Legal Business

Corporate trumps disputes again as Palmer wins second term as HSF senior partner

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Leadership Herbert Smith Freehills

Herbert Smith Freehills (HSF) lifer and incumbent James Palmer has seen off a challenge from disputes partner Mark Shillito to be re-elected as senior partner and chair of the firm.

After successfully winning approval from over 50% of the partnership  – although the firm could not confirm how many votes he received – Palmer will begin his second term of three years on 1 May. 

Palmer said: ‘I am delighted and greatly honoured to be taking on a second term as senior partner…I look forward to working with all our colleagues and our leadership team in pursuing our strategy and ambitions. The firm continues to perform well in our markets globally and remains superbly placed to strengthen still further.’

The result will come as little surprise after both internal and external observers roundly backed Palmer as the safe bet. One HSF partner told Legal Business when the nominees were announced: ‘our current senior partner is a very good person to be in the role.’

Shillito was billed as a symbolic challenger when news that he was running for leadership came last month. As head of disputes, his standing against corporate partner Palmer further fanned the flames of a persistent and long-running rift between HSF’s heavyweight transactional and contentious branches.

Palmer has been with HSF since joining as a trainee in 1986. After being made partner in 1994, he acted as the firm’s global head of corporate between 2010 and 2012.

In November 2014, Palmer triumphed over Sydney-based partner Mark Crean, London litigation head Tim Parkes and EMEA managing partner Allen Hanen to win the senior partner role.

Going forward, Palmer will continue fee-earning. Major clients on his books include BP, BAT, National Grid and the Weir Group.

HSF chief executive Mark Rigotti said: ‘The re-election of James will bring a degree of stability and continuity to the implementation of our strategy.’

tom.baker@legalease.co.uk

 

Legal Business

#MeToo: HSF latest firm to axe partner after sexual harassment allegations

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Herbert Smith Freehills

The string of sexual harassment scandals that are blighting the legal profession shows no sign of stopping, with Herbert Smith Freehills (HSF) becoming the latest firm to fire a partner following claims of workplace misconduct.

An unnamed male partner based in Australia was suspended from the partnership on 9 March, after an internal investigation discovered evidence of misconduct. The investigation came after a number of female employees of the firm made claims of sexual harassment. HSF will remove the partner from the partnership on 23 March.

HSF said in a statement: ‘In the past two weeks several people have come forward to make a number of allegations about the partner’s behaviour. Herbert Smith Freehills is taking them very seriously and has acted promptly. The misconduct is behaviour for which Herbert Smith Freehills has no tolerance.’

Mark Rigotti, HSF chief executive, commented: ‘We will not accept behaviour that violates a person’s dignity or erodes their self-respect. As custodians of the business, the partnership in particular must live and breathe our values and do all they can to ensure that all our team members enjoy an open, inclusive and supportive working environment that encourages them to thrive and enables them to be their whole, true selves at work and outside work.

‘On a personal level, I am deeply disappointed to hear how the behaviour of this person has impacted others at our firm. Every one of our people deserves to be treated with respect and dignity and the action we are taking should highlight the importance of this.’

The news comes in the same week as the Solicitors Regulation Authority (SRA) issued a warning to firms to combat the misuse of non-disclosure agreements (NDAs). The SRA stipulated that NDAs are improperly used if they seek to prevent a person from reporting misconduct to the police or other prosecution or regulatory body.

In recent months, multiple firms have been caught up in sexual harassment controversies. Baker McKenzie last month issued a review of complaints handling, following a historic allegation of sexual assault against a high-ranking partner at the firm. In Germany, former Linklaters partner Thomas Elser was sentenced to three years and three months in prison by a court in Munich for assaulting a student at a firm party several years ago. While a former Scottish partner left Dentons in February after the firm launched an internal investigation into allegations of past inappropriate sexual behaviour.

Tom.baker@legalbusiness.co.uk

Nathalie.tidman@legalbusiness.co.uk

Legal Business

Corporate v litigation: Palmer to contest HSF senior partner election against disputes head Shillito

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Leadership Herbert Smith Freehills

In an announcement that will do little to bridge the long-running divide between the firm’s transactional and contentious branches, Herbert Smith Freehills’ (HSF) senior partner election will see incumbent corporate partner James Palmer go head to head against dispute resolution chief Mark Shillito.

Nominations for the election closed today (23 February), with the vote slated to take place during the second week of March. There will be just one round of voting as there are just two candidates, with the winner requiring over 50% of the vote to be successful.

The safe money is on Palmer (pictured) to be re-elected who, despite ruffling a few feathers internally, carries significant respect both within and outside the firm. One external peer described Palmer as ‘a good leader, a nice chap and he speaks well. He’s outward-looking and collegiate, he’s supportive of those around him.’ A HSF partner added: ‘our current senior partner is a very good person to be in the role.’

Palmer also has experience on his side. He saw off three other contenders for the HSF senior partner role in 2014, with London litigation head Tim Parkes, EMEA managing partner Allen Hanen and Sydney-based M&A partner Mark Crean losing out. According to Palmer at the time, the partnership did not vote along geographic lines and he had ‘a lot of support in Australia.’

Shillito has pedigree, having been with HSF since he was a trainee, becoming a partner in 1996. He became head of disputes for the UK & US when legacy Herbert Smith merged with Freehills in 2012, and has overseen high-value disputes in sectors such as life sciences, media and telecoms.

But one former partner is doubtful that Shillito has what it takes: ‘I can see that the litigation side of the practice might be flexing its muscles but I don’t really think that Mark is likely to cause any change in the strategy of the firm. It needs someone who is going to improve the transactional side – someone with clear thinking and with the courage and leadership to make changes.’

There had been speculation that widely respected arbitration head Paul Hodges QC would also be in the running for senior partner and, as one HSF insider insisted: ‘If Paula Hodges were to put herself forward she would win.’

Shillito’s decision to stand provides clarity to this week’s revelation that he was stepping aside from his role as head of disputes. As of 1 May, much-touted banking litigator Damien Byrne Hill will assume Shillito’s old role .

Rather than the geographic focus of HSF’s last senior partner election, this election will be defined by the ongoing turf war between the firm’s pre-eminent disputes arm and its comparatively weaker corporate division. One ex-partner commented: ‘For many years there was a tension between corporate and litigation with litigation being the stronger part of the firm. But the firm’s strategy has been built on the demands of the corporate side of the practice.  It would take a very strong leader to change that.’

HSF declined to comment.

tom.baker@legalease.co.uk

(£) For more on HSF, read this month’s interview with the firm’s chief executive Mark Rigotti.

Legal Business

‘There’s scope for growth’: Damien Byrne Hill on taking over HSF’s disputes team

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Interview Herbert Smith Freehills

Herbert Smith Freehills (HSF) today (21 February) announced that much-touted banking litigator Damien Byrne Hill will be replacing Mark Shillito as head of disputes for the UK and US on 1 May.

Unsurprisingly as one of the key names in what remains the City’s bellwether ComLit shop, Byrne Hill has acted on a string of marquee matters in his 27 years at HSF (by way of legacy Herbert Smith), including defending Goldman Sachs in a $1.2bn claim brought by the Libyan Investment Authority. Shillito, who had run the practice for ten years, including steering it through a turbulent period in the wake of its 2012 union with Australian leader Freehills, returns to full time fee earning.

Legal Business caught up with Byrne Hill to discuss his new role:

LB: How does it feel as a HSF-lifer to become head of disputes?

Truthfully it is not what I had ever planned to do. But now that I’ve agreed to do it I am genuinely excited about what I can bring to the role and continue the things that have started under Mark.

LB: How would you describe the job your predecessor has done?

I hadn’t realised that he had done it for so long. He’s a very level-headed partner who fully understands the value of the thing he is charged with looking after. He listens fairly to new ideas and it’s enabled us to respond to change over time.

LB: Do you think you’ve just taken over the most difficult job at the firm? Disputes remains the core brand for HSF.

Managing a practice that is very successful has challenges, but it’s not as difficult as trying to build a new practice or run a practice that needs to be transformed. There’s scope for growth and development, but against the backdrop of a very successful practice.

LB: What are your ambitions for the US disputes practice?

I don’t take over until 1 May so my view is currently parochial rather than the one I’ll develop over time. That said, we need to build in relation to the areas which we originally set the offices up to do: arbitration, corporate crime and investigations and the US aspect of international litigation.

LB: How does this appointment compare to some of the other highlights of your career?

The closest comparison is being made a partner in 2000. That marks the recognition of one’s partners, which is difficult to beat.

LB: What attracted you to HSF in the first place then?

One was disputes, which I knew I wanted to do. The other was shipping, which I thought I wanted to do. As it turned out, I never did any shipping. When studying law, shipping had some of the most interesting disputes so I thought it was the pinnacle of litigation. I’m not sure it is now.

tom.baker@legalease.co.uk

(£) For more on HSF, read this month’s interview with the firm’s chief executive Mark Rigotti.

Legal Business

LLP accounts: HSF records ‘exceptional’ revenue growth in Europe as profit holds steady

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Financial results 2016/17 Herbert Smith Freehills

A standout performance in Europe helped Herbert Smith Freehills (HSF) boost global revenues by 11% in 2016/17, according to the firm’s latest filings with Companies House, although increased overhead saw operating profit barely move.

Global revenues rose from £832.2m to £920.8m, with the firm claiming that its EMEA region ‘generated exceptional revenue growth’. The accounts cited in particular ‘excellent performances in Paris, Moscow and Madrid’ as well as a robust showing from its Asia practices. Mark Rigotti (pictured), chief executive of HSF, commented: ‘It is very encouraging to see another year of growth as our brand continues to strengthen across markets and regions.’

While often overshadowed by its disputes practice, the accounts also highlighted the performance of HSF’s corporate arm. The firm reportedly advised on over 120 cross-border deals throughout the financial year, with a combined value of around $160bn. Among the major mandates was advising Sky on its proposed £18bn buyout by 21st Century Fox.

At the end of last year HSF shook-up its remuneration system, hiking plateau equity shares from 100 to 130 points. The move, which came weeks after Freshfields Bruckhaus Deringer pushed through similar reforms, has given HSF the freedom to extend its core pay ladder and allow top earners to take home well over £1.5m.

But the changes have not come into play in time to affect the most-recent accounts, with the firm’s highest-earning partner receiving the exact amount as in the previous financial year: £1.6m. The number of partners at the firm was essentially static, increasing from 373 to 374. The number of fee-earners at the firm rose 5% from 2,317 to 2,444, with overall headcount numbers increasing from 4,073 to 4,248.

HSF’s key management personnel, which consists of members of the firm’s global executive committee, took home a smaller share of profits in 2016/17. In 2015/16, the group took home a total of £8.7m, compared to £8.5m this year.

The muted payouts most likely reflect the fact that HSF’s operating profit also barely grew, rising less than 1% from £245.7m to £247.9m. The accounts also detailed payments made out to former members, totalling £3.9m, compared to £1.1m the year previous. The firm said the figure represents payment of profit entitlements to partners after they retired.

tom.baker@legalease.co.uk

Legal Business

Being great at one thing is not enough – remaking a City leader for the times

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Leadership Herbert Smith Freehills

LB: What have been the big wins for Herbert Smith Freehills [HSF] over the last two years?

Mark Rigotti (MR): It has been the shift from integration. That’s by definition backwards-looking so it’s good to move on. We’ve been strengthening some of the smaller offices. We’re different from the Magic Circle that have long-established European practices. We’ve grown about 50% in five years in mainland Europe. The German, Madrid and Paris offices are all significantly bigger. There are more European clients and more leadership positions going to Europeans. That’s a big cultural shift.

Legal Business

The edge of the cliff – Brexit response for worried GCs

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Brexit Herbert Smith Freehills

For UK business, 2018 will be dominated by one question: when do we push the button on Brexit? Months of scenario planning have given a sense of the possible outcomes, but there is little confidence that a decision will be taken in full possession of the facts.

‘We are 500 or so days on from the referendum, and it is still not clear what the arrangements between the UK and the EU will be,’ notes Kirsty Cooper, group general counsel (GC) and company secretary at Aviva. ‘As GCs we are being asked to give our best guess, but the scale of the conjecture with Brexit is unusual.’

Legal Business

Goodbye lockstep – HSF latest City leader to give richer rewards for rainmakers

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Salaries Herbert Smith Freehills

Herbert Smith Freehills (HSF) has backed a shake-up of its partnership that will boost top performers’ earnings by a third, hiking plateau equity shares from 100 to 130 points.

The move substantially lengthens its core pay ‘ladder’ and paves the way for top City earners to take home well over £1.5m with bonuses. The overhaul comes just weeks after Freshfields Bruckhaus Deringer voted through similar reforms.

HSF’s package, which was voted through this week after proposals were put to partners late last month, means top earners will receive more than three times that of entry-level equity partners, who remain on 43 points.

Core remuneration can already be topped up via a bonus scheme that reserves 5% of profits to reward exceptional short-term contribution. With the bonus scheme, which is unchanged, partners can get annual awards of up to 30 points, potentially now giving top performers 160 points firm-wide.

The reforms build on a broader shake-up of HSF’s partnership model in 2013, which followed the 2012 union of Herbert Smith and Australian leader Freehills. The earlier reforms introduced considerable flexibility to Herbert Smith’s eight-year lockstep, though it maintained some differences between the partnership in Australia and the rest of the firm.

The new model will see the 43-100-point equity scale continue with a ‘presumption of progression’ for eight years. Beyond 100 points, seniority will be largely discarded as a factor in remuneration in favour of a more substantially ‘contribution-driven’ assessment.

The changes leave HSF’s partnership in Australia unaffected. There is a ‘presumption of progression’ up to around 78 points for Australia partners. Past that, high performers could already receive up to 130 points, reflecting the wider spread in earnings at Freehills historically.

While the firm maintains a lower equity entry point in Australia and South Africa, believed to be around 35 points, HSF will now implement the 130-point ceiling firm-wide, with the 43-point entry used in all other markets after proposals for a lower entry point in some other markets were rejected.

HSF said that the latest reforms, which will take effect in May 2018, are designed to improve flexibility. ‘The changes ensure that our remuneration system continues to support the business as we implement our global strategies, improves flexibility to reflect the different markets in which we operate and incentivises teams to deliver the best service from the whole firm to our clients,’ according to a firm statement.

While the reforms are a further step from Herbert Smith’s legacy pay model, one partner argued that the model remains a ‘modified lockstep’, stressing that HSF still avoids sharp annual changes in earnings in favour of a medium-term view of partner contribution. He commented: ‘Four years ago was the big change. This is useful additional flexibility but if you compare us to some US firms, this is still a lockstep.’

HSF’s most recent LLP accounts show its highest-paid partner took home £1.6m in 2015/16, a drop of 12% on the previous year, when this was £1.8m. The firm generated profit per equity partner of £760,000 in 2016/17 against revenues of £920.5m. HSF currently has 337 full equity partners, with 141 fixed-share partners, referred to internally as ‘below point’ partners.

The development certainly reflects the growing pressure on City-bred law firms to compete with US rivals frequently offering huge paydays for high-billing partners. London’s big four Magic Circle firms have all modified their partnerships in recent years to make it easier to retain and attract star individuals.

tom.baker@legalease.co.uk

Legal Business

International doubles – Bird & Bird and Herbert Smith Freehills open new hubs in Amsterdam and Sydney

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Europe Bird & BirdHerbert Smith Freehills

Bird & Bird continues to invest in its international operations, launching its second Dutch office in Amsterdam 16 years after opening in The Hague.

However the new base, operative in January 2018, will not have any permanent staff but act as a hub for the firm’s lawyers to meet with Amsterdam-based clients as well as providing a flexible working space.

Netherlands managing partner Marcus Huisman told Legal Business the firm saw Amsterdam as a logical step. ‘There is a need to be close on a regular basis to our clients and prospects. International clients arrive at Schiphol Airport [in Amsterdam] and we want to offer them the opportunity to meet us there.’

He also pointed to the relocation of the European Medicines Agency from London to the Dutch capital in April 2019 as the most recent development encouraging the firm to open the new space. ‘We have a strong footprint in that sector, and this provides us with new opportunities.’

Bird & Bird’s office in The Hague numbers 80 lawyers, around 20 of them partners, focusing mainly on IP, telecoms, IT, corporate, energy and tax.

Huisman said there was a ‘broad feeling’ that the firm’s energy, corporate and fintech operations would find more opportunities with a base in the capital, and the firm was also looking closely at the Dutch media sector, which is very much Amsterdam-based.

‘We don’t think the new space should be limited to a few partners or associates,’ added Huisman. ‘We want a collective effort to make it a success.’

Bird & Bird’s main operations in The Netherlands will remain in The Hague, where the country’s telecoms regulator and Supreme Court are located and many IP matters decided on. A division of the Unified Patent Court is also expected to be established in the city next year.

This is the third announcement concerning Bird & Bird’s international operations over the last two months. It signed a non-exclusive co-operation agreement with Chinese firm AllBright Law Offices at the beginning of the month and also announced it would open a representative office in San Francisco next year, its first base in the States.

Meanwhile, Herbert Smith Freehills (HSF) is to open a second base in Sydney to house its alternative legal services team and most of its Australian business services staff from 2018.

The firm said the opening of the ‘innovative business service hub’ means ‘a much more sustainable occupancy cost for the firm in Australia’ and will help modernise the way its people work.

About 230 staff will relocate from the firm’s office at Castlereagh Street to the new premises in Macquarie Park at Talavera Road in the first half of next year, including chief operating officer Nicole Bamforth.

‘This enables us to markedly reduce the amount of space we lease in 161 Castlereagh Street with a number of the floors we currently occupy being relinquished to the building’s owners for re-leasing,’ said HSF chief executive officer Mark Rigotti. ‘The per-metre cost-saving is materially significant. The business case in making this move is unquestionable.’

marco.cillario@legalbusiness.co.uk

Legal Business

HSF launches in Milan with hire of Simmons Italian disputes head

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Strategic recruitment Herbert Smith Freehills

Strengthening its considerable European disputes offering, Herbert Smith Freehills (HSF) will open in Milan with the hire of Simmons & Simmons’ Italian disputes and IP head Laura Orlando.

The firm is seeking to take advantage of the European pharmaceutical patent litigation market, second only in the world to the US in terms of size. The office is set to officially open in early 2018.

Orlando had previously led Simmons’ disputes and IP practices as well as the life sciences sector group, and has experience acting on high-profile multi-jurisdictional patent litigation cases.

HSF’s UK head of disputes Mark Shillito told Legal Business that Orlando had been on the firm’s radar for some time, having worked alongside her for ‘two or three years’.

‘The plan is to open an intellectual property and litigation boutique. We’ll see how it beds down, but we expect it to be very successful very quickly. We’ve got some pre-existing Italian clients of our own and Laura is bringing the majority of her clients too, they’ve been very supportive’, he added.

In a statement, HSF’s global head of disputes Justin D’Agostino noted the firm’s impressive European growth of late, doubling the size of its disputes team in Germany and attracting lateral hires in both its Madrid and Paris offices. ‘This reflects the fact that there is a strong client demand for our disputes expertise throughout Europe’, he added.

With the addition of the Milan outpost, HSF has now opened four offices throughout Europe over the past five years, and made over 30 lateral hires.

The departure of Orlando is the latest in run over high profile IP departures to larger UK-based rivals. In the space of four months in 2016, Simmons lost IP partners to A&O, including highly-regarded patent specialist Marjan Noor in June, followed by London IP head Marc Döring in August, and Mark Heaney and David Stone in September. The exodus to A&O prompted the firm to push through amendments to its partnership deed restricting team moves.

The European expansion will be welcome for HSF, after it lost a two-partner real estate team from its Paris office in September. Well-cited Paris real estate head Pierre Popesco and urban planning and public law expert Florence Chérel left for CMS after 12 years at the firm.

However in the same month, HSF made a major move in Asia, hiring a three-partner projects team from Pinsent Masons in China.

tom.baker@legalease.co.uk