Legal Business

High-value commercial litigation rises 16% as recession-related disputes filter through to courts

High-value commercial litigation rises 16% as recession-related disputes filter through to courts

2013 saw a sharp rise in high-value commercial litigation as major disputes arising from the recession filter down to the courts in greater numbers, according to research released today (7 April) by RPC.

Statistics compiled by the firm shows that 1,353 cases were launched in the Commercial Court in 2013, up 16% on the 1,167 cases started in 2012.

RPC said the increase is likely due to the length of time it can take for a claimant to pull together a major case or because of situations where parties have failed to reach a deal, leaving the claimant deciding litigation is the only option to resolve the dispute.

RPC’s head of commercial litigation, Geraldine Elliott, said: ‘This kind of “big-ticket” litigation tends to be quite complex as well as very contentious – it’s not something that can be rushed to court. So there’s bound to be a time-lag between disputes arising during the downturn and when they start to come through the system.

‘Sometimes high-value or large-scale claims can take several years to actually get as far as filing a claim, let alone a court hearing, which is why we are seeing such an upswing in cases coming to court now, even as we start to leave the recession behind us.’

The research also indicated that banking litigation will continue to be a key area for high-value claims, as PPI mis-selling, Libor and interest rate swap scandals faced by financial institutions have resulted in a steady pipeline of cases in recent years.

Banks preparing themselves for further potential claims include the Royal Bank of Scotland, which earlier this year announced it would set aside an additional £3bn for legal claims, including £1.9bn for mortgage-backed securities claims.

The amount of money set aside for FX manipulation claims is also likely to be higher according to the research, as banks not only have to face fines and penalties but have to undertake costly investigations.

RPC financial disputes partner Andy McGregor, said: ‘Claims based on alleged FX manipulation are likely to be particularly complex, and the scale of resources required to deal with the regulatory probes could dwarf even what we saw with Libor. Increasingly, the Financial Conduct Authority is looking to the banks themselves to organise and fund the bulk of data mining and other investigative work, which is going to take huge amounts of specialist manpower.’

Examples of high-profile commercial cases involving banks last year included a dispute between UK trading and investments firm CF Partners and Barclays. The former filed a claim against Barclays last year alleging that the bank breached a confidentiality agreement. CF Partners, whose claim is being bankrolled by Harbour Litigation Funding, alleged that Barclays used confidential information it supplied to the bank when requesting funding for its own bid for Swedish carbon trader Tricorona.

This research coincides with a study published today by Eversheds, which has released similar findings on the rise of large commercial disputes, despite the fact that corporates do not want to resort to litigation. In a study entitled Companies in Conflict: How Commercial Disputes are Won, whether a company wins or loses in court is determined by the calibre of the professionals involved in the case, while corporates that generate revenue of more than £1bn were typically engaged in two to five large disputes over the last three years, but 16% of companies were involved in more than ten. One fifth of businesses involved in the study considered managing reputation to be the most important factor in pursuing a dispute.

Legal Business

LLP latest: DLA Piper’s net debt down 32% as RPC posts 21% increase in fee income

LLP latest: DLA Piper’s net debt down 32% as RPC posts 21% increase in fee income

DLA Piper International’s net debt decreased by 32% while cash in the bank dropped almost 15% according to its most recent limited liability partnership (LLP) filed at Companies House.

Net debt was down from £47.5m at the end of 2011/12 to £32.4m at the end of last financial year, with the 4036-lawyer firm’s cash position also down from £35m to £29.9m.

Turnover at DLA Piper International – which includes all the firm’s activities outside the US including its share of joint ventures – increased from £788m in 2011/12 to £800.4m in the last financial period, while profit available for discretionary allocation among members dropped almost 3% from £269m to £261.5m during that period.

The UK, meanwhile, saw revenue decrease by 3.4% from £287.3m to £277.5m, while operating profit also fell 7.5% from £102.9m to £95.2m at the end of 2012/13.

However, both Continental Europe and the Asia Pacific saw turnover increase by around 4% to £290.1m and £210.2m respectively. Operating profit in Continental Europe grew 2.7% from £107m to £110m but in Asia Pacific it fell by 9.4% from £65.7m to £59.5m.

The biggest boost came from activities in the Middle East, where turnover increased 15.5% from £18.8m in 2011/12 to £21.7m in 2012/13, while operating profit was up from £158,000 to £2.8m in the same period.

DLA’s move to an all-equity partnership on 1 May 2012 resulted in a boost in member’s capital of £27.6m during the year, although 29 members internationally elected to remain as non-equity partners, eight of which were in the UK.

The highest paid partner received £1.8m in 2012/13, 3.3% more than the previous year.

Elsewhere, RPC posted an above average 21% increase in fee income from £67.4m to £81.7m. Costs including non-member partner profit shares rose 27%, which, the top 50 firm said, reflect significant one-off costs associated with setting up two new offices.

Profits available to members increased during the year by 8% to £26m while staff costs increased by 21% to £36.2m from £28.5m in the 2011/12 financial year.

At 30 April, the firm’s net debt stood at just over £5m – a 123% increase compared to £2.3m the previous year, while bank loans of £4.8m (£3m in 2012) are repayable by equal monthly instalments until 2017 and a further bank loan of £833,333 (£412,905 in 2012) was due for repayment in October 2013.

The estimated profit attributable to the highest paid member stood at £928,018 compared to £789,282 the previous year. The average monthly number of fee earners rose from 196 to 252 at the firm, which has invested solidly in lateral hires over the last year, including Davenport Lyons former head of banking and finance Sukh Ahark, former SJ Berwin corporate partner Anthony Shatz, and Wragge & Co former managing partner and corporate head respectively, Richard Haywood and Maurice Dwyer.

Legal Business

Rising Stars for 2014 – RPC

Rising Stars for 2014 – RPC

Twelve months ago, when Legal Business’s inaugural GC Power List landed, the global economic outlook was still decidedly bleak. Talk of a double-dip recession had started to feel like blind optimism, with global manufacturing output at its lowest level since 2009, unemployment in the eurozone at epidemic proportions and signs that the Chinese economic engine was beginning to falter.

A year on and there’s cause for cautious optimism, in the UK at least, with joblessness falling and it seems more reason for economists to be bullish about the strength of the recovery than for half a decade.

Legal Business

RPC abolishes flat-rate salary for newly-qualified solicitors

RPC abolishes flat-rate salary for newly-qualified solicitors

City firm to move junior lawyers to structure based on merit and market rates.

RPC has taken the final steps to adopting an entirely merit-driven pay model as it last month announced that it will abolish the traditional flat-rate salary for newly-qualified solicitors (NQs) in the UK and move to a system linked to merit and market rates from September 2014.

In a move said to take into account what is happening in other sectors and the pressures that clients are under to achieve value, the firm will operate a variable pay scale where the strongest NQs entering their careers ‘in the most competitive areas of the profession’, will be eligible to earn salaries above those currently offered by major City firms, a firm statement said.

Legal Business

On your merit: RPC abolishes flat rate salary for NQs

On your merit: RPC abolishes flat rate salary for NQs

City law firm RPC has taken the final steps to adopting an entirely merit driven pay model as it today (19 November) announced that from September 2014 it will abolish the traditional flat rate salary for newly-qualified solicitors (NQs) in the UK, and subsequently move to a system linked to merit and market rates.

In a move said to take into account what is happening in other sectors and the pressures that clients are under to achieve value, the firm will operate a variable pay scale where the strongest NQs entering their careers ‘in the most competitive areas of the profession,’ will be eligible to earn salaries above those currently offered by major City firms, a firm statement said today.

Having scrapped the partner lockstep model over a decade ago, the firm introduced a merit-based career framework for associates in 2009, and rolled out the same programme to business services and secretaries in 2010 and 2012 respectively.

‘Today’s move is the final step in an ongoing programme of modernisation and is simply about bringing that same reward structure to bear on our NQs,’ said RPC managing partner Jonathan Watmough (pictured). ‘It makes perfect business sense for us to calibrate our salary levels based on the value particular positions offer both to clients and to our own bottom line.’

He added: ‘The legal profession lags well behind most other sectors when it comes to structuring the way we pay our people.’

‘We’ve been rewarding all our other people – from partners to business services – based on merit and value for years now. The concept of the flat rate has passed its sell by date and no longer has any integrity. It does not recognise the different merits of individual NQs nor does it recognise the market variances between the different branches of law into which they will qualify. Crucially, it does not take into account the pressures clients are under to obtain value from their suppliers.’

Despite many City firms taking a number of different steps to recognise and adjust to their clients’ pressures and many have now adopted the US-style ‘eat what you kill’ approach to partner and senior associate pay, RPC is unusual in taking this approach to the pay of its more junior lawyers.

Watmough added: ‘I spend a lot of time talking to general counsel, in-house lawyers and finance directors from businesses in a range of sectors. Many of these have come from private practice backgrounds and, now in the commercial arena, they feel the real pressures of the competitive marketplaces in which they operate. They simply do not see why private practices can, or should, be immune from them – and, frankly, nor do we.’

Legal Business

Deal watch: Hogan Lovells, RPC in key work for Kodak and AstraZeneca as DLA Piper reveals major High Court win

This week has seen two of the larger global challenger firms reveal significant wins on behalf of major international clients. Hogan Lovells closed a $650m acquisition for the trustees of the Kodak Pension Plan and DLA Piper secured victory for China Southern Airlines in the High Court. Meanwhile, one of the top performers in this year’s LB100, RPC, is advising AstraZeneca on its move to a new purpose-built HQ in Cambridge.

Hogan Lovells is a longstanding advisor to the trustees of the Kodak Pension Plan (KPP) – Kodak’s largest creditor. Led by pensions partner Katie Banks, the firm worked on a comprehensive settlement of KPP’s claims against Eastman Kodak Company (EKC) and Kodak Limited, its UK subsidiary. This included the acquisition of EKC’s personalised imaging (PI) and document imaging (DI) businesses, valued at US$650m but acquired through a mixture of release of claims and a cash consideration of $325m. The acquisition closed Tuesday (3 September) the day of EKC’s emergence from bankruptcy.

EKC, the guarantor of Kodak Limited’s obligations to KPP, filed for Chapter 11 bankruptcy protection in the US in January 2012 which consequently led to the trustees of KPP filing unsecured claims for $2.8bn against EKC last year.

After extensive negotiations, EKC and KPP agreed a settlement, approved by the US bankruptcy court earlier this year, including the acquisition by the KPP of the PI and DI businesses in an elaborate carve-out transaction which involved extracting the relevant assets from over 50 EKC entities worldwide. The ongoing income generated by these businesses will be used to fund member benefits.

Linklaters, led by London-based pensions partner Mark Blyth and a Sullivan & Cromwell team advised Kodak Limited and Eastman Kodak respectively.

Banks, who has advised the KPP trustees since 1994 and has also advised ITV, Vodafone, and Santander in the past, describes the deal as the ‘biggest pension restructuring’ on record.

‘I’m the pension’s lawyer who has had the relationship with the trustees but I had to get help from employment, competition, and IP lawyers around the world,’ she adds.

Banks’ team included New York-based insolvency and restructuring partner Christopher Donoho, commercial partner Elizabeth Donley, and tax partner Karen Hughes.

Meanwhile DLA Piper has announced a significant victory for its client this week after representing China Southern Airlines (CSA) in the High Court earlier this summer. In a judgment handed down at the end of July, CSA was awarded $28m in damages and interest over a breach of contract dispute brought by commodity trader Tigris International.

Tigris made the claim against CSA for $46m in damages in a battle which arose over an aircraft sale agreement between the parties for the purchase of six redundant Airbus A300 aircraft and five spare Pratt & Whitney engines for $124m.

Due to an internal shareholder dispute at Tigris, CSA was only able to deliver one of the six aircraft to Tigris. To mitigate its loss, CSA subsequently sold the remaining five aircraft to other purchasers, including a South African company owned by the financier of Tigris.

CSA counterclaimed for its losses of about $37m arising from Tigris’ failure to pay for and take delivery of the undelivered aircrafts and engines as well as other associated expenses such as parking and maintenance charges.

Fountain Court’s Bankim Thanki QC and David Murray were instructed by DLA’s Hong Kong-based partner Kevin Chan and City-based partner Mark Franklin, while Blackstone Chambers’ Hugo Page QC was instructed by Watling & Co on behalf of Tigris. Heard by Justice Simon, the 10-day trial in London’s Commercial Court ultimately ended in dismissal of the claims against CSA. In addition to the $28m in damages awarded to CSA on its counterclaim, the court ruled that CSA was entitled to forfeit the deposit paid by the claimant in the amount of $10.5m.

Chan said: ‘This case is a significant victory for CSA and we are pleased with the result we achieved for our client. The case involved close collaboration of our colleagues from various countries around the world, including Hong Kong, China, the UK, the Netherlands, the US, as well as DLA Cliffe Dekker Hofmeyr in South Africa.’

Finally, RPC has won the mandate to be sole advisor on a project involving pharma giant AstraZeneca on the acquisition, construction and planning related issues for a new global research and development (R&D) centre and corporate headquarters at the Cambridge Biomedical Campus, which AstraZeneca intends to invest £330m into.

The deal was headed by real estate head Martin Barrett and construction partner Stephen Malley and the team was initially called to advise on the establishment of the new R&D centre in March this year. RPC is a longstanding advisor to AstraZeneca, having previously advised on property and construction issues when the company moved to an office space at 2 Kingdom Street at Paddington Central, as well as a joint venture deal with Bericote Properties for a distribution park at Severnside.

Barrett noted the deal was ‘one of the largest’ in the market at present. ‘This new facility will have state-of-the-art technology and AstraZeneca’s move is further recognition that Cambridge is becoming a pre-eminent location for the life sciences industry,’ he added.

Legal Business

LB 100 – The second quartile: Wind swept

LB 100 – The second quartile: Wind swept

Mid-pack advisers faced contrasting fortunes over the year, with many generalists seeing margins under continued pressure, while a sizeable band of confident City and insurance players rode the winds

With a combined total of 9,859 lawyers, 1,416 equity partners, £2.46bn in revenue and profits of £578.7m, the firms ranked 26-50 in the LB100 lag significantly behind the top 25 as a group.

Revenue at the average firm in the upper quartile of firms is up 9%, inflated by the wave of mergers that has boosted the income at firms such as Dentons and Herbert Smith Freehills, while firms ranked 26-50 managed average revenue growth of 7%.

Legal Business

Trainee Retention: Hogan Lovells, Travers and RPC reveal numbers

Trainee Retention: Hogan Lovells, Travers and RPC reveal numbers

The trainee retention rates rollercoaster continues to bring with it good news and bad as today firms including Hogan Lovells, Reynolds Porter Chamberlain (RPC) and Travers Smith are on something of a high.

Top 50 UK firm Travers Smith has posted a 95% retention rate while at transatlantic firm Hogan Lovells – where out of a total of 33 trainees, 28 offers were made and 25 were accepted – the firm achieved a retention rate of 76%.

City firm RPC also today unveiled an 80% retention rate after offering 13 out of its 16 trainees a newly-qualified (NQ) position. RPC’s managing partner Jonathan Watmough (pictured) said the results are a ‘testament to the rigour of both our recruitment process and the quality of our trainee programme that we’re consistently able to retain a high percentage of our intake each year.’

Watmough added: ‘Given the massive over-supply of aspiring lawyers in the market simply getting a training contract these days is far harder than it was a decade ago, and the bar for qualification is rising year-on-year. We invest a lot of time and energy into our trainees – having spent time with them, I can say with confidence that this represents a key investment in the future success of our firm.’

These developments follow a more variable picture last week, when Osborne Clarke attained a 100% retention rate but Shoosmiths only 41%.

Osborne Clarke took on all eight of its trainees who qualify next month. This group of trainees is the first to qualify under the Q3D programme, which maintains regular assessment of junior lawyers once they have qualified by testing them in specialist areas. The programme is run in conjunction with BPP Law School.

‘Qualification is a massive milestone in a lawyer’s career, and I would like to congratulate each of these impressive NQs on achieving positions within the firm. At Osborne Clarke we see education and training of our people as a key and ongoing priority – both during their training contracts and also beyond, as seen in our education and development programme Q3D,’ said Nick Johnson, training principle at the firm.

The NQs will be spread across the firm’s offices, with three in London, four in Bristol and one in Reading.

Last week also saw Stephenson Harwood announce it is to retain 80% of its trainees, offering positions to eight out of ten. Three are going into the commercial litigation group, one apiece in finance, corporate, real estate, marine and international strategy, while the eighth trainee is to work in the firm’s Singapore office.

These retention rates are in stark contrast to Shoosmiths, where only nine of its 22 trainees achieved a NQ position, giving it a retention rate of just 41%.

Legal Business

Revolving Doors: DAC Beachcroft, RPC, K&L Gates and Reed Smith boost London offering with lateral hires

Revolving Doors: DAC Beachcroft, RPC, K&L Gates and Reed Smith boost London offering with lateral hires

London has been the focus of a series of hires for top national, City and US firms including DAC Beachcroft, RPC, K&L Gates and Reed Smith, as Dechert has also boosted its Moscow offering with a hire of a partner from Hogan Lovells.

Adrian Williams joins DAC Beachcroft’s corporate insurance team from reinsurance giant Swiss Re, where he was general counsel for Europe, Middle East and Africa, and was based in Zurich. The firm has also bolstered its real estate team in London with the hire of Nathan East from Hempsons. East specialises in advising medical professionals, care providers and the NHS.

‘We are delighted to welcome Nathan to the firm. His appointment adds an important extra dimension to our existing health practice with his considerable experience of advising GPs,’ said Eve Gregory, head of the firm’s health real estate team.

Elsewhere, 1,548-lawyer firm Reed Smith continues to grow its London office with the appointment of Eoin O’Shea as a partner in the firm’s global regulatory disputes practice based in London. Joining from Lawrence Graham (LG), O’Shea is known for his disputes work which includes economic crime, corporate crime, fraud and corruption disputes and investigations. He spent six years at the commercial bar and another six years with Simmons & Simmons before joining LG. O’Shea has led on litigation for major pharmaceutical companies relating to blackmail and other crimes.

‘Eoin’s reputation and his broad experience, across our key industry sectors and geographies, will ensure that Reed Smith is even better placed to assist clients facing the rapidly evolving regulatory landscape,’ said Richard Spafford (pictured), head of Reed Smith’s commercial disputes group for Europe and the Middle East.

‘O’Shea told Legal Business: ‘The reason I joined Reed Smith is because they are very strong in litigation worldwide. For my specialism in bribery and corruption it helps to have a strong group in the US.’

Reed Smith hired banking and finance partner Claude Brown from Clifford Chance in April this year.

Meanwhile, K&L Gates, which dropped three places in this year’s Global 100 to 25 with a turnover of $1,06bn, has added Anthony Fine as a partner in its energy, infrastructure and resources (EIR) practice in London. Fine joins from White & Case where he was head of the PPP/PFI practice in the firm’s energy, infrastructure, project and asset finance group.

‘With his track record in projects and infrastructure and his significant market connections, I am delighted that Anthony has joined our growing practice,’ said Tony Griffiths, London managing partner of K&L Gates.

Also growing in London with a number of recent heavyweight hires is RPC, which has brought in partner Sukh Ahark from Davenport Lyons, where he was head of banking and finance.

Ahark spent eight years at legacy Herbert Smith and has also worked for Pinsent Masons and Hammonds. Recent mandates he has advised on include luxury building company Harrison Varma Limited on the financing of a development of 20 new residential apartments, where the financing was provided by Barclays and Coutts.

‘We’re very pleased to have Sukh on board. His practice neatly complements our existing broad-based corporate offering, and his outgoing, unfussy and approachable style of doing business fits very well with how we operate at RPC,’ said Jonathan Watmough, managing partner of RPC.

Sukh’s appointment follows RPC’s hire of a three partner corporate team from Wragge & Co at the start of the year, consisting of former managing partner Richard Haywood, the head of corporate Maurice Dwyer, and David Marshall, a private equity specialist.

In Russia meanwhile, global top 50 US firm Dechert has recruited Taras Oksyuk from Hogan Lovells where he was head of real estate to lead the firm’s real estate and construction practice in Moscow. Deals that Oksyuk has advised on include leading Russian property fund, O1 Properties, on its $500m sale of a business centre in Moscow to Kaspersky lab.

Laura Brank, Moscow managing partner and head of Dechert’s Russia & CIS practice said: ‘We are very pleased that Taras is joining us. He is a highly regarded Russian real estate and construction expert who will bring a wealth of experience to our corporate and real estate practices in Moscow.’


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Legal Business

Consumer protection dragged into 21st century with new Bill that could open floodgates to class actions

Consumer protection dragged into 21st century with new Bill that could open floodgates to class actions

A Consumer Rights Bill published on Wednesday (12 June) is set to radically overhaul the rights of consumers in the digital age but could open the door to US-style class actions, lawyers warn.

The Bill was one of many announced in the Queen’s speech at the state opening of Parliament in May, and if enacted, will enhance consumer rights by making them easier to understand and streamline complex areas of consumer legislation into a single bill.

However, the Confederation of British Industry, speaking for some 240,000 businesses that together employ around a third of the private sector workforce, has highlighted the dangers behind a provision that allows members of the public, businesses or consumers to bring collective actions on an opt out basis.

Matthew Fell, the CBI director for competitive markets, said: ‘We will resist any efforts to introduce US-style class-actions into consumer redress, which risks fuelling a litigation culture and making the UK a worse place to do business.

‘Consumer law should be fit for the digital age but any changes must be properly scrutinised before they are put into practice.’

Hogan Lovells partner and product liability specialist Rod Freeman says they are right to be cautious. ‘It could lead to more litigation and that’s the greatest concern,’ Freeman said.

Speaking to Legal Business, he added: ‘The great concern is these measures on this side of the Atlantic are expressly intended to avoid the excesses that you see in the US class action regime, but the practical reality is the kind of infrastructure that’s been described is naturally going to attract those excesses. There are real questions on whether the safeguards being put in place will be effective.’

Few question that reform of the out of date consumer protection framework is necessary and consumer minister Jo Swinson said: ‘For too long, the rules that apply when buying goods and services have been murky for both consumers and businesses.’

This situation has worsened in the digital age, and the Bill specifically covers consumers’ ability to claim for faulty digital content, including film and music downloads, online games and e-books replaced.

Oliver Bray, commercial, IT and technology partner at Reynolds Porter Chamberlain said: ”There is lots of overlap and uncertainty with legislation including the sale of goods act which is now 30 years old. The messy backdrop is a complex patchwork of legislation. What was slightly bizarre is you have a consumer buying a CD with more protection than someone who is downloading music online.

‘This is going to be good for everyone. It’s simplifying and clarifying, and hopefully will make us more competitive. We are moving to a more sane world where digital content in particular is covered and there’s clearer lines of redress for services than before.’

Freeman added: ‘The area of consumer law in the UK is a mess. One of the great challenges is for the legalisation to keep up with changes in technology and changes in practices in the market. It’s important that it’s coherent, understandable legislation in dealing with digital content as much as it’s important for tangible goods and for services.’

Elsewhere, trading standards officers will be required to provide reasonable notice to businesses before carrying out routine inspections, as well as speedier and faster remedies for businesses that have been disadvantaged by breaches in competition law.

Consumers currently spend more than 59 million hours every year dealing with goods and services problems, according to a government statement published. The hope is that the new measures will reduce the effort consumers and businesses have to make to resolve problems.