Bench strengths – Sizing up the City’s top dispute teams

The best dispute lawyers often have something of the diva or rockstar about them – argumentative, uncompromising and brash. Michael Davison, head of Hogan Lovells’ litigation, arbitration and employment group, describes Neal Katyal, who runs the firm’s Washington DC disputes team, as such a figure. It is easy to see why: at the age of 48, Katyal had argued more Supreme Court cases than anyone else in US history and appeared as himself in Netflix’s political drama House of Cards.

London, of course, has no shortage of big characters in litigation, even if the clubby world of hard-living, hard-working boys is giving way to a more diverse crowd. To assess the prospects for the disputes market, Legal Business decided to focus on a dozen of the largest players in the City, spanning traditional leaders, the largest specialist firms and a handful of the most expansive US outfits.

What emerges is a uniquely competitive market in which a varied group of players are jostling to secure position in high-end disputes in London and beyond. Clifford Chance (CC)’s London disputes head Helen Carty comments: ‘There are enough disputes to go around and the London market has a huge number of firms to choose from. Between the Magic Circle, US firms, boutiques and others there are a lot of people with a lot of talent.’

The band of brothers (and sisters)

The Magic Circle have disparate disputes strategies but patterns emerge. Unique is Slaughter and May, thanks to its London-centric model (leaving Hong Kong as its only substantive foreign branch). It is also by far the smallest of the Magic Circle overall and in litigation, with only 12 partners in London, a line up dwarfed by its key peers. The conservative City outfit made only its third-ever partner hire in 2018, with disputes partner Wynne Mok added to its Hong Kong office after a stint at the Hong Kong Securities and Futures Commission.

‘The London disputes market has a huge number of firms to choose from. Between the Magic Circle, US firms and boutiques, there are a lot of people with a lot of talent.’
Helen Carty, Clifford Chance

Slaughters prides itself on its market-leading M&A practice, but has maintained a reputation for a quality disputes team with the flexibility born of its famed generalism. Disputes head Sarah Lee comments on the team’s positioning: ‘People often say Slaughters is a corporate firm and that contentious isn’t taken as seriously, but anyone in the City will tell you that risk and disputes form an incredibly salient part of corporate business.’

In contrast, at Freshfields Bruckhaus Deringer and CC it has been clear for years that disputes were a core part of business. At Freshfields, dispute resolution now makes up over a quarter of its global income, with more than 800 disputes lawyers spanning 19 global offices, generating approximately £350m. Sarah Parkes, who runs the firm’s London disputes team, says the City practice is performing ‘pretty strongly’ citing a ‘broad, well-performing base of traditional litigation and arbitration’. She adds: ‘For the last ten years, disputes has been one of the most popular places for our trainees to qualify into.’

There is a similar proportion at CC, where roughly 20% of the firm’s revenue comes from disputes. The firm fields a 27-partner London team. CC is branching out into other areas: a new sports litigation practice is being developed, with the team already representing VB Football Assets in its long-running dispute with Owen and Karl Oyston over the ownership and management of Blackpool Football Club. But Carty insists that growth in general is the main goal for CC: ‘It’s growing across the board. There’s no one particular factor in that growth, which is a good thing.’ The firm generates roughly £325m a year from disputes.

Allen & Overy (A&O), meanwhile, is viewed as having only taken disputes seriously in the last decade as a core part of its business. The firm has certainly achieved scale, with 27 partners in London, and 94 worldwide. Moreover, A&O is currently without question the most aggressively committed to growth in the Magic Circle.

Its employment and litigation teams are also set to be merged, a move global head of litigation, Karen Seward (herself an employment specialist), says will allow for shared resources and more collaboration. Disputes currently makes up 19% of A&O’s business, approaching £300m.

Seward says A&O sought to build its disputes reputation on the back of its highly-rated regulatory profile after the banking crisis: ‘We have a historical perception for regulatory investigations being our premium product.’

In recent years, A&O has also made a sustained investments in IP disputes. A&O notably took on four partners from Simmons & Simmons in 2016, including Mark Heaney, who specialises in contentious matters across a broad range of IP (though the firm last year lost global IP head Nicola Dagg to Kirkland & Ellis).

‘People say Slaughters is a corporate firm, but risk and disputes form an incredibly salient part of corporate business.’
Sarah Lee, Slaughter and May

In comparison, Linklaters is the least dispute-centric of the Magic Circle’s ‘big four’. Despite making some efforts to invest in litigation, only 11% of firm-wide income comes from disputes, in part because its contentious business is still heavily concentrated in London. Firm-wide Linklaters generates less than £175m from disputes, half as much as its old sparring partner Freshfields and well behind its peers.

Consisting of 23 partners in London, and 56 firm-wide, the disputes department is led globally by Michael Bennett, who concedes the firm is cautious: ‘We have a mandate to grow where it makes business sense. That doesn’t mean we will pop up in all sorts of different countries, we need a sensible strategy for growth.’

Outriders

There is an increasingly common view of the London disputes market which places a band of litigation-driven specialists near the top tier alongside the City elite. Topping that list is US litigation leader Quinn Emanuel Urquhart & Sullivan, which burst onto the City scene in 2008 and has carved out an enviable reputation for high-end disputes. Quinn Emanuel is particularly visible as claimant counsel, thanks to its conflict-free willingness to pursue major banking groups.

Quinn Emanuel has since been hugely successful in financial terms, posting a 16% uptick in City revenues for the 2018 year alongside a startling 70% profit margin. Richard East, co-head of its London office, comments: ‘We are part of a law firm that’s turning over $1.4bn a year. The size of the practice is very significant. In London we are at £85m, which puts us into a different stratosphere.’

He sums up the current market dynamic: ‘Clients either want commoditised legal services or specialists. There’s not much room in the middle. We benefit from that because we have a very distinct brand and practice.’

Stewarts, which launched in London in 1990, describes itself as the UK’s largest litigation-only law firm with 67 partners and 162 lawyers. The firm has been one of the most consistent financial performers over the last 20 years with the notable exception of 2017/18, when its revenue dropped by 20% to £62.2m.

Clive Zietman, head of commercial litigation, puts the fall down to the impact of contingency fees. The previous financial year, the firm received a significant windfall with the settlement of the £4bn shareholder group action against The Royal Bank of Scotland (RBS), with Stewarts’ claimant clients taking a settlement offer in December 2016. It was Stewarts’ best-year ever, generating £77.9m. After that settlement, Zietman recalls: ‘I held a meeting with junior partners and told them: “This is great, but there are going to be peaks and troughs.” It’s like being Man City, if you are at the top, staying at that level is tricky. There are only so many RBS cases.’

‘Disputes is one of the jewels in Simmons’ crown. Litigation is the second largest practice and we’re looking to make it the largest.’
Hans-Hermann Aldenhoff, Simmons & Simmons

Aware of such ebbs and flows, Stewarts has made a concerted effort to diversify. In July last year, the firm hired Richard Kovalevsky QC, formerly of 2 Bedford Row, to head up a new financial crime unit. In January, Stewarts established a new media disputes team. Zietman estimates that the non-core practices of competition, tax, arbitration and corporate crime will need five partners each to reach critical mass.

Zietman adds: ‘The economic pressures are on the medium sized all-service firms. The big players and the niche players are busy. The small firms who do not have a unique selling point are the ones struggling. We are an easy sell. We are litigation. What’s your simple message to the market?’

Riding the wave

Despite the high disputes profile of Magic Circle firms, chasing pack outfits are far more potent challengers in litigation than deal work, with Herbert Smith Freehills (HSF), Hogan Lovells and Simmons all having carved out prominent positions.

For HSF, the traditional bellwether for high-end City disputes, the firm retains a commanding presence for plc clients on high-stakes work alongside key rivals Freshfields and CC. Nearly half (approximately 45%) of the firm’s business comes from its much-vaunted disputes practice, approaching £420m, more than any Magic Circle rival.

Big names among its 71 London disputes partners include Rod Fletcher, who runs the corporate crime team, arbitration heavyweight Craig Tevendale and banking litigator Damien Byrne Hill, who is now head of the London disputes team.

HSF rode the wave of post-financial crisis litigation effectively, but with that tide of work dissipating, Byrne Hill is cautious on the market: ‘It’s stable rather than growing rapidly.’ This reflects the firm’s overall slowdown: revenues for the 2017/18 financial year stuttered to less than 1% growth. Given the maturity and size of the team, HSF rarely hires partners in London, the last exception being Brian Spiro, hired from corporate crime boutique BCL Solicitors in May 2017.

Hogan Lovells remains a similarly muscular presence in high-end disputes, though it has only hired two lateral partners in the last two years in London: litigation partner Antonia Croke and arbitration specialist Angus Rankin. The firm’s dispute resolution practice billed $747m globally for the calendar year 2018, up 1.8% on the previous year. In London the firm fields 40 partners.

Junior partners to watch include commercial litigator Rebecca Wales, who Davison describes as ‘fantastic on every level’. Michael Roberts ‘rewrote the law on privilege’, according to Davison, after successfully representing Eurasian Natural Resources Corporation in the much-watched battle with the Serious Fraud Office.

‘At the mid-tier there’s always been a price pressure but now it’s being applied at the top level too. It creates a blurring between those two types of work.’
Damien Byrne Hill, Herbert Smith Freehills

While unable to match HSF and Hogan Lovells for range in disputes, Simmons, led by senior partner (and shrewd litigator) Colin Passmore, has carved out an increasingly distinct and profitable position in recent years.

The London disputes team, particularly renowned for finance-related matters, has seen a 10% year-on-year rise in revenues. The firm now fields 35 contentious partners in London and generates around 30% of its income from disputes (at over £100m in the 2017/18 financial year, a respectable haul for a 77-partner global team).

International disputes head Hans-Hermann Aldenhoff has high ambitions: ‘We really do consider disputes one of the jewels in Simmons’ crown. Litigation is the second-largest practice at the firm and we’re looking to make it grow, not just in terms of headcount, but revenue.’

Aside from London leaders and boutiques, a handful of the US firms have forged broad UK teams, notably Latham & Watkins and White & Case. Latham is seeing ‘incredible growth’ across its finance litigation practice according to partner Martin Davies, who comments: ‘The Magic Circle is great, but there is always the difficulty of trying to crack the US in the way the US firms have cracked London.’

Davies was a rare defector from Quinn Emanuel when he joined Latham in February 2017, bringing an established banking litigation practice. Later that year, legacy Olswang commercial litigation partner Ian Felstead made the switch. Latham then made a double swoop for Hogan Lovells’ litigation partners Jon Holland and Andrea Monks in 2018. It now fields 12 UK disputes partners, though this is dwarfed by its 225-partner global practice, which generates around 30% of its revenue (in the $1bn ballpark). The firm also has three QCs in the City, arbitrators Sophie Lamb and Philip Clifford in addition to white-collar partner Stuart Alford.

It is a similar story at White & Case, which has been on a sustained recruitment drive in recent years. The firm has made six partner-level recruits in London in the last two years and fields no less than 20 litigation partners in London.

White & Case disputes veteran John Reynolds cites the firm’s specialism in white-collar and banking litigation, and points to its recent senior hires as evidence of the firm taking the practice seriously. There was a strong bench even without the reinforcements – in the latest silk round, two White & Case partners – Aloke Ray and Dipen Sabharwal – were appointed QC.

With so many credible entrants in recent years, opinion among the traditional leaders remains divided as to their impact. Notes HSF’s Byrne Hill: ‘There are definitely tiers. There’s work we simply won’t do because the amount at stake is too small. But there’s a price pressure now which has changed the market. At the mid-tier there’s always been a general price pressure but now it’s being applied at the top level too. It creates a blurring between those two types of work.’

‘For the last ten years, disputes has been one of the most important places for our trainees to qualify into.’
Sarah Parkes, Freshfields Bruckhaus Deringer

Conversely, Davison reflects: ‘The big names in litigation continue to be the ones clients come to. I’m not sure that the new entrants on the block are going to be able to complete with that in the long term. Stewarts – I’ve never dealt with them.’

Healthy competition

If there is one area in which nearly all the top teams are investing, it is antitrust disputes. East describes it as ‘the strongest area of demand’ for Quinn Emanuel. The firm has two marquee competition cases on its books currently: partner Boris Bronfentrinker is defending truck maker Daimler in a mass cartel case and also representing consumer rights activist Walter Merricks in the largest claim ever brought before the English courts against Mastercard.

East says further resource is needed at the associate rank rather than partner level: ‘We have made 15 offers to associates at the beginning of the year, to join us between May and September. It’s the most we’ve ever had join us in London in one year.’

The trucks cartel litigation has produced lucrative mandates for a range of firms: Slaughters is representing MAN, Volvo-owned Renault has enlisted Freshfields for its defence, HSF is leading for Iveco while Hausfeld is partnering with litigation funder Burford Capital to offer a financing package for UK claimants.

Freshfields global head of disputes Andrew Hart sees such cases as driven by an expanding claimant Bar and the increasing prominence of litigation funders able to bankroll group claims: ‘It’s essentially dealing with the consequences of consumerism.’ Freshfields is currently defending Volkswagen against thousands of claimants as a result of the company’s emissions scandal. On the other side is personal injury specialist Slater and Gordon, backed with funding from Therium Capital Management.

Hart adds: ‘If you were to go around Europe now and look at the claimant’s side, you get some of the traditional firms but also a wave of new claimant firms. These are both the larger firms but also many smaller local enterprises. This is mirroring what has happened in the US. They’re spreading around the world.’

Simmons has moved to position itself in the expanding field, landing a big-ticket mandate for LG Electronics. The South Korean multinational was successfully defended by Simmons after Japanese rival iiyama brought a High Court claim relating to a cartel finding by the European Commission.

While this increase in group claims has provided a lucrative work stream to some London firms, it is not for everyone. Zietman highlights ‘the critical mass’ needed to take on such claims: ‘We are not going to do mass litigation, we don’t like it. We don’t want to act for 20,000 people.’

If antitrust disputes remain a hot business line, more familiar areas of investment like white-collar crime/investigations, arbitration and finance litigation remain popular. Contentious IP, meanwhile, is once again being talked up by leading teams, a shift from a few years back when most City leaders apart from Hogan Lovells were reducing exposure to the sector citing concerns over fee levels.

The B word

While City litigators are in confident mood, the UK’s exit from the European Union remains on the horizon, albeit an issue with some immediate upside as most litigators are expecting (and in a few cases already handling) Brexit-related disputes. The wider question is the long-term impact on the global drawing power of London’s courts following a dislocating Brexit.

Davison comments: ‘Will [Brexit] damage London? No, because that’s dependent on English law, it’s not attractive because we are part of the EU.’ Zietman, unusual among City litigators as an outspoken Eurosceptic, predicts a boon for lawyers: ‘If there’s a disruption to the supply chain due to a hold-up at the UK border, there’s going to be some very interesting issues.’ Says Byrne Hill at HSF: ‘Litigation happens when someone loses money. A change like Brexit is going to create a lot of winners and losers.’

In response some leading teams are now looking to step up investment in mainland Europe. HSF’s European disputes practices in Germany, Paris and Madrid are growing ‘much faster’ than London, according to Byrne Hill, in part due to ‘starting from a much smaller base.’ But there has also been a concerted recruitment drive on the continent, with HSF hiring Simmons’ dispute resolution and IP head in Italy, Laura Orlando, in 2017. HSF also appointed leading French patent litigator Frédéric Chevallier as a partner in its Paris arm.

Simmons has also made strides in Europe: in the last two years the firm has made seven lateral hires in the region, including an IP team in Milan and four new Paris partners.

And the first Brexit-related disputes are now emerging. Freshfields, led by partners Deba Das, Rod Carlton and Sally Roe, picked up a significant mandate for Eurotunnel, which litigated against the Department for Transport after it awarded contracts to three additional shipping suppliers as part of Brexit preparations.

In another much-publicised case, CC advised the European Medicines Agency, which held a 25-year lease of a building in Canary Wharf. In February 2019, the agency unsuccessfully argued to the High Court that Brexit ‘frustrated’ their lease and were therefore able to walk away without liability as the agency was relocating to Amsterdam.

In short, the outlook for leading City team remains robust, especially compared to transactional work facing increasing commoditisation. Such attractions mean more competition, with many citing the impact of smaller disputes teams at Stephenson Harwood, RPC and Travers Smith in carving out a space for handling major disputes on a conflict-free basis. Notes Davison: ‘Stephenson Harwood has always pitched themselves as a firm ready to take conflicted work. They are an excellent firm.’

Fundamentally, there remain many reasons to invest in a dispute resolution practice. East is blunt: ‘We do so well because there’s a load of litigation and there’s a lot of white-collar activity. I don’t see that changing much in the near future.’

Go to the Disputes Yearbook 2019 menu