Freshfields remains bullish in wake of heavyweight arbitration departures

Magic Circle firm will continue to work with Three Crowns spin off

An undisputed leader in the field of arbitration, Freshfields Bruckhaus Deringer has nonetheless been hit by the recent departures of London heavyweights Constantine Partasides and Paris-based partner Georgios Petrochilos, together with a team out of its German offices, bringing the latest exits to five.

Partasides and Petrochilos will join Freshfields’ former co-arbitration chair and consultant Jan Paulsson to form a breakaway arbitration boutique called Three Crowns operating out of three major financial hubs: London, Washington and Paris.

The new venture was given further weight by the announcement at the end of February that the trio will be joined by Shearman & Sterling Paris-based international arbitration partner Todd Wetmore, Covington & Burling’s London-based international arbitration co-chair Gaëtan Verhoosel, and Washington-based Jones Day litigation partner Luke Sobota.

Separately, Freshfields disputes partner Christian Borris announced in March that he will leave the Cologne office at the end of April to set up his own local arbitration boutique, alongside former associates Rudolf Hennecke, who left the firm in February, and Sebastian Kneisel, who relocated from the Cologne office to Frankfurt last year. The new practice will launch on 1 May as Borris Hennecke Kneisel.

For Freshfields, the calibre of the departing partners means the move cannot be anything other than a blow. The arbitration market was awash in March with talk of the breakaways, and one disputes partner at a US firm with a sizeable disputes practice in London comments: ‘Up until now Freshfields was the number one competition in arbitration, but after losing Partasides, this will now change.’

There is an element of wishful thinking in this remark, and it is by no means quite so clear cut that the departures will threaten Freshfields’ position in arbitration to the extent envisaged.

‘The two London partners that are leaving are both good arbitrators, but we have the leading practice in the market.’
Christopher Pugh, Freshfields

The Magic Circle firm remains one of the larger teams in the City, with global disputes head Christopher Pugh, Nigel Rawding, Sylvia Noury and Jane Jenkins also highly rated in arbitration (see box).

Its recovery will also be aided by Dubai-based disputes partner Reza Mohtashami, who transfers to London in the next few months.

Additionally, the latest round of partnership promotions saw five partners made up in the City firm’s disputes practice, of which two are arbitrators: one in New York and one in Hamburg.

Pugh comments: ‘The two [London] partners that are leaving [Partasides and Petrochilos] are both good arbitrators, but we have the leading practice in the market, comprising 25 partners globally in 12 countries, with five partners in London, including, shortly, Reza Mohtashami, who has recently built our MENA practice into the leading practice in that region. None of our competitors have anything like this scale and I would suggest they are overstating the impact of the departures for obvious reasons. The two partners also don’t have a particular speciality or regional capability that any of our other partners don’t also possess.’

Much is being made by Freshfields of the fact that the breakaway is independent and will continue to collaborate with its former firm. Indeed, Pugh says, there are already four cases in the pipeline that Freshfields and Three Crowns will be teaming up on over the next few months.

Outgoing US regional managing partner Julian Pritchard adds: ‘They have not spun off to a competitor. And we are so ahead of the market in arbitration.’

Certainly the boutiques will not be able to compete with the full disputes package on offer in a large firm and which large clients have arguably come to expect.

Covington & Burling’s arbitration partner Ben Holland said the firm was sorry to lose Verhoosel, but added: ‘The new boutiques specialise in arbitration, but that is it. This runs against the trend I see, where clients appear to want to work with a few trusted advisers regardless of what their problems are.’

Although, according to one arbitrator at a Magic Circle firm, if the boutiques can offer something that clients cannot find elsewhere, they will do well, and what they do offer is a lack of conflicts; a problem that dogs many arbitration practices in City firms and one that was the key driver in Borris’ decision to leave.

Clients have already taken note, with the spokesperson of one major energy company observing to Legal Business in an unofficial capacity that the breakaway was of interest for being conflict free.

As for Freshfields, it still has the brand and the resource. But it would be unwise to write off the moves lightly.