No dispute over ADR success

Last week Baker & McKenzie announced it had made more than £6bn out of arbitration work. Elizabeth Davidson discovers that the firm is not the only one in the money as making up before reaching court becomes more popular.

Last week The Lawyer reported that international firm Baker & McKenzie is valuing its total global arbitration cases at more that £6bn.

This is a sign of the times for international dispute resolution as well as a milestone for arbitration at Baker & McKenzie. Firms are expanding their dispute resolution departments – White & Case, Allen & Overy and Hammond Suddards, for example, all claim to be seeking new recruits – and routinely offer arbitration and mediation as well as advice on litigation.

Baker & McKenzie's London construction and projects partner Jeremy Winter last week proclaimed that the volume of arbitration business will keep on rising because “it is increasingly common that arbitration is the chosen method of resolving disputes”.

And Allen & Overy's partner in charge of arbitration David Sutton claimed that his firm is handling a comparable amount of business. He boasted: “I am personally handling billions on a regular basis at Allen & Overy.”

Tony Willis, dispute resolution consultant to Clifford Chance, says it is the clients that are creating this explosion in work.

“It is a very client-driven process because it puts clients in control of the outcome.

“At Clifford Chance most litigators will have had some experience of mediation and there are about a dozen trained mediators, although I am the only one who does it full-time,” Willis says.

Firms are attaching increasing importance to mediation and arbitration, and lawyers agree that no firm can claim to have an international presence unless it has a specialist dispute resolution department.

Markets for dispute resolution are opening up in Europe, eastern Europe, Latin America, Africa and the Far East in the wake of an increase in international trade and cross-border transactions. Consequently, law firms are positioning themselves for an increase in work.

Willis believes that the trend is not confined to the UK. “Australia, New Zealand, Hong Kong and South Africa are particular leaders in the field [of mediation], with The Netherlands, France, Germany and Spain all increasingly using it,” he says.

According to statistics supplied by the London-based mediation provider for Europe, the Centre for Dispute Resolution (CEDR), one in five commercial mediations referred to it is international in nature, and an increasing number have no element of UK jurisdiction at all.

Inevitably, US firms are expanding in the area. US firm White & Case is the latest. As The Lawyer reported last week, the firm is increasing its litigation, arbitration, mediation and alternative dispute resolution practice in Europe, the Middle East and Africa.

The firm is transferring head of global litigation Rayner Hamilton from New York to Paris for at least two years to oversee the growth of the practice. There is currently a team of 12 lawyers, including four partners, dedicated to dispute resolution in the Paris office.

Hamilton says: “We have always done dispute resolution in Europe to one degree or another, but the commercial and transactional world is getting smaller. Cross-border transactions are increasing and, when you have these, disputes follow just as certainly as night follows day. There is increased demand and expectation that we should be able to provide that expertise.

“In the US there tends to be a high-profile litigation market. US companies are familiar with litigation, they are comfortable with it, and they are well represented. In the Far East, on the other hand, important commercial entities are not as familiar with disputes as US companies and are unlikely to be as well represented. Therefore there is an opportunity for us to expand our practices.”

He says: “There has been an awakening of financial and commercial entities in Europe and eastern Europe in particular – I think there will be increased use of litigation and dispute resolution there.

“International firms see dispute resolution as an area that will increase, I have no doubt about that. Most entities prefer to arbitrate rather than go to the local courts.”

Business tends to follow high-profile cases because they make companies realise how vulnerable they are to other jurisdictions and shows them the legal options available. Hamilton cites Warsaw as an example of a key centre for development owing to the claims for recovery of money brought by US Holocaust survivors and their families against Polish banks.

He says: “This has raised the antenna of a lot of banking entities in Europe, which did not understand the reach of US lawyers and courts and had no idea that the US courts could and would exercise jurisdiction and impose huge awards of damages.”

According to Allen & Overy litigation partner Judy Gill, the general perception of arbitration radically improved in the Middle East when it was used to deal with claims surrounding foreign interests and disputes between Iranians and the US after the Shah of Iran was deposed.

“The arbitration was conducted using the rules of Uncitral [United Nations Commission on International Trade Law] and that gave those rules a lot of credibility,” Gill says.

She adds that “arbitrations vary enormously in terms of value but are measured in millions and, in some cases, billions”. She says arbitration work involves “serious cases and serious clients” and “all the signs are that this is very much a growth area”.

Although firms are keen to expand their alternative dispute resolution practices, lawyers agree there is a fairly small pool of experts to recruit from, particularly at partner level.

CMS Cameron McKenna employment partner Anthony Fincham says: “I don't think any firm has developed a stranglehold on dispute resolution.”

Lawyers name Clifford Chance, Freshfields, Herbert Smith, Allen & Overy, Linklaters & Alliance and Hammond Suddards as prominent UK firms and White & Case, Baker & McKenzie, Cleary Gottlieb Steen & Hamilton, Jones Day Reavis & Pogue and Debevoise & Plimpton as prominent US firms.

Hammond Suddards commercial disputes partner Stephen York says: “There is a small handful of lawyers specialising in this area and other lawyers seeking to join the bandwagon.”

Chief among these are the US firms. York says: “It is easier for US firms trying to play globally to stay out of the court system and keep within the ambit of ADR because they don't need to be admitted [as practising lawyers]. I think we will see more US firms entering this market.”

The surge in mediation and arbitration work is particularly good for London, which is seen as a centre for dispute resolution.

York says: “The work is doubling each year and I expect that to go on for a number of years.

“In terms of mediation we are way out in front of our European colleagues. A lot of South American companies want to go to London rather than the US because they are looking for a neutral venue to hear the dispute – there is often US involvement in business there.

“Companies with no connection whatsoever are including clauses in their contracts naming London as the place for arbitration. This is just beginning to happen and I think we will see an increasing amount of it.”