29 June 2009 | By Tom Phillips
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Ireland’s law firms are up in arms after Arthur Cox won arguably more than its fair share of recession-related roles, with some pointing accusing fingers at the firm’s cosy relationship with the government. Tom Phillips reports
Dublin is seething with angry banking lawyers. They are angry because the workbook at Arthur Cox reads like a Who’s Who of Ireland’s economic crash and other firms have yet to get much of a look in.
Arthur Cox is acting for most of the parties involved, including Bank of Ireland (BOI), the finance minister on the restructuring of BOI and the property developers that owe the banks millions of euros.
But this is old news that has stoked strong feelings over an apparent ‘establishment’ blocking out rival firms - feelings that came to a head when, earlier this month, Arthur Cox was named as legal adviser to the National Asset Management Agency (Nama), the government department responsible for ringfencing banks’ property loans to take them off the balance sheet.
The announcement saw the squaring of a circle: Arthur Cox working on all sides of the boardroom, including opposite itself, in vital negotiations to drag the country out of the economic mire. It is also what prompted one senior lawyer at a top five firm to laugh out loud when he heard
“I wasn’t surprised,” says the source. “There’s the distinct sense that it stinks.”
Which neatly sums up the feeling among lawyers across the ranks of the firm’s rivals. Has a single law firm ever been so involved in the reconstruction of a country’s economy?
Arthur Cox will be shaping the legislation on how Nama operates with the banks, opposite, among others, Arthur Cox at the BOI. It is an extension of a relationship with the government that has existed for years.
There is no doubt that Arthur Cox is an excellent firm. Indeed, that is often the caveat given before the tirade. It is a firm with a reputation for quality that is also well thought of in London. But the dissenters say its lawyers must have superhuman abilities to avoid tripping up in the maze of Chinese walls at Arthur Cox HQ.
Not that any will say so on the record. Despite the notorious backbiting that goes on in the Irish legal market, no one wants their views to sound like sour grapes.
“I wasn’t surprised. If it were up to me I wouldn’t have even bothered to put a tender together for the Nama contract,” says one partner at a rival firm.
There are many questions for Arthur Cox, such as how will junior lawyers fare opposite their senior colleagues? Can a law firm sit opposite a client that has paid it large sums in fees and not be influenced? And how will the firm cope with the workload?
These are issues that have faced large law firms the world over since the recession kicked in. In Ireland the recession caused massive problems for many Arthur Cox clients simultaneously and demonstrated the influence the firm has at some of the largest corporations and financial institutions in Ireland, and within the government itself. But, the critics argue, any of the big five firms could have won the Nama contract.
The potential for conflicts was originally revealed in the Irish Times, which has been asking some awkward questions of the firm over its work with a private equity house that expressed an interest in buying into the BOI. At the time Arthur Cox listed both the BOI and the Finance Minister as clients, a three-way conflict that Arthur Cox originally denied, then later admitted.
That tie appears to have been cut, but Arthur Cox managing partner Pádraig Ó Ríordáin must still feel like Christmas has come early. Well, when the financial end of year comes around anyway. The firm is being paid twice for some of the most lucrative hours and important work ever to appear in the Irish market.
Right now, though, its lawyers are most likely very thinly stretched indeed. With 90 partners and 300 lawyers, Arthur Cox is one of the largest in the big five - the others being Matheson Ormsby Prentice, A&L Goodbody, McCann FitzGerald and William Fry.
It lists 13 partners in its banking practice, but it is hard to tell how many lawyers in total are working on the numerous deals. Arthur Cox is not speaking to the press or making any statement at all, let alone on the issue of potential conflicts.
It is understood that the team working on the creation of the Nama infrastructure will be an independent, segregated and cross-disciplinary team drawn from the firm’s four core-practice areas of corporate, finance, litigation and property.
Ó Ríordáin, it should be added, was named chair of the Financial Legislation Advisory Forum by Minister for Finance, Brian Cowen, in 2007. The forum’s mandate is to “provide expert advice, support and drafting assistance on the preparation of a Bill to streamline the existing legal framework for financial services regulation.”
Presumably this would include avoiding allowing circumstances where conflicts could arise between law firms and accountants working on essential deals.
“They are a good law firm with some very good people but they are too close to the government,” argues a rival of the Nama appointment. “It’s damaging to the country. The wrong choice has been made.”
“The whole of Dublin is talking about it,” adds the managing partner of a firm outside the top five. “The impression of cronyism has risen throughout this recession. This work will dictate the shape of our economy.”
Another partner adds: “It wouldn’t happen in the UK.”