Legal fees for the London Underground PPP totalled more than £70m, according to the latest Public Accounts Committee report.
Freshfields Bruckhaus Deringer, which advised London Underground, notched up £29.2m in fees on the Tube Lines and Metronet PPPs for five years’ work. Included in the figure was the two years during which Freshfields advised on the reorganisation of London Underground in preparation for the PPP.
One source close to the deal described the job as a “poisoned chalice”. The bill ultimately cost Freshfields its relationship with London Underground. In 2003, following the transfer of London Underground to Transport for London, the firm was dumped in favour of Herbert Smith. Mayor of London Ken Livingstone was a long-time opponent of the London Underground PPP.
Meanwhile, Lovells received £13.6m for its three and a half years of work for the Tube Lines consortium, with Norton Rose collecting £7.8m for its work advising the banks and funders. These figures exclude fees on the mammoth refinancing.
Legal fees for the single Tube Lines deal are high when compared with those for the two-contract Metronet PPP. However, advisers on the deal defended the figures, pointing out that Tube Lines was the first deal to close, blazing the trail for Metronet, and that Metronet could replicate much of its own work on its two contracts. Lawyers also pointed to Tube Lines’ complex inter-creditor arrangements as another reason for the high fees.
None of the firms advising on the deals achieved 100 per cent returns on their fees. For example, Metronet called a meeting with its advisers in December 2002 after which lawyers agreed to take a bath on fees until the deal closed in April 2003.
One lawyer commented: “We didn’t charge a premium for our work. We didn’t see it as an opportunity to milk the cash cow.”
Another lawyer added: “It ended up being an enormous job that’s never been done before and it will be scrutinised closely by any government looking to do the same thing again.”