised as an eminent white-collar team in London. Aaron’s hire is an incredibly strong contribution to that aim.’

‘He has a great reputation in the market. I asked my mates when the hire became a possibility, and it seems Aaron is very well-liked and well-respected, which is a good combination.’

Meanwhile,  Akin Gump has snapped up Julian Nichol from Bracewell in London as a partner in its global project finance practice. Nichol will focus on transactional energy and natural resources matters, having previously headed the EMEA power group and co-headed the firm-wide oil and gas practice at Bracewell. He advises investors from across EMEA looking to invest in the US and around the world, as well as international investors looking to invest in EMEA.

Elsewhere in London, Eversheds Sutherland lost real estate partner Anthony Van Hoffen to fellow City firm Lewis Silkin, while Carl Rohsler, Squire Patton Boggs’ head of IP litigation and gambling regulatory practices, left for Memery Crystal.

The week saw a flurry of activity in Europe, with Linklaters, Herbert Smith Freehills, Dentons and Orrick all adding laterals across the continent.

Freshfields Bruckhaus Deringer’s Frankfurt-based employment partner Timon Grau left to join fellow Magic Circle firm Linklaters in its employment practice out of Düsseldorf and Frankfurt.

Matthew Devey, who will be head of Linklaters’ employment practice group from 1 May onwards, said of Grau: ‘His expertise in fields that are of crucial importance to our German clients in particular – such as dealing with trade unions and works councils, matters concerning corporate bodies, compliance and crisis management as well as restructurings – will brilliantly add to our strengths in the field of providing strategic advice to international clients and dealing with cross-border matters.’

Meanwhile Herbert Smith Freehills boosted its Paris real estate practice, hiring Anne Petitjean as a partner from White & Case, where she had been a counsel for 11 years, advising on French and foreign investment funds, as well as institutional investors and developers on acquisitions of real property portfolios investments and project management.

Orrick’s hiring of Geneva and London-based arbitration partner James Hargrove was another loss to Eversheds Sutherland last week. Hargrove has advised on numerous arbitrations and litigation matters involving tech and telecoms, commodities and trade, energy, construction and financial sectors in London, Europe, the Middle East, Africa, and other jurisdictions.  He also has a particular track record in Russia and CIS-related disputes.

Australian hires have focused on disputes, with Quinn Emanuel Urquhart & Sullivan and Ashurst both making lateral hires in the space within a week.

Quinn Emanuel hired Michael Lundberg, former partner in charge and head of disputes at King & Wood Mallesons’ Perth office and head to its own team in Perth.

Meanwhile Ashurst bolstered its Canberra disputes bench with dispute resolution partner Melanie McKean from Norton Rose Fulbright. With 18 years under her belt, she has advised corporate and private clients, as well as acting on major investigations for the Australian government.

TMT partner Angela Summersby also joined Ashurst in Canberra from HWL Ebsworth to advise on Australian Government contracting, intellectual property, privacy and business process outsourcing.

Meanwhile Clyde & Co has made a key hire for its Middle Eastern strategy, appointing Marla Valdez as managing partner of its associated office with Fatma Al Mamari Advocacy and Legal Consultancy Firm in Oman. Formerly a partner at Dentons in Oman, Valdez will be joined by legal director Stephen McKenna, who is relocating from Clyde & Co’s Abu Dhabi office.

Legal Business

King & Spalding partner Wray discloses $9.2m earnings before confirmation as FBI head

King & Spalding partner Wray discloses $9.2m earnings before confirmation as FBI head

King & Spalding litigation partner Christopher Wray, nominated as FBI director, earned $9.2m for his partnership share over the last eighteen months, according to documents.

Washington DC-based Wray, who joined the US firm in 2005 after serving as assistant Attorney General in charge of the US Department of Justice’s criminal division, detailed his salary and client connections before his confirmation hearing. On 13 July, he will replace former FBI director James Comey, whom Trump fired.

Following his exit from King & Spalding, Wray will receive his final partnership share distribution, a payment returning capital he paid into the firm. He will also receive a further lump sum distributing his cash pension plan balance with the firm, the documents stated.

In a separate document, Wray said he anticipated receiving an estimated $880,000 partnership distribution from King & Spalding on July 17, reflecting his share for June. If he continues as a partner for the rest of July, it is expected he will receive an estimated $815,000 before his exit.

The document also details he expects the return of his paid-in capital at King & Spalding to be $1.27m if he leaves the firm at the end of July.

Wray disclosed a list of clients from which he has received more than $5,000 including Credit Suisse, Johnson & Johnson, Wells Fargo, Chevron Corp. and two online sports betting groups, FanDuel and DraftKings. Four clients were kept confidential. Wray disclosed that three were subject to non-public investigations and one was subject to DC Bar Rule 1.6 regarding confidentiality of information.

Wray’s confirmation hearing before the Senate panel comes more than two months after Trump fired Comey. Trump announced his intention to nominate Wray in early June, with the nomination sent forward three weeks later at the end of last month.

Legal Business

‘Remarkable deal’ for tech: King & Spalding, SullCrom line up Delivery Hero’s €1bn IPO

‘Remarkable deal’ for tech: King & Spalding, SullCrom line up Delivery Hero’s €1bn IPO

King & Spalding and Sullivan & Cromwell are leading one online food-delivery service Delivery Hero’s planned initial public offering (IPO) €1bn target, with Freshfields Bruckhaus Deringer advising the underwriters. 

The IPO would value Delivery Hero at €4.4bn. The Berlin-headquartered company said it will sell up to 39m shares with pricing set at €22 to €25.50.

Freshfields’ team, acting for the underwriters on the deal, is led by financial institutions global co-head Christoph Gleske.

King & Spalding is advising Delivery Hero on the US law side while Sullivan & Cromwell is acting on German delivery service laws. King & Spalding is advising Delivery Hero on the US law side while Sullivan & Cromwell is acting on German delivery service laws. King & Spalding’s team includes London based-capital markets partner Markus Bauman (pictured) and tax partner John Taylor. 

Sullivan & Cromwell’s Frankfurt based partners Carsten Berrar and Krystian Czerniecki are advising.

The company’s online and mobile platforms reach customers across 40 countries in Europe, the Middle East & North Africa, Latin America and the Asia-Pacific region. Its brands include, Foodora and Foodpanda. The company was set up in 2011.

Bauman told Legal Business: ‘It is a remarkable deal for the tech ecosystem in Europe generally, Berlin specifically. There are any number of push and pull factors that may see these companies go to market or stay private a little bit longer’, he said

‘The wealth of private money that is available to them is one thing that keeps them off the market but many of these companies will find their way over the next few years’ Bauman added.

King & Spalding has been advising Delivery Hero since 2015, when Berlin-based e-commerce group invested $586m in Delivery Hero.

Legal Business

A tale of two firms: K&S London turnover drops by 8%, while Covington ups City revenue by 9%

A tale of two firms: K&S London turnover drops by 8%, while Covington ups City revenue by 9%

King & Spalding‘s London revenue dipped by 8%, while Covington & Burling‘s City turnover went the other way, improving by 9% for the calendar year 2016.

King & Spalding’s City income is down to $42.6m from $46.5m in 2015, despite the firm’s global turnover increasing by nearly 4% to $1.1bn.

The lawyer headcount of the firm in London also dropped from 53 to 47, as the US firm’s London revenue per lawyer (RPL) increased by 3% from $877,358 the year before to $906,382 in 2016.

The firm’s London head Garry Pegg said: ‘While we saw a modest reduction in headcount last year and therefore an expected decrease in revenue, we continue to prioritise efficiency and productivity.’

Key mandates for King & Spalding in 2016 include representing Aldersgate Investments on the £2.4bn Global Switch deal in December last year, as well as GlaxoSmithKline on its strategic collaboration with Germany-based Miltenyi Biotec in March 2016.

Last year King & Spalding also hired Jones Day’s head of employment Jules Quinn, and relocated disputes partner John Savage QC to London from Singapore. Savage was made a Queen’s Counsel last month.

Meanwhile, Covington’s London revenue, which accounts for 8% of the firm’s global turnover, increased by 9% from $63.6m to $69.5m. Lawyer headcount at Covington also decreased marginally in the US firm’s London office from 85 to 83, including one less partner.

Globally, Covington’s RPL hit $1m for the first time last year, while revenue was up by 13%, around $96m, to $838.5m.

Covington recently hired five partners from King & Wood Mallesons’s collapsed EUME arm including KWM’s high-billing head of litigation Craig Pollack.

Pollack was one of the biggest billers at KWM’s City office and advises investment banks, hedge funds, public companies and high net worth individuals.

Major mandates include advising a major Russian telecoms provider in post-LCIA arbitration enforcement proceedings across various jurisdictions, and defending a star hedge fund manager in a Financial Conduct Authority investigation into regulatory breaches.

Other former King & Wood Mallesons partners to move to Covington include Alex Leitch, Greg Lascelles, and Elaine Whiteford.

Legal Business

King & Spalding takes key role on $12bn Saudi public-private partnership

King & Spalding takes key role on $12bn Saudi public-private partnership

King & Spalding (K&S) has won a lead role on a $12bn public-private partnership as Saudi Arabia moves to privatise the construction and management of school buildings.

The deal will see HSBC act as financial adviser for the state-owned firm Tatweer Building Co, which is associated with the Saudi Ministry of Education, in its efforts to privatise the management and construction of school buildings.

K&S is providing legal advice to Tatweer with a team led by partner Leroy Levy. The firm had previously advised the national shipping company of Saudi Arabia, Bahri, on its framework agreement with the Arab Petroleum Investments Corporation to establish an investment fund to acquire large crude carriers.

Other projects the firm has contributed to in the Middle East include advising Arabian Company for Water and Power Development on the Islamic financing for a new $2bn industrial gases project in Saudi Arabia.

K&S has a significant background in large-scale social infrastructure projects in Saudi Arabia, but the deal will mark the first of its kind for the Arabic state.

Levy (pictured) said: ‘The education programme is one of many key infrastructure schemes that form part of Vision 2030 as Saudi Arabia looks to diversify its economy beyond oil.

He added: ‘The next plan is a US$50 billion-plus water privatisation programme, with others in the pipeline. Law firms are anticipating that Vision 2030 will have huge legal input, covering everything from construction to project finance to PPP agreements.’

Fahad al-Hammad, the chief executive of Tatweer Building Co said: ‘We aim to boost private sector participation in providing educational buildings, which is a model implemented worldwide.

‘This will minimise government burdens, as the private sector will take over building, maintenance and operation.’

Read more in: ‘Price of debt – austerity and the plight of a project finance partner’