3 September 2007
3 September 2007
27 March 2012
24 June 2005
30 April 2001
3 August 1999
It could simply be taken as a sign of the continued downturn in litigation: the total revenue generated by the UK’s top 20 disputes groups was down last year. Not by a mere £10m or £20m, but by £132m.
Big-hitter Lovells was one of eight firms to drop places in the top 20 league, moving from third to sixth.
The plunge came following a drop in revenue of more than £32m, from £130m to £97.8m in the past financial year. The fall in turnover for Lovells’ litigation practice equated to a third less revenue for the practice area, the largest decrease in fees for any of the top 20.
Lovells’ disputes practice now contributes 23 per cent of total turnover, compared with 33 per cent in the 2005-06 financial year. Lovells global head of dispute resolution Patrick Sherrington says that, as with most litigation practices, there had been less work around, but he believes his group is bearing up well.
“Our global practice hasn’t slowed down at all and in fact I’m pleased with our current position,” continues Sherrington. “London didn’t grow, but stayed even, which is an achievement considering many of the big cases, such as BCCI, are now off our books.”
Sherrington adds that, while certain areas such as finance and product liability were strong, and others, including insurance, were slower, he believes Lovells’ practice was in a good position due to its wide-ranging diversity.
“And with the market for business looking somewhat shaky, there’s likely to be more opportunities. We’re entering an exciting time,” he argues.
The current financial year has been kinder for Lovells so far, although it is still looking to bring its book back up to full kilter following the conclusion of its major cases.
In addition to Lovells, four other firms also saw drops in their contentious revenues, although they did not necessarily lose their spots in the league.
Freshfields Bruckhaus Deringer, which kept its number two position, was the only magic circle firm to suffer a drop in revenue in the litigation market. Its gross fees dropped from £131m in the 2005-06 financial year to £123.3m last year, a reduction of 6 per cent.
Freshfields has undergone turbulent change, of course, with de-equitisations and exits across its partnership. But this does not translate into losses that could account for the slump in its litigation department’s performance.
Litigation, as a proportion of the total turnover for the firm, dropped by 2.5 per cent, from 15 to 12.5 per cent, an indication that the practice group has been faltering. Dispute resolution partner Ian Terry says that globally the disputes practice had slowed, but in London it was very much on the up.
“All in all we’re in a good position for the expected downturn in the economy, with a strong arbitration and ADR practice as a parallel to litigation,” says Terry. “The stagnation of revenue is not an indication at all that the practice is suffering. In fact, Freshfields is still acting on some of the most hard-hitting cases in the UK.”
Terry’s own practice is a prime example of the ‘hard-hitting’ disputes with which Freshfields is involved.
Apple v Apple was one of the longestrunning and most high-profile IP cases of the last financial year. Terry’s team brokered a settlement for Apple Inc with The Beatles’ record label Apple Corps that gave ownership of the trademarks relating to the word ‘Apple’.
Lovells and Freshfields, however, are not heavy litigation firms proportionately, with the magic circle firm’s litigation practice contributing just 12.5 per cent to the firm’s overall gross fees.
Simmons & Simmons also saw a drop in turnover, but it is a far more contentiousheavy firm, with 26 per cent of revenue derived from disputes.
Its drop, however, was slight, at 1 per cent. As one partner argues, it simply shows that the practice area has stayed steady in “the flat landscape of litigation”.
The final two firms where litigation turnover fell are Barlow Lyde & Gilbert (BLG) and Berrymans Lace Mawer.
For Berrymans, the drop, like with Simmons, was just one percentage point and can therefore be put down to the market.
But for BLG the drop was a more significant 4 per cent, or £2.4m. The firm’s headline litigation revenue figure for 2005-06 came in at £59.6m, falling to £57.2m in the last financial year.
Senior partner Richard Dedman says the dip could be accounted for by the fact that the 2005-06 turnover was overstated as a result of the FRS5 accounting rule change.
“We were initially told to add a 4 per cent uplift to its total revenue, but were later required to add this to reserve instead, which accounts for the discrepancy,” reveals Dedman.
This 4 per cent shift would mean that BLG’s litigation revenue for the last financial year has actually stayed even, which according to Dedman is the result of litigation staying flat.
BLG managed to keep an even keel thanks to a 7 per cent growth in the second half of the financial year.
For the first half of the year, the disputes team was looking to balance its work book following the conclusion of three of its major cases, including Equitable Life.
Elsewhere, DLA Piper had a stellar year, jumping a massive nine places to take the fourth spot after the dispute resolution group’s turnover increased by a massive 70 per cent.
In the 2005-06 financial year the firm’s revenue stood at £62.7m, but jumped to £107m last year.
Litigation now makes up 24 per cent of DLA Piper’s overall turnover, compared with 17 per cent the previous year.
The colossal rise, however, may not be as impressive as it first seems. DLA Piper has merged its litigation and regulatory teams, creating one super group for the Europe, Middle East and Africa (Emea) region.
The merger of the practice groups effectively reversed a move made in 2003 when the regulatory group was carved out of the firm’s larger litigation and dispute resolution practice. Since then it has gone from pulling in an annual revenue of £8m a year to around £23m.
The move reflects the decline of litigation and the importance of regulation to all the City’s law firms.
Dispute partner Neil Gerrard, who heads the litigation and regulatory group at DLA Piper, says the earlier plan of carving regulation away from disputes was designed to allow the former to grow at its own pace.
Disputes has been the fastest-growing practice area for DLA Piper, which appears to go against the grain of the rest of the market.
“Our fast growth comes down to our mix of general and specialist practices,” says Gerrard. “We have a holistic approach to the area, where our lobbying group will assist clients to amend the law. Once it’s changed we set up a compliance programme, which often leads to us getting work off the back of it.
“Gone are the days where you can sit back and wait for a piece of commercial litigation to come to you. Law firms need to find their own business if they want to succeed.”
For one firm, however, the more traditional realms of litigation have helped it to move forward.
Kennedys, which makes 92 per cent of its turnover from litigation, has seen its cashflow grow as a result a very active order book,
which includes the fires at Buncefield oil depot and the Cutty Sark, as well as the Sheffield floods.
High-volume litigation has also helped Kennedys climb up the top 20 ladder. The firm is involved in The Accident Group (Tag) litigation, in which 700 law firms are potentially liable for £70m in damages to insurer Winterthur after the collapse of Tag.
Other insurance litigation firms have also benefited heavily from the multitude of disasters during 2006-07.
Holman Fenwick & Willan, for instance, should benefit for years to come from the beaching of the MSC Napoli on the shores of Cornwall, which saw much of the ship’s cargo looted in January.
Holmans’ disputes practice’s turnover increased by 16 per cent, from £49.3m to £54.6m . However, Clyde & Co’s litigation practice’s turnover nudged up by only £200,000, to £89.7m
Clydes chief executive Peter Hasson admits the firm’s litigation and insurance work had flatlined, but argues that it was “in good shape compared with the last time it faced these sort of conditions”.
In relation to revenue per partner (RPP) in litigation, two magic circle firms broke through the £2m-barrier despite the economic conditions working against disputes.
Allen & Overy (A&O) took pole position in the RPP table, with each partner bringing in a massive £2.22m, a jump of 20 per cent on the previous year’s figure of £1.85m.
The firm nudged Clifford Chance off the top spot by a tiny margin of £2,000. In the 2005- 06 financial year Clifford Chance was ahead of A&O by £117,000 with an RPP of £1.97m.
Linklaters, however, was not that far behind last year, with each of its litigation partners generating 12 per cent more fees in the last financial year compared with 2005-06. The magic circle firm’s latest RPP is £1.91m, compared with £1.7m the previous year.
Freshfields, with an RPP of £1.54m, was pipped from taking a top five spot by Herbert Smith and Irwin Mitchell, which came in fourth and fifth respectively.
The RPP statistic for personal injury powerhouse Irwin Mitchell is slightly misleading, as the firm’s model is different from most of its rivals’ in the table, as significant numbers of non-lawyers also bring in fees.
Irwin Mitchell, like RJW, which took the last spot in the top 20, has more dependency on its non-legally qualified staff due to the high-volume nature of the work it undertakes.
RJW has a call centre through which it routes the more administrative type of legal claims, while Irwin Mitchell has more than 1,100 fee-earners, only 332 of whom are qualified lawyers.
At the other end of the scale, Berrymans posted the lowest RPP. The firm, in fact, saw its revenue for each litigation partner drop by 3 per cent, from £426,000 to £412,000 per partner, last year.
Managing partner Terry Renouf acknowledges that the firm, which gleans 90 per cent of its turnover from disputes, had indeed suffered from the downturn in litigation.
“Our strategy was to focus on the more lucrative areas of insurance, including fraud and professional indemnity,” says Renouf. Unfortunately for Berrymans, that market is itself pretty flat at the moment.
The non-insurance litigation groups seemed to have weathered the storm more prosperously, some by changing their structures.
Herbert Smith and Eversheds, for instance, have found that restructuring to include their own ‘in-house barristers’ chambers’ has been beneficial.
Herbert Smith’s advocacy unit has been running successfully now for two years and, according to the firm’s head of litigation Sonya Leydecker, is providing revenue and cutting the cost of litigating.
The figures for Herbert Smith’s disputes team, it could be argued, reflect this, with the group increasing its turnover by 8 per cent, from £107.7m in the 2005-06 financial year to £116.6m last year.
The increase has also led to the firm moving up one position in the table to third place.
Eversheds, which also moved one rung up the league ladder to eleventh place, saw its turnover grow by 10 per cent, from £58.1m to £64.1m, in the past financial year.
Within those 12 months Eversheds took the plunge of creating a chambers with the hire of Tom Keith, formerly of Fountain Court Chambers, to head its advocacy unit.
Keith says that, within the first seven months of the department’s creation, which coincided with the end of the financial year, he was personally instructed on 70 cases and that the workload was increasing all the time.