Legal Business

Shanghai savings: HSF first Western firm to open alternative legal services hub in China

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With international law firms intent on carving up pricey mandates so that chunks can be processed more mechanically by cheaper teams, Herbert Smith Freehills (HSF) has become the first Western firm to open an alternative legal services hub in China.

A 13-member team of lawyers and legal analysts bilingual in Mandarin and English has been set up in the firm’s Shanghai office. The business combines legal expertise, process efficiency and client technology solutions to process high-volume or document-intensive work more cost effectively.

‘A complex transaction or dispute can involve the review of millions of Chinese-language documents that often must remain in China,’ said Libby Jackson, HSF’s global head of alternative legal services. ‘By equipping this new team with the technology and processes proven at our existing legal hubs in Belfast and Perth, we can offer clients a cost-effective way of tackling the document-intensive elements of these projects on the ground in China.’

The move marks a further rolling out of HSF’s alternative legal services team, which employs some 350 lawyers, legal assistants and technologists across Belfast, London, Melbourne, Perth, Sydney and Brisbane. Belfast, which launched in 2011 as a purely alternative legal services hub, has so far been at the centre of HSF’s bid to deconstruct legal work, which covers document review, due diligence, claims assessment, commercial contracts and asset management for real estate clients. The launch of a team in Shanghai expands the programme at a time when Mandarin is increasing as a business language and provides a more cost-effective offering in a legal market that has to date been poorly monetised.

‘This innovation of a new centre in Shanghai helps us deliver on the firm’s commitment to providing innovative and cost-effective service delivery options to our clients. It is part of our new strategy launched earlier this year, and continues the pioneering work we have done in the alternative delivery of our services to clients,’ said global co-chief executive Sonya Leydecker.

tom.moore@legalease.co.uk

Legal Business

HSF appoints Freshfields’ co-head of power and utilities as it ramps up German push

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Herbert Smith Freehills (HSF) has landed M&A partner Christoph Nawroth from Freshfields Bruckhaus Deringer in Dusseldorf.

Nawroth co-headed the Magic Circle firm’s global power and utilities group and its infrastructure funds group during his time at the firm. The high-profile hire by HSF follows a contrasting time for the London rivals in Germany, with Freshfields shrinking its presence in the country after closing its Cologne office, whereas HSF has rapidly scaled up since launching in Frankfurt and Berlin in 2013.

Since 2013 HSF has grown to more than 55 lawyers, including 16 partners, across three offices. The firm launched in Dusseldorf in March with the arrival of former Clifford Chance arbitration partner Thomas Weimann.

Nawroth is not the first Freshfields partner depart for HSF in Germany, with the firm’s former co-head of energy and natural resources Dirk Hamann switching two years ago in a blow to the Magic Circle firm.

Scott Cochrane, HSF’s head of corporate, said: ‘Christoph will help us further enhance our offering to our clients in Germany, a crucial market for us given the size and strength of its economy and more widely EMEA, a key region for our firm.’

Ralf Thaeter, Germany managing partner, added: ‘According to Thomson Reuters, acquirers listed in Germany were EMEA’s most acquisitive companies for Q1 2016, with a combined total of almost $85 billion in offers. We anticipate a steady flow of M&A deals to continue and the strategic hire of Christoph, a highly respected practitioner with an outstanding reputation for handling complex transactional work for blue chip clients, aligns to our ambition to be a leader in the market.’

tom.moore@legalease.co.uk

Legal Business

HSF delivers best post-merger revenue performance yet with revenues up 7% to £870m

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Herbert Smith Freehills (HSF) has put in its strongest financial performance since its creation in 2012 through the merger of the UK’s Herbert Smith and Australia’s Freehills, with revenue up 7% in 2015/16 to £870m.

Revenue increased by £55m from £815m in 2014/15 to £870m in 2015/16. While still lagging behind HSF’s record profit per equity partner (PEP) of £1.03m, achieved ahead of the financial crisis, PEP rose 5% last year to reach £840,000. This equates to an extra £39,000 in take home pay per partner, and equals the £840,000 PEP Herbert Smith achieved in its final year before the Australian merger.

Net profit increased 7% last year to £278.2m, which helped to fund the firm’s globalisation efforts, with openings in Dusseldorf and Riyadh in November coming just a month after the launch of its first African office in Johannesburg. However, HSF is the only major UK firm to report in a constant currency basis, meaning its performance may be less impressive in real currency rates given the strengthening of the pound against the Australian dollar in 2015. For example, last year the firm reported £815m on a constant currency basis, but its LLP filing for the year showed revenue at £793.4m.

Co-chief executive Sonya Leydecker told Legal Business: ‘These results show the merger has been a success. Our strategy is about ensuring we have capability where we need it. It’s not about adding capability in all offices. We may not have everything we want in some of our offices but like everybody else, we’re prudent about how we spend our money. It’s a growth strategy.’

HSF increased the number of panels it was appointed to this year, by 21 to 161, after being named as a go-to adviser for Weir Group, National Grid, Bank of Queensland, British Land, and Royal Bank of Scotland.

Leydecker (pictured) said that the firm’s ‘disputes group had another exceptional year’, while the finance and real estate groups ‘saw strong growth’ and projects experienced ‘a real resurgence’. Highlights include guiding ICBC Standard Bank, until recently the investment banking unit of South Africa’s Standard Bank, to the UK’s first-ever deferred prosecution agreement; defeating a judicial review against Big Four accountancy KPMG over its handling of compensation from banks that mis-sold interest rate hedging products; and getting an international arbitration claim against Spain over renewable energy subsidy changes thrown out. The firm also continues to act for RBS in a landmark claim by 40,000 shareholders over its 2008 rights issue.

Leydecker added: ‘We are seeing an increase in cross-border mandates, which we’ve been working hard on. Our top-30 clients now instruct us in more than nine offices. The strapline for our strategy is to become a world-class professional services business and that means becoming more efficient and effective in the way we run our own business,’ she adds. ‘That hasn’t at the moment meant there’s been any cost-cutting but we’re looking at processes and how we do it better. Clients want better pricing and more efficiency and that’s not going to change.’

tom.moore@legalease.co.uk

Read more on the firm in: ‘Consumed – Can burning ambition from Down Under recast Herbert Smith for the global stage?’

 

Legal Business

HSF enters pay war with newly-qualified base salaries above Linklaters and Slaughters

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Herbert Smith Freehills has significantly bumped up pay packets, awarding its associates with a base salary of £82,000, up £13,000 on last year’s £69,000.

With flexibility to reward its high performing associates, newly qualified (NQ) lawyers have had their pay set between £82,000 and £90,000. At the top of the pay scale, those with three years’ post qualified experience (PQE) will have the opportunity to earn between £112,000 and £122,000, a 26% rise on last year’s £89,000.

Trainees at the firm have also had a boost to their pay packets; first years will receive a 4.8% increase to £44,000, while second years will be given an extra £4,000.

UK, US and EMEA regional managing partner Ian Cox said the approach to pay had not changed a result of the EU referendum.

Cox added: ‘The vote will have no immediate impact on the firm’s operations other than any arising from general effects on the UK economy and we are focused on providing our clients around the world with counsel and support as they navigate the implications of the UK’s vote to leave the EU.’

The strong increase in salaries follows a general round up across the board with many of the Magic Circle firms wrapping its bonuses into base salaries.

At Freshfields Bruckhaus Deringer, NQ pay packets were boosted by an extra £17,500 after the firm announced it would be folding in its discretionary bonuses, with pay set to rise 26% to £85,000 on last year’s figure of £67,500. Clifford Chance has also set its associate pay at £85,000 compared to £70,000 before bonuses in 2015.

NQ lawyers at Linklaters can expect to take home slightly less, with the firm posting salaries of £81,000 next year including bonus. High performers will on average earn £91,000 including bonus, up on last year’s basic £68,500 salary. One-year PQE associates will on average receive £90,000, with two-year PQE and three-year PQE associates receiving £100,000 and £111,000. However, high-performing lawyers will receive substantially more than their Freshfields counterparts, with one-year PQEs set to earn £101,000. High-performing two-year PQEs will earn £119,000 and high-performing three-year PQEs will earn £130,000. That is up on the £98,500 basic salary three-year PQEs would have received last year.

Meanwhile, Slaughter and May released more subdued salary increases, with salaries for NQs up 2% from £70,000 to £71,500, while lawyers with one year’s PQE will see their salaries go up to £79,000 from £75,500.

madeleine.farman@legalease.co.uk

Herbert Smith Freehills 2016/2017 associate pay

First year trainees – £44,000

Second year trainees – £48,000

NQs – from £82,000 to £90,000

1 year PQE – from £87,000 to £95,000

2 year PQE – from £97,000 to £107,000

Legal Business

Guest post from Herbert Smith Freehills – Brexit: After the vote

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The ‘in-out’ referendum on the question of the UK’s membership of the European Union (EU) which has dominated the political and business agenda in the UK for the last six months, has resulted in a majority of voters (on a turnout of approximately 72%) preferring the UK to leave the EU.

The vote was 51.9% in favour of leaving, with 48.1% voting to remain.

Businesses need to consider how to deal with the immediate effects, what analysis and planning they should undertake as a result and what communication they may need or wish to make to investors, staff, customers, suppliers and other stakeholders.

In this briefing, we consider what happens next, as well as outlining some practical steps.

1. Immediate effects on businesses exposed to the UK

This section deals with the possible immediate effects of the leave vote on businesses with heavy exposure to the UK. These factors, which organisations will likely have already anticipated, may now take on redoubled significance following the UK’s vote to leave the EU.

Market volatility

International financial organisations, the Bank of England, the major investment banks and expert commentators expect sharp movements in financial markets in response to the leave vote.

A variety of contracts and regulations may give rise to immediate exposures upon significant volatility or falls in foreign exchange rates or the value of traded securities; this in turn, may impact the financial or trading position of a business and its disclosures.

In the short-term, a sharp drop in the value of sterling immediately following the vote to leave may impact the ability of parties to comply with financial covenants under their financings and other financial contracts, particularly where covenant test dates fall on 30 June. The knock-on consequence for their counterparties would be the practical challenge of dealing with a potentially large number of technical defaults and requests for waivers, on the assumption that these counterparties would have limited desire to immediately accelerate or terminate the relevant financings or contracts.

In the longer-term the impact on profitability and cashflow of businesses, and how that feeds into the ability to comply with financial ratios, is both difficult to predict and would be varied.

Companies and institutions with significant sterling cashflows but with non-sterling debt will see the costs of servicing that debt and any related hedging rise with a fall, or substantial volatility, in the value of sterling.

Commercial contracts with unhedged obligations in foreign currency may become uneconomical to perform on a sustained basis and parties to contracts may seek to invoke material adverse change or other termination rights.

Counterparties to derivative contracts involving sterling may become significantly out of the money and be subject to substantial margin calls or have large mark to market payment obligations in the event of a close out following significant shifts in currency markets. A fall in share prices impacting the valuation of listed shares would affect margin financings, repos, equity derivatives and other such market contracts and may lead to margin calls. There may also be practical challenges of trading capacity in the equity markets for traders.

Whether the vote to leave would impact liquidity in the debt markets will be dependent on numerous factors. The decision to lend to a particular borrower will be influenced both by a lender’s view about the impact of an exit on the business of that borrower and also their view as to the broader macro-economic impact of the vote to leave and the appetite of lenders to provide liquidity into such markets. The position of UK banks and, if the view is taken that the vote to leave has a general unsettling impact on the EU more generally, of European banks may be perceived to have weakened as a consequence of the vote to leave. Any such weakening has the potential to impact the financial markets and the willingness of institutions to lend.

Finally, potential exists for the Brexit vote to bring about a downgrade or negative watch for companies with major sterling exposure and for a downgrading of publicly traded debt issued by such companies. To the extent the vote to leave is regarded as negatively impacting financial institutions with large sterling holdings, rating agencies may also consider downgrading such institutions; this could impact a whole range of financing transactions across various markets. In practice however, short term volatility in the markets may be unlikely to influence rating agencies to downgrade companies, debt and financial institutions in this way.

Consideration should therefore be given to material commercial contracts, financing and trading contracts and security agreements, and also to any regulatory capital obligations, and the risks under these assessed against the expected market shifts.

Financial and trading position

A review of contractual and regulatory obligations or the effects of external factors may result in the conclusion that the financial or trading position of a business is significantly adversely affected.

External factors such as a drop in market confidence may have an immediate negative effect on financial or trading positions.

Falls in consumer demand, a tightening of credit, and investors exiting UK-focused funds and equities are examples of possible early manifestations of such sentiment.

Boards should monitor closely any effects on financial or trading positions and observe their duties with regard to solvency and the interests of shareholders, the company and its creditors.

Directors should be particularly mindful of their duties when considering distributions or other discretionary payments or commitments.

Disclosure

Regulatory and contractual obligations as well as commercial factors may prompt communications with stakeholders in response to the leave vote.

Investors, lenders, auditors, regulators, customers and suppliers may all have contractual or legal rights to be informed of a significant shift in financial or trading position resulting from the vote to leave.

Irrespective of any strict obligation, organisations may wish to communicate voluntarily with such stakeholders, and in particular be prepared for queries from concerned staff and pension scheme members.

Although major market fluctuations in and of themselves will not amount to inside information requiring announcement by issuers, they may do so when taken together with other information which is not already in the public domain.

Issuers should monitor the prices of their publicly-traded securities and assess in the usual way whether they have inside information and their obligation to make it public, in consultation with their legal advisers and brokers.

Looking ahead: practical steps for business

-Inform the board by preparing briefings on the risks and opportunities raised by the vote to leave the EU.

-Analyse exposure by conducting due diligence of business lines and cost centres, eg identifying areas which depend on UK membership of the EU for market access or which would be affected by a change to tariffs.

-Build resilience by devising and applying risk mitigation strategies to address identified risks, eg new EU physical locations, modified legal structures, and amendments to policies and procedures.

-Review strategy by engaging with strategic planning exercises to include Brexit factors, eg consider revising longer-term plans to involve member states not planning to leave the EU.

-Revise projections by reviewing business projections, eg considering the impact of tariffs or other trade barriers, changes affecting the provision of services or the free movement of workers.

-Engage with stakeholders by communicating with investors, staff, suppliers and customers eg outlining analysis undertaken, assessment of impact, the (gradual) nature of the transitional process and an intention to monitor developments closely.

-Review employment plans including for recruitment and secondment of employees. Audit the immigration status of EU migrant workforce and the workforces of the businesses in supply chains. Communicate with employees, particularly those who might be affected by changes in immigration law, provide reassurance that they will be kept informed as the position becomes clearer and consider if any current employees can apply for British (or other EU) citizenship or permanent residence now.

2. What is the legal effect of the referendum vote?

The vote for the UK to leave the EU will not have any direct legal effect on its own.

Under the terms of Article 50 of the Treaty on European Union, which governs the process, the UK will first inform the European Council of its intention to leave the EU. This notification triggers the two-year period specified by the Treaty for the negotiation of the terms of a member state’s withdrawal. The British prime minister David Cameron (pictured) has previously indicated that he intends to inform the European Council immediately in the event of a leave vote but some delay may affect the procedure, particularly if there is political turmoil in the UK as a result of the leave vote.

3. The two-year transition period leading up to a UK exit from the EU

The two-year transition period can only be extended with the unanimous agreement of the UK and all of the remaining 27 member states. If the period is not extended and an agreement on the terms of the UK’s withdrawal has not been reached beforehand, the UK will cease to be a member state of the EU at the end of that two-year period, quite possibly before any agreement has been reached either on the terms of the withdrawal or the terms of the future EU-UK relationship.

In parallel with the negotiations with the EU of the UK’s terms of withdrawal, UK lawmakers will (during the same two-year notice period) need to review the elements of UK law which are derived from EU law and take decisions as to whether to retain, reform or repeal them. The enormity of this exercise makes it likely that, at least initially, most rules will be retained (or ‘grandfathered’) albeit not without significant issues to be addressed, including in relation to their future interpretation and the influence of decisions of the Court of Justice of the European Union (CJEU) on the interpretation of EU laws retained by the UK.

4. What will the key constitutional changes be once the UK leaves the EU?

When the UK eventually leaves the EU, the UK’s constitutional relations with the EU will be fundamentally altered. The EU Treaties will cease to have the same effect and new arrangements may be put in place. There is no requirement (or right) to have new arrangements in place with the EU before or after we leave.

The key constitutional changes on leaving the EU (in the absence of agreement to the contrary, such as the UK becoming a member of the European Economic Area (EEA)) are:

-there will be no obligation to apply or adopt new EU legislation;

-there will probably be no obligation to follow the CJEU interpretation of EU law or to apply that interpretation in UK law based on EU law; and

-there will be no financial contributions between the EU and the UK (unless the UK were to join the EEA or enter into a Swiss-style agreement with the EU).

-It is likely that the UK and the EU will seek to agree substitute arrangements as regards trade in particular but this may be a prolonged process extending beyond the two-year withdrawal negotiations, and possibly taking as long as ten years.

The UK will cease to benefit from existing EU trade agreements with third countries (whether or not it joins the EEA) and would be excluded from those under negotiation (including those with many Commonwealth countries).

It will benefit from the European Free Trade Association (EFTA) Free Trade Convention in trading with other EEA States if it re-joins EFTA (a precursor to joining the EEA) but otherwise could be expected to have no (or very few) trade agreements with third countries, other than as a member of the World Trade Organisation (WTO).

The EU has around 50 international trade agreements with third countries from which the UK benefits, and many more are under negotiation. The UK will therefore have to make a major effort to improve its position vis-à-vis third countries, including establishing its independent terms as a member of WTO and building up its capacity to negotiate trade agreements, which has largely been outsourced to the EU in recent years.

Rights enjoyed by UK businesses and citizens in the EU would be lost, including free movement, recognition of qualifications and protection from ‘soft’ trade barriers, except in so far as they are saved by new trade agreements with the EU or accepted by the CJEU as protected by the doctrine of ‘acquired rights’, which could cut both ways.

5. The future UK/EU relationship

The implications of the vote to leave depend very much on what EU membership will be replaced with. For example, will the UK have no formal link with the EU, or will it join the EFTA and (like most EFTA countries) the EEA agreement with the EU, or will it enter into some other form of free trade agreement with the EU? Given the uncertainty, business planning has to take into account the risks of the least favourable outcomes.

There would be a number of possible structural outcomes, apart from any bilateral arrangements arising from the secession negotiations. The main options, which have precedents in the EU’s relation with other countries, are:

-EEA (European Economic Area)

-EFTA (European Free Trade Association)

-EU/UK FTA (Free Trade Agreement)

-Customs Union

-EU/UK CETA (Comprehensive Economic and Trade Agreement)

-WTO (World Trade Organisation)

A key point to bear in mind is that apart from the EEA, none of these models would give the UK’s important financial services sector the same rights to do business across the EU which it currently enjoys. Most of these models, apart from a WTO relationship on its own, would eliminate customs duty for manufacturing businesses trading between the UK and the EU.

Read Herbert Smith Freehill’s full briefing here.

For more commentary see: ‘LB’s Brexit take: City law’s globalisation playbook has just been shredded’

Legal Business

Quinn Emanuel expands in London again, appointing HSF’s Bremen as City construction chair

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US firm Quinn Emanuel Urquhart & Sullivan has strengthened its construction offering with the appointment of Herbert Smith Freehills’ James Bremen as its chair of the construction practice based in London.

With experience in the oil and gas, mining, water, power and major infrastructure sectors, Bremen has worked across 25 countries advising on both contentious and non-contentious construction matters. He regularly represents clients in other emerging markets, in particular Malaysia and the CIS countries.

Bremen will divide his time between London and Qatar where, notably, he has over a decade’s experience advising the State of Qatar and the Kingdom of Saudi Arabia on major infrastructure projects and disputes.

Other clients of Bremen’s include Qatar Petroleum, Malaysian oil and gas company Petronas and education, science and community development non-profit Qatar Foundation.

Before joining HSF, Bremen had been partner at both King & Spalding and Maxwell Winward. He gained his experience at White & Case and McCullough Robertson.

Bremen is the third major lateral hire Quinn Emanuel has made to its London office this year. In March, the firm appointed DLA Piper UK competition head Kate Vernon to its competition practice. The firm also announced in February Clyde & Co litigator Paul Friedman would join as the firm continued to expand its Israel practice. Friedman joined the firm’s 12-partner team in London but splits his time between the City and Israel, despite the firm not having an office in the Middle East.

Managing partner John Quinn said the firm’s arbitration practice, and construction arbitration in particular, have been important growth areas for Quinn Emanuel. He added ‘we have long had significant clients in the Gulf region.  James is a very good fit for us on multiple levels.’

London office co-managing partner Richard East said: ‘We are delighted to be able to welcome James to the firm and to be able to add another very significant litigation specialism  to our growing practice in London.’

madeleine.farman@legalease.co.uk

Legal Business

Holman Fenwick continues recruitment drive with HSF litigator Foster

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Holman Fenwick Willan has recruited another key lateral to its City practice, this time with Herbert Smith Freehills (HSF) solicitor advocate and partner Christopher Foster.

Foster is a commercial litigator specialised in contentious insurance and reinsurance matters. He advises on policy drafting (both direct and reinsurance), commutations, portfolio transfers and the insurance aspects of corporate transactions.

Major instructions under his belt include advising on losses arising out of California wildfires; the invasion of Kuwait; WorldCom; Exxon Valdez oil spill; Madoff and hurricanes Katrina, Rita, Juliette, Ivan and Wilma.

He also advised Graff on its Bond Street robbery, the largest ever UK insurance claim following a gem heist, and HSF’s longstanding client British American Tobacco on its exposure in the US for the pollution of the Lower Fox River in Wisconsin and the Kalamazoo River in Michigan.

Other disputes stars to exit HSF in the last twelve months include experienced arbitration partner Matthew Weiniger QC, who departed for Linklaters last summer.

Holman Fenwick has been on a recruitment drive for the last year, having hired Reed Smith corporate partners Giles Beale and James Wilson in December, Stephen Marais from rival Ince & Co and energy partners Alexander Reid and Jonathan Martin, who joined from Baker Botts and Fasken Martineau respectively. The firm also had a strong promotions round, electing nine new partners to ‘drive international expansion.’

The move to build out its offering follows a difficult financial year, with a 15% slide in profits per equity partner (PEP) for the 2014/15 year which saw a 3% drop in revenue from £144m to £139m. The falling numbers marked the end of a steady increase in recent years with turnover up by 2% in 2013/14 and PEP up 5%, while in 2012/13 the firm saw revenue grow to £141m, up from £124m the previous year.

sarah.downey@legalease.co.uk

Legal Business

The Brexit debate: The big uneasy

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The biggest issue facing business for a generation looms on 23 June with the Brexit vote. We assembled a group of GCs to find out how they are managing the unmanageable.

It is the business issue that has dominated headlines for months and represents for UK plc a potentially far more profound impact than any general election or change of government. The vote on 23 June on the UK’s membership of the EU promises ominous levels of uncertainty for business and unprecedented challenges for general counsel (GCs) trying to help their companies manage systemic risks. In the second part of a collaboration withHerbert Smith Freehills (HSF), we gathered a group of senior in-house counsel to assess what legal teams should be doing now… and potentially on 24 June.

Legal Business

Gowling WLG boosts banking and projects ranks with appointments from Dentons and HSF

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Gowling WLG has made a double partner hire, appointing Dentons’ Matthew Harvey in banking and finance and former Herbert Smith Freehills (HSF) Abu Dhabi head Andrew Newbery in projects. The appointments are the first UK lateral hires the firm has made since its merger went live earlier this year.

Newbery (pictured), who joined HSF in 2006, advises on significant EMEA infrastructure, energy, mining and project finance transactions. In 2008 he became managing partner of HSF’s Abu Dhabi office but left in 2013 to establish his own consultancy in London.

At Gowling WLG Newbery will work on projects to target priority infrastructure and energy work in the UK, Africa and the Middle East.

Newbery said he was impressed by the firm’s regulatory, funds and construction expertise.

He added: ‘This is going to be a great platform and I believe that my recent client-side experiences will benefit the firm and its clients. Lessons learned on major UK procurements such as interconnectors and the super sewer will be pertinent elsewhere, including in the international arena where my earlier experience of procuring and financing large-scale infrastructure projects in the Middle East and Africa will also be relevant.’

The firm has also appointed Harvey from Dentons, where he had been a partner since 2000. Harvey has over 20 years’ experience acting for corporates, banks and finance companies on structured, asset and export finance transactions with a particular focus on equipment leasing and the financing of corporate aircraft and helicopters.

Kirsty Barnes, head of the firm’s banking and finance practice said: ‘Matthew’s appointment is part of our drive to increase revenue and market share in sectors including financial institutions and aviation. His experience in asset finance is truly global. This will be another significant boost to our practice following the addition of the team in Canada with the launch of Gowling WLG.’

The recently-merged Gowling WLG completed its first round of partner promotions this week, appointing Chris Towle and Michael Twining to its partnership and taking the total number of partners in the UK to 141.

kathryn.mccann@legalease.co.uk

For extensive coverage of the Wragge Lawrence Graham merger with Gowlings see the feature: ‘The road to Ottawa – why WLG believes Gowlings can put it on the global map.’

Legal Business

HSF client Goldman Sachs loses costs argument against sovereign wealth fund ahead of $1bn trial

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A pre-trial review of the upcoming $1bn court battle between Goldman Sachs and the Libyan Investment Authority (LIA) has seen the bank lose a key costs argument at London’s High Court.

The $1bn claim against Goldman Sachs relates to nine financial derivative transactions which the LIA entered into with the bank between January 2008 and April 2008. The LIA paid upfront premiums to the bank to enter into the disputed trades which subsequently expired as worthless in 2011.

The LIA argues HSF client Goldman Sachs exploited the LIA’s position of vulnerability as a newly established sovereign wealth fund that lacked experience in dealing with derivative instruments.

In recent weeks, the LIA, represented by Enyo Law, sought a costs order against Goldman Sachs of £70,000, after the bank abandoned a particular challenge, forcing Enyo to amend its pleadings. An additional order was made for the bank respond to the LIA’s request for further information.

Presiding over the hearing on 3 May, Mrs Justice Rose held: ‘Despite that lack of clarity in the correspondence, that does not, in my judgment, persuade me that the LIA should not get at least the bulk of the costs thrown away by Goldman Sachs raising and then abandoning the point about lack of authority. It is a strong thing to plead an allegation, in effect, against a firm of solicitors that they have commenced a major piece of litigation without making sure that they are properly authorised by their client to do so.’

She added that Goldman Sachs must have known that by raising the challenge it would ‘engender a great deal of work on the part of the LIA and their advisers to gather together the evidence and the documentation needed to prove authority.’

‘The total costs claimed amount to over £141,000 incurred in relation to disclosure, correspondence, factual witness involved in the ratification of the authorisation… If, having made such an allegation, it turns out that the allegation was misconceived, and the solicitors can show that they are properly authorised, then the party making the allegation must, in my judgment, pay the costs.’

Deducting 10%, the judge ordered Goldman Sachs to pay £63,000 in costs to the LIA. The full trial is listed to commence on 13 June for seven weeks.

The LIA has instructed Enyo Law’s Simon Twigden to represent it while Herbert Smith Freehills partner Damien Byrne Hill is representing Goldman Sachs.

Enyo Law is also currently acting for the LIA at the High Court in a $2.1bn claim against Societe Generale for a rescission of a series of trades allegedly entered into with members of the latter group between November 2007 and October 2008.

sarah.downey@legalease.co.uk