Legal Business

Global Outlook sponsored briefing: The International Chamber of the Paris Court of Appeal – France has risen to the challenge

Global Outlook sponsored briefing: The International Chamber of the Paris Court of Appeal – France has risen to the challenge

The Paris courts aim to strengthen France’s appeal as a centre for litigation post-Brexit

Paris has long been positioned as one of the leading centres for international commercial arbitration disputes, so the French government’s latest legal initiative should come as no surprise to its European counterparts. Indeed, Paris is no stranger to international dispute resolution as there has existed for more than ten years within its Tribunal of Commerce an International Chamber, formed of ten English-speaking judges, hearing commercial disputes with an international dimension.

Legal Business

Legal Business 100: Case study – Stewarts Law

Legal Business 100: Case study – Stewarts Law

Stewarts Law, the UK’s largest litigation-only firm, had an eventful 2016/17 financial year, which resulted in its third consecutive period of double-digit growth. As a standout performer across the Legal Business 100 (LB100) as a whole, the firm had a record year with turnover rising 25% to £77.9m and profit per equity partner (PEP) climbing 19% to £1.9m, seeing it move up into the top half of the LB100 for the first time. It has become recognised as one of the fastest-growing players organically in the UK legal market, with revenue growing 123% over the last five years. PEP rose 110% over the same time period.

Year-on-year performance in 2016/17 was boosted by the resolution of some significant mandates last year, most notably the £4bn shareholder group action against The Royal Bank of Scotland (RBS) in which Stewarts’ claimant clients took a settlement offer in December 2016 in a case against RBS’ former chief executive Fred Goodwin and three other directors.

Stewarts is also currently in battle with Tesco on behalf of over 125 institutional funds, who claim they lost money as a result of Tesco overstating its profits by £263m in October 2014.

‘We keep an open mind, but we want to remain a litigation-only business, so it’s a small market for us in terms of mergers.’
John Cahill, Stewarts Law

Coming as a surprise to many after years of startling organic financial performance, Stewarts looked at a potential merger with boutique Enyo Law in early 2017 to create an £80m disputes specialist. The acquisition of Enyo was in the preliminary stages before it was called off, with Stewarts managing partner John Cahill saying at the time that the firm wanted to ‘continue down the path of organic growth and selected lateral hires’.

True to Cahill’s word, Stewarts has made a couple of select lateral hires of substantial seniority over the past year. Firstly, veteran litigator Ian Gatt QC arrived from Herbert Smith Freehills’ advocacy unit in October 2016, bringing with him over 30 years’ experience in both litigation and arbitration disputes.

In June this year, Stewarts brought in Dechert commercial litigation veteran David Hughes. Hughes, who also served as Berwin Leighton Paisner’s head of banking and finance litigation for nine years, slotted into Stewarts’ core commercial litigation practice. However, the firm did lose partner Daniel Loblowitz in July, who left to join property firm Jury O’Shea and build his own practice.

LB: Did any areas thrive or perform poorly over the last year?

John Cahill: Our commercial disputes department had a very strong year. But our newest departments that we’ve set up over the last few years, such as arbitration, tax and trust litigation, need growth and critical mass added to them. Our challenge for the next year will be to focus on building them up.

Has Brexit had any tangible impact over the last financial year?

Cahill: For us, no. In terms of the future, it’s difficult to make predictions. It’s likely that litigation will be less affected by the uncertainty of Brexit than other practices. Market uncertainty may reduce transactional volumes for a period of time, which will be a problem for firms doing that kind of work. If it’s going to bring a harder financial climate, the counter-cyclical nature of litigation may mean we find more work with our clients. It has to be a priority for the government that London remains an international centre for resolving disputes. It’s a major export, so it’s important this is not threatened.

Following the scrapped proposed merger with Enyo, is the firm looking forward to any other mergers?

Cahill: You’ve only got to turn on your computer or read the legal press to see that potential mergers are always being talked about. We keep an open mind, but we want to remain a litigation-only business, so it’s a small market for us in terms of mergers. We’re in no rush to go down that road.

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Legal Business

Financials 2016/17: Stewarts Law reaches £1.9m PEP in another year of standout growth

Financials 2016/17: Stewarts Law reaches £1.9m PEP in another year of standout growth

Litigation specialist Stewarts Law has posted its third consecutive year of double-digit growth, with a record profit per equity partner (PEP) rising 30% to reach £1.9m.

In its best year in revenue terms to date, the firm marks the conclusion of a number of high-value long-running matters, with its 2016/17 figures revealing a 25% revenue rise to £78.1m.

However, the firm said the breakdown of revenue is drawn purely from litigation and includes £1.2m in respect of ‘value recognised on certain contingent work where the income recognition policy applied in our management accounts differs to the statutory financial statements’.

The UK’s largest litigation-only firm, which specialises in complex high-value disputes, has posted a 124% increase in revenue over the last five years.

Meanwhile, Stewart’s average PEP increased 125% over the same period. Net profit stood at £36.4m, also a 25% increase from last year, while compensation for all partners totalled £44.5m, a 24% increase rate.

Managing partner John Cahill (pictured) said Stewarts was pleased to post ‘another strong set of financial results’ as the firm concluded a number of long-running cases which ‘contributed to our strong revenue and profit figures’.

UK fee income continues to account for the majority of the firm’s revenue, as the top of the firm’s equity now stands at nearly £2.5m, 40% more than the £1.8m it recorded in 2015/16.

The lower end of the equity scale stands at nearly £1m, a significant increase from £642,000 in the last financial year.

The firm’s largest piece of concluded litigation this year was the settlement in June of the 2008 £4bn shareholder rights issue group action against the Royal Bank of Scotland (RBS), in which the last shareholders accepted a lsat-minute offer of 82p per share.

Over the year, Stewarts also represented over 125 institutional funds which have filed a damages £100m claim against retailer Tesco, accusing it of breaching the Financial Services & Markets Act in relation to its alleged over-statement of earnings in 2014.

Last year, the litigation firm also recorded double-digit revenue growth of nearly 19% to £62m, alongside a 26% increase in net profits to £29m. That year, PEP also grew 25% to £1.6m.

On this year’s results, Cahill said: ‘In over 50 per cent of those disputes we are sharing risk with our clients through contingent fee arrangements including both damages based agreements and conditional fee agreements.’

‘Increasingly, this will result in “non-linear” patterns of income which will in turn lead to fluctuations in profit,’ he added.

Georgiana.tudor@legalease.co.uk

Legal Business

Stewarts Law brings in Dechert veteran to bolster fraud practice

Stewarts Law brings in Dechert veteran to bolster fraud practice

Disputes leader Stewarts Law has made a rare partner hire in its core commercial litigation practice after recruiting Dechert litigation veteran David Hughes.

Hughes joins after three years at Dechert and had previously served as Berwin Leighton Paisner’s (BLP) head of banking and finance litigation for nine years. His practice focuses on fraud and regulatory issues for banking groups, two boom areas of contentious work.

Despite its expansive form as one of the fastest growing practices in the LB100 Stewarts has been relatively restrained at lateral recruitment in recent years. Its last major hire came in October 2016 when it recruited Herbert Smith Freehills’ advocacy head Ian Gatt QC.

Stewarts’ head of commercial litigation Clive Zietman (pictured) told Legal Business that Hughes will help widen the 52-partner firm’s fraud team: ‘He wanted an absolutely top-quality team and he felt our team could really support him. We’re very picky with our laterals, but we felt that his arrival went in line with what the firm is doing.’

Hughes’ arrival bolsters a commercial litigation team that is currently fighting a headline-grabbing shareholder claim against Tesco. Partner Sean Upson is leading for Stewarts in the case, which relates to a 2014 profit misstatement which saw Tesco over-state its profits by £263m.

The disputes specialist was one of the fastest growing LB100 firms in 2015/16, with revenues increasing by 17% to £61.3m. However, the firm abandoned a preliminary attempt to merge with fellow litigation boutique Enyo Law in March this year.

tom.baker@legalease.co.uk

Legal Business

Called off: Stewarts Law deal to acquire Enyo scrapped

Called off: Stewarts Law deal to acquire Enyo scrapped

A deal for Stewarts Law to merge with boutique Enyo Law to create an £80m disputes specialist has been called off, Legal Business can reveal.

The unexpected acquisition was due to be finalised before the end of the financial year. Details surrounding the transfer of lawyers and staff to Stewarts were not disclosed.

In a statement, Stewarts said. ‘Following very preliminary and exploratory discussions both firms have decided not to pursue matters further.’

Stewarts managing partner John Cahill (pictured): ‘Our preference is to continue down the path of organic growth and selected lateral hires. Our record growth over the last five years has been impressive and has not been driven by merger or acquisition.’

He added:’The expansion of our commercial disputes offering is a priority and we anticipate being active in the lateral hire space over the next 24 months, seeking out the very best new talent to join Stewarts Law, as well as promoting our rising stars from within.’

City litigation partners had mixed reactions to the merger news; Herbert Smith Freehills head of international arbitration Craig Tevendale saw sense in the collaboration: ‘Both firms have some very good people and have made a success of the litigation boutique model.’

Ted Greeno, commercial litigation partner at Quinn, Emanuel, Urquhart & Sullivan was less convinced: ‘I’m surprised that they were prepared to give up their independence but no doubt they had good reasons for it.’

Enyo was founded in 2010 by former Addleshaw Goddard partners Simon Twigden, Pietro Marino and Michael Green. A profitable outfit, Enyo posted strong financial figures over the last couple of years with revenue growing 27% to £21m in 2016. Remuneration among members stood at £12.5m.

Stewarts Law, which generated £62.1m in fees last year, has also seen positive financial growth in recent times, with the firm’s highest paid member pocketing £1.7m for the 2015/16 financial year, a 20% increase from the previous figure. The litigation specialist also saw a consecutive year of double digit revenue growth, with revenue jumping 17% to £61.3m.

Stewarts represented a number of retailers including Asda, Morrison, New Look and Next in a £1.2bn claim against MasterCard which was ruled on in January. The High Court decided in favour of MasterCard amid claims that the card issuer overcharged consumers due to controversial interchange fees.

tom.baker@legalease.co.uk

Read more on litigation boutiques in:‘Focal points – Law boutiques and the art of focus’

 

Legal Business

Boutique boost: Stewarts in talks to pick up Enyo to create £80m firm

Boutique boost: Stewarts in talks to pick up Enyo to create £80m firm

Litigation boutique Stewarts Law is in discussions to buy Enyo Law in a deal which will see about £20m added to Stewarts’ revenue.

It is believed the deal to acquire Enyo Law will be finalised before the end of the financial year in April, although it is currently unknown how many lawyers and staff will be transferred to Stewarts.

The disputes boutique was founded in 2010 by former Addleshaw Goddard partners Simon Twigden, Pietro Marino and Michael Green.

The financial outlook for Enyo had been healthy, with revenue increasing by 27% from £15m in 2014/15 to £21m in 2015/16. Remuneration among members was also up significantly from £8.1m in 2015 to £12.5m in 2016.

A key mandate for the firm has been acting for sovereign wealth fund, the Libyan Investment Authority (LIA), in a $2.1bn claim for rescission of a series of trades purportedly entered into with members of the Société Générale Group; as well as LIA’s $1bn claim against Goldman Sachs over nine large financial derivative transactions that lost over 90% of their value. Enyo lost the Goldman Sachs case last year.

Stewarts Law, which generated £62.1m in fees last year, has also seen positive financial growth in recent times, with the firm’s highest paid member pocketing £1.7m for the 2015/16 financial year, a 20% increase from the previous figure. The litigation specialist also saw a consecutive year of double digit revenue growth, with revenue jumping 17% to £61.3m.

At Enyo, the highest paid member took home £2.9m last year, an increase from 2015’s amount of £1.8m.

Stewarts Law represented a number of retailers including Asda, Morrison, New Look and Next in a £1.2bn claim against MasterCard which was ruled on in January. The High Court decided in favour of MasterCard amid claims that the card issuer overcharged consumers due to controversial interchange fees.

tom.baker@legalease.co.uk

Read more: ‘Focal points -Law boutiques and the art of focus’

Legal Business

RBS group action settles with Quinn, Stewarts and Mishcon claimants as Signature prepares for trial

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The long running saga that is the £4bn shareholder group action against the Royal Bank of Scotland (RBS) has reached a decisive stage, as claimants represented by Quinn Emanuel Urquhart & Sullivan, Stewarts Law and Mishcon de Reya have settled their case while thousands of claimants represented by Signature Litigation will press ahead for trial next spring.

The RBS action is brought against the bank’s former chief executive Fred Goodwin and three other directors, and relates to a rights issue in April 2008, in which RBS sold its shares at £2 per share. The claimants alleged that the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions.

Quinn, Stewarts, and Mishcon, which were instructed by a host of investors, are set to attend a private court hearing this Wednesday (7 December) to manage the logistics of the settlement with the case’s presiding judge, Justice Robert Hildyard.

Stewarts’ disputes partner Clive Zietman wrote a letter to the judge in relation to the hearing, where attached was a court order signed by the trio of settling parties.

Over 30,000 individual investors represented by Signature and Leon Kaye, have decided against settlement and are set for trial on 6 March 2017.

RBS chief executive Ross McEwan said in a statement: ‘We have been very clear that we wanted to deal with as many of our legacy litigation issues as possible during 2015 and 2016.’

‘We are pleased to have reached this agreement and hope that it will be accepted by the remaining claimant groups so that this long course of complex and costly litigation can now be concluded.’

The case has been dogged in controversy since its inception in 2014. In June Legal Business revealed Quinn, Stewarts and Signature were seeking millions worth of costs incurred from the claimants of Mishcon. Mishcon partner Richard Leedham, who took the instruction to lead the institutional clients from Signature last year, filed a costs estimate totalling £700,000 for legal work on the case up until that point. Mishcon settled the issue with the other firms weeks after.

Herbert Smith Freehills continues to represent RBS, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones. The firm itself came under scrutiny after it emerged in June it would likely exceed its previous cost estimate of £92m.

sarah.downey@legalease.co.uk

Legal Business

Stewarts Law: The green shoots of English securities litigation

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Clive Zietman

Head of commercial litigation, Stewarts Law

czietman@stewartslaw.com

Unbeknown to many English lawyers there is an area of the law that has matured and developed in the US over the past 80 years but which, until recently, has hardly been recognised as a separate practice area. There are flickers of light that suggest that the situation may be on the verge of changing.

In the 19th century, when English company law was, in many ways, still in its genesis, a few leading cases established the building blocks for what survived thereafter and still exists today. One of those cases, frequently referred to on day one at most law schools is Foss v Harbottle (1843), a ruling that essentially established that if a wrong is done to a company, the company itself and only the company can sue, as opposed to any individual shareholder or group of shareholders. Over the years, that harsh rule was tempered such that shareholders were not left completely without protection and gained the ability to sue in what is now a raft of different circumstances. Case law developed to create exceptions to the rule in Foss and, with the added assistance of statute, derivative actions and minority shareholder petitions became just two examples of how matters moved on from first principles. What we have never had in this country, however, is anything akin to the well-developed structures that took root in the US in the 1930s and gave rise to wide-ranging statutory shareholder rights that enabled shareholders to sue with a direct cause of action against the company in a raft of circumstances where wrongdoing has been committed by the company itself, its directors or others. In the US there is a long history of securities litigation – cases in which aggrieved shareholders have sued the company when the company’s fortunes deteriorated and the value of its shares dropped as a result. No such regime exists here and there is no clamour for us to adopt an American approach any time soon.

This said, the sands have shifted over the past few years or so and investors who once saw the US as the only jurisdiction to assert claims have turned their attention elsewhere. The reason for this has been twofold. First, as a result of the well-publicised decision in Morrison v National Australia Bank, the US decided that it would no longer play host to cases involving foreign securities that have little or no connection with their home patch. Second, other countries such as Australia, the Netherlands and England have come to the attention of investors, keen to find a credible and palatable alternative.

‘In the US there is a long history of securities litigation. No such regime exists here and there is no clamour for us to adopt an American approach any time soon.’

In England two avenues for investor protection litigation were forged by sections 90 and 90A of the Financial Services and Markets Act 2000, which created statutory causes of action that go well beyond the ambit of the rather constrained common law options that had existed for centuries beforehand. In essence, section 90 makes a company that is responsible for listing particulars and prospectuses liable to compensate a person who has acquired shares to which the listing particulars or prospectus apply; and has suffered loss as a result of either: any untrue or misleading statement or omission. No reliance by the claimant needs to be proven, as it would in, for example, a common law misrepresentation case. Section 90A creates a cause of action for persons who have suffered loss as a result of a dishonest misleading statement or omission in a wide range of published information relating to shares, or a dishonest delay in publishing such information but in this instance the claimant must prove reliance. Statutory defences exist, including a ‘reasonable belief’ defence.

Apart from the well-publicised current case brought against The Royal Bank of Scotland (RBS) by its shareholders under section 90, there have been precious few cases commenced at all (and no reported case law) that can properly be described as English securities litigation. The reasons for this are manifold but they include the following:

  • Prospectuses and other published material are generally accurate and reputable companies go to great lengths employing expensive corporate lawyers to ensure that this is the case.
  • There is nothing in England akin to an opt-out American-style class action system, which makes the framework of a shareholder action very difficult if there are disparate claimant shareholders.
  • Bringing a shareholder claim against a substantial company is not for the faint-hearted – it is time-consuming and very expensive and requires considerable resource and expertise.
  • The risk of adverse costs liability puts off many prospective claimants although there are avenues for insuring against this, nowadays these are often built into a third-party funding package.
  • Whereas the US system actively encourages ‘roll-of-the-dice’ litigation with jury trials, limited adverse costs and mega-damages, ours does the very opposite.

Notwithstanding the above, there are some who believe that we are witnessing a new dawn for investor protection litigation in England and there are strong signs of new cases being developed. There would appear to be a number of reasons for this. First, there seems to be a growing mood among sophisticated institutional investors (such as pension funds and asset managers) that on one level, they have a duty at least to consider possible claims. Second, new funding and after-the-event insurance models and the permissibility of contingent fee arrangements have made feasible claims that perhaps once would not have been. Third, there is a growing awareness of investor protection generally. The Morrison case has forced institutions who historically limited their horizons to the US to look elsewhere. England has the advantage of being a well-respected and stable forum for dispute dissolution coupled with a disclosure regime which, although not as extensive and probative as that administered in the American courts, does make England a more attractive place than continental Europe where reliance discovery tends to be the order of the day. There is much talk in the media about shareholder ‘class actions’ often discussed in the context of a growing compensation culture. In reality there is little reason to believe that in the short term we are likely to see a full-blooded US-style class action system here that would make cases of this kind much easier to run and administer. That said, the mood music suggests that the times they are a changing.

Clive Zietman is a well-known commercial litigator who has been involved in a wide range of complex high-value claims, including a number of very high-profile fraud, professional negligence and banking disputes. His work regularly involves an international dimension. He has acted in several well-publicised cases, including the bankers’ bonus case against Commerzbank and the RBS shareholder litigation.

He leads the commercial litigation team at Stewarts Law and over the past few years he has been involved in several actions against banks, a task which most central London law firms are unable to undertake as a result of conflicts of interest.

 

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Legal Business

Financials 2015/16: Disputes specialist Stewarts a standout performer with double digit revenue and PEP growth

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Litigation powerhouse Stewarts Law has posted a second consecutive year of double digit revenue growth for the 2015/16 financial year, with revenue increasing 18.5% to £62.1m while profit per equity partner rose by 25% to £1.6m.

Net income stood at £29m while compensation for all partners totalled £35.8m. UK fee income amounts for the lion’s share of firm revenue with £61.8m and top of equity now stands at £1.8m – bottom of the equity starts at £642,000.

The firm said the breakdown of revenue is drawn purely from litigation and includes £853,000 in respect of ‘value recognised on certain contingent work where the income recognition policy applied in our management accounts differs to the statutory financial statements.’

Managing partner John Cahill said the firm was pleased to have marked the end of its 25th year with ‘another solid set of financial results.’

The firm added 20 lawyers to its headcount over the last year including through lateral hires, internal promotions, as well as seven new training contracts.

Major ongoing disputes for the firm include the £4bn shareholder group action against the Royal Bank of Scotland (RBS), and preparing for a legal action against Tesco following the supermarket giant’s overstatement of profits by £263m in 2015.

Last year the firm recorded double digit revenue growth of 14% to £53m alongside net profits rising 12% to £23m, although PEP remained flat at £1.1m.

On this year’s results, Cahill (pictured) added: ‘We have a busy and challenging year ahead with a number of substantial trials and the launch of trust litigation in September.’

Stewarts Law has boosted pay and incentives for junior lawyers, paralegals and business services staff in a bid to maintain and enhance competitive advantages.

The firm has boosted salaries for all staff, though it declined to confirm exact figures. New incentives for all staff include an extra day off on birthdays and access to private GPs and discounted gym membership. The changes came into effect earlier this month on 1 May.

sarah.downey@legalease.co.uk

Legal Business

Quinn, Stewarts and Signature demand costs from Mishcon clients in RBS litigation saga

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The ongoing saga that is the £4bn shareholder group action against the Royal Bank of Scotland (RBS) continues to prove controversial, as it has emerged that litigation powerhouses Quinn Emanuel Urquhart & Sullivan, Stewarts Law and Signature Litigation are seeking millions worth of costs incurred from the claimants of Mishcon de Reya.

Essentially the argument centres over whether Mishcon’s clients should continue to have a free ride, and keeping benefiting from other claimants’ lawyers’ work, despite having left the shareholder group in October last year.

The RBS action is brought against the bank’s former chief executive Fred Goodwin and three other directors, and relates to a rights issue in April 2008, in which RBS sold its shares at £2 per share. The claimants allege that the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions.

At a recent case management conference (CMC) in mid-June before Justice Robert Hildyard, an application was made by the three lead claimant groups, represented by Quinn, Stewarts and Signature, demanding that Mishcon’s clients – which include nine pension investment subsidiaries connected to Lloyds Banking Group and are listed as follower claimants – to pay their share of the costs incurred by the lead groups in taking the litigation forward on behalf of all claimants.

The follower claimants (whose damages are worth £420m of the £4bn total) are the same group that instructed Mishcon in place of Signature. The costs estimate, says one City litigator, is said to ‘run into the millions’ and dates from the time Mishcon came on the record last year and leading up to the trial in March 2017.

Separately, Mishcon disputes partner Richard Leedham, who took the instruction to lead the institutional clients from Signature last year, has filed a costs estimate totalling £700,000 for legal work on the case so far.

At the CMC in June, the judge expressed surprise that there was an issue in this respect and said he assumed the matter would be resolved quickly without the need for the application to be heard by him this month where it has been scheduled for a half-day hearing.

Evidence has been swapped by parties over the last few weeks and Justice Hildyard has considered using a judicial assistant to help him with the trial and the mass of expert evidence in particular. A decision on the costs debacle between advisers is expected to be handed down in July.

No additional costs budgets were filed or raised at the CMC however it is understood that RBS’s adviser firm, Herbert Smith Freehills, is likely to exceed its previous cost estimate of £92m.

The RBS Shareholder Action group is the largest of three currently in dispute with RBS. Herbert Smith Freehills continues to defend RBS, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones.

sarah.downey@legalease.co.uk