Linklaters set to arbitrate with German malcontents

Linklaters is close to agreeing to a formal arbitration of its festering dispute with the four ousted Germans who threatened to dissolve the firm.

As revealed by The Lawyer (10 January), four sacked partners threatened last October to apply to the UK courts for a dissolution of Linklaters’ global partnership.

However, Linklaters’ management now believes it has agreed a framework for talks that could produce a compromise exit package for the disgruntled partners. This could lift their previous threat of an application for a dissolution.

German senior partner Michael Lappe said: “We assume that arbitration proceedings should begin shortly; and after a sober and factual discussion we’ll be able to reach an agreement which everyone will find reasonable.”

Linklaters sources say the German partners have a number of issues.

The partners claim that the terms of the partnership agreement stated that Linklaters’ management could not remove them before 2006 for reasons of non-profitability, which are the grounds on which they say the management removed them.

When the Linklaters-Oppenhoff & Rädler merger was sealed in 2001, a protective covenant was inserted into the German partners’ agreement, which meant they could not be removed on profitability grounds for at least five years.

The German partners also believe the firm should have given them a formal warning and a chance to improve their profitability under Linklaters’ ‘two strikes and you’re out’ policy for de-equitisation, say the sources.