Clifford Chance's position as one of the top advisers on international debt issues has coincided with criticism from the underwriters' trade association regarding alleged conflicts of interest over a bond deal.
A survey of the firms advising on medium term notes (MTNs), published by the International Financial Law Review, shows Clifford Chance as advising most managers of the issues in 1996, with 227 “draw downs” – sales of MTNs – followed by Allen & Overy with 217 and Linklaters & Paines much further behind with 144. The fourth firm in the table, US practice Sullivan & Cromwell, handled only 53 draw downs.
But a deal Clifford Chance is advising on involving a Dutch company has attracted criticism from the International Primary Markets Association (IPMA), which, in 1995, issued a recommendation that the same lawyer should not act for the issuer and the lead manager or dealers of the issued bonds or paper.
Clifford Chance's Amsterdam office is advising a Dutch company on setting up a company to do a bond issue while its London office is advising the dealers of the issue on English law. The firm maintains that it was advising the Dutch company on the setting up of a company, not the terms of the issue.
But Clifford Dammers, IPMA secretary general, said the firm was breaching its 1995 recommendation. “The only law firm I know that is not complying is Clifford Chance with this one deal in the Netherlands,” said Dammers. “They say they are advising the issuer only on local Dutch law but it's difficult to draw the line.”
He said that if Clifford Chance's Amsterdam lawyer found a flaw in the underwriting agreement he would face an ethical dilemma.
Dammers also attacked the practice, particularly followed by Clifford Chance, of acting both for the dealers in bonds or MTNs and the ratings agency that assigns a credit rating to the bonds. Clifford Chance managing partner Geoffrey Howe said in all the cases where the firm acted for more than one part of a transaction it was done with the agreement of the clients.
“These are not private clients but sophisticated institutions. They realise that transactions can be done more cheaply with one firm,” explained Howe.
“We act all the time in situations where there could, hypothetically, be a conflict. We have to look at each case. Where we think there is a likelihood of an actual conflict developing, we will withdraw from one side.”
See analysis, page 2