Review of the year
13 December 2004
The news that Gordon Pollock QC had formed a new club – the ‘three million pounders’ – kicked off 2004. Pollock became the bar’s highest earner, thanks to his £3m brief fee for the BCCI case. The Essex Court silk went on to deliver the longest opening statement in history on behalf of the liquidators of BCCI, finally sitting down 79 court days after the 13 January start date.
January also saw the publication of The Lawyer Hot 100 2004, which highlighted this year’s stars of the legal profession. Presciently, it included Robert Ivens of Marks & Spencer (M&S), who later held off Philip Green’s bid for his company in one of the deals of the year.
Clifford Chance found itself at the top of the European M&A tables for 2003, having advised on 216 deals with a combined value of €163.1m (£112.5m). Across the Atlantic, meanwhile, the firm was struggling with its New York office and fighting to keep partners from leaving.
In Italy, Parmalat administrator Enrico Bondi was preparing for a showdown with Cadwalader Wickersham & Taft after dropping Cayman firm Maples & Calder from advising the stricken dairy company.
Offshore saw another change in January, as Hunter & Hunter and Appleby Spurling & Kemp announced that they were set to merge, creating a firm with offices across five jurisdictions.
Closer to home, the month ended with more money changing hands, as Addleshaw Goddard billed Michael Douglas and Catherine Zeta-Jones £2m for acting in the couple’s privacy case against Hello!, in the process landing the magazine with a bill, including damages, of £4m.
February’s big news was the report of the Hutton Inquiry into the death of Dr David Kelly. The inquiry exonerated the Government, causing widespread disbelief, and also baffled some senior lawyers. Lord Lester QC told The Lawyer: “I’d be very surprised that anyone who practises in media or libel law would think that Hutton got it right.”
Once again, the costs issue came to the fore, as it emerged that taxpayers would be shelling out £2m for the work of Clifford Chance, James Dingemans QC, Bircham Dyson Bell and Jeremy Gompertz QC. That multimillion-pound expertise was recognised later in the year when the team of Clifford Chance and Dingemans scooped The Lawyer Public Sector Team of the Year Award in June. Money well spent, surely.
On 2 February, The Lawyer revealed that the London offices of US firms were failing to keep up with stateside operations, where growth was in double digits. By the end of the month preliminary full-year figures were in for the US, with Kirkland & Ellis, Simpson Thacher & Bartlett and Weil Gotshal & Manges all celebrating record years.
Skadden Arps Slate Meagher & Flom topped the league table, raking in $1.6bn (£826m) of income in 2003. Simpson Thacher topped the profitability ranks, bringing in an average of $1.9m (£982m) per partner.
February was not a good month for Technology and Construction Court judge Mr Justice Seymour, who found himself overruled by the Court of Appeal for the second time in the two-month old year. The judge had labelled Vogon International’s claim against the Serious Fraud Office as “dishonest”, but the Court of Appeal said that the judge was “entirely wrong”. The decision raised questions about the training and monitoring of judges.
The talk throughout March concerned the fate of former accountancy-tied firms, both in the UK and Europe.
At the beginning of the month, EY Law global head Patrick Bignon – described by The Lawyer as “totemic” – resigned, and was followed just weeks later by Landwell leader Gérard Nicolai.
In between, EY Paris replaced managing partner Hervé Labaude with a four-person executive committee, and EY UK member Tite & Lewis announced that it was to split from accountancy parent Ernst & Young (E&Y). The Lawyer reported that E&Y had poured £22m into Tite & Lewis during its four-year existence.
Meanwhile, the restructuring at McGrigors following the collapse of its alliance with KPMG continued with the departure of three corporate partners from its London office.
Elsewhere, Linklaters announced that it was to split from alliance partner Gianni Origoni Grippo & Partners, ending four years of cooperation.
On a lighter note, Mipim, the annual property conference in Cannes, proved that real estate was alive and kicking. The focus was on potential in the Middle East, with lawyers discussing the state of the sector in countries such as Dubai and Qatar. The verdict? Lots of opportunity, but the legal systems of such states still need a little developing.
In April, Denton Wilde Sapte (DWS) and Freshfields Bruckhaus Deringer became the latest foreign firms to downsize in Asia.
As first revealed in The Lawyer (19 April), Freshfields sent shockwaves through the region after deciding to pull out of Thailand as part of a full-scale review of Asia. Freshfields’ decision to shut the doors on its three-partner Bangkok office followed DWS’s announcement the previous week that it was quitting Asia in another bid to force up flagging profitability.
Meanwhile, as DWS and Freshfields were shrinking their practices, Boston’s Hale and Dorr and Washington-based Wilmer Cutler & Pickering voted to merge, creating one of the US’s largest firms with more than 1,000 staff and a combined turnover in excess of $700m (£360.5m).
The big in-house news in April included the appointment of French Connection’s first ever in-house lawyer. As first revealed by The Lawyer (19 April), the high street retailer hired Alice Close, a competition law specialist at Burberry.
Embattled supermarket J Sainsbury also appointed its first ever in-house lawyer. The supermarket giant hired former Clifford Chance lawyer Katherine Kinch in a bid to slash its external legal spend.
Meanwhile, FTSE 100 oil giant Shell drafted in Cravath Swaine & Moore to help Debevoise & Plimpton on the US Securities & Exchange Commission’s investigation into the oil reserve scandal. The debacle eventually led to an historic restructuring that will see the combination of Netherlands-based Royal Dutch and UK-based Shell creating a single entity – Royal Dutch Shell.
The Lawyer (26 April) also revealed that HSBC Holdings was poised to launch a full-scale review of its panel. The review, which eventually kicked off in August, is still underway.
Clifford Chance hit the headlines in May as it embarked on a fundamental review of its West Coast practice in a bid to bolster US turnover.
The first casualty of the review was iconic Californian lawyer Tower Snow, who was demoted. As revealed by The Lawyer (10 May), securities litigation expert Snow, who was also a member of the firm’s Americas management board, left the equity and moved into a consultancy-style role.
Meanwhile, in a year when a number of firms reported a slump in profits, Berwin Leighton Paisner (BLP) bucked the trend by posting record year-end results. For 2003-04 the firm’s profitability leapt a stunning 40 per cent, translating into average profits per partner (PPP) of £425,000.
Towards the end of the month, The Lawyer (24 May) also revealed that DWS was poised for a £10m tax windfall thanks to a change in the way the Inland Revenue taxes work in progress. DWS, the story reported, could save most of the estimated £10m cost of closing its Asian network by offsetting it against a one-off tax hike.
On the deals front, the green shoots of a possible recovery in the technology sector started appearing after Google announced a $20bn (£10.3bn) float. The mega flotation proved good news for Google’s lawyers Wilson Sonsini Goodrich & Rosati. The West Coast firm was set to pocket up to $11.3m (£5.8m) thanks to its initial equity investment in the world’s leading search engine prior to its launch in 1999.
Other news that broke in May included: the launch of a bespoke training programme for trainees at US firms by the College of Law; Bryan Cave sending partner David Pfeiffer to scout southern Iraq as a prelude to launching an office there; and revelations that staff in White & Case’s City practice were being forced to work in premises in which asbestos was discovered.
The month drew to a close with Slaughter and May and Freshfields scooping the lead roles in the most high-profile deal in 2004 – Green’s bid for M&S. Slaughters was instructed by longstanding client M&S to help the troubled retailer fend off a £9bn takeover from entrepreneur Green. Freshfields, meanwhile, scooped its first instruction from Green.
The battle for M&S continued to dominate the early part of the month. On 3 June the High Court upheld an injunction against Freshfields, preventing the magic circle firm from acting for Green due to concerns over potential conflicts. Within hours of the court’s decision Green replaced Freshfields with Ashurst.
In the same month Law Society president Peter Williamson put conflicts on the society’s agenda after giving a strong indication that the rules would be clarified to meet the City’s requirements.
Meanwhile, Clifford Chance’s West Coast troubles continued as a team of eight partners from its Los Angeles and San Francisco arms quit to join Orrick Herrington & Sutcliffe.
June also meant The Lawyer Awards. The biggest cheer of the evening went to the winner of the Public Sector Team of the Year Award: the Hutton Inquiry team. It was that inquiry which had “ruined the summer” of host for the evening Alastair Campbell.
July was a month of celebration for US firms, with the AmLaw 100 showing another bumper year. As revealed by The Lawyer (5 July), Jones Day and White & Case both posted turnover rises of 20 per cent.
But while the champagne corks were popping across the Atlantic, the mood at the UK’s elite firms was less ebullient. Profits and turnover at Allen & Overy (A&O), Clifford Chance, Freshfields and Linklaters all fell in 2003, with Clifford Chance posting a stinging profit drop of more than 13 per cent.
The Lawyer revealed that both Freshfields and Linklaters had embarked on a partner cull in Germany (26 July), while Ashurst had asked up to six of its equity partners to leave the firm (19 July).
Meanwhile, as if plummeting profits were not enough, Simmons & Simmons found itself slapped with a racial discrimination claim by one of its equity partners, Robert Schon (The Lawyer, 26 July). The claim, unprecedented in the City, is still ongoing.
The seemingly endless stream of panel rejigs and reviews continued. Shell took the axe to its law firms, launching what promised to be a radical panel review, which ultimately took six months to complete. Elsewhere, the export credit agencies (ECAs), acting as guarantors to commercial lenders financing the purchase of Airbus planes, caused consternation in the asset finance market when they left off Clifford Chance and Freshfields on their first ever joint aviation legal panel.
Finally, Lovells’ much-admired managing partner Leslie MacDonagh announced that she was standing down.
Some light relief was provided by Bevan Ashford’s (now Ashfords) Tiverton partner Tim Hughes. The partner was rapped over the knuckles after a whirlwind 26-hour jaunt in Jordan with Saddam Hussein’s legal team, all paid for on the firm’s corporate expenses (The Lawyer, 5 July).
Ashfords managing partner Simon Rous said: “He’s made a fool of himself, but I don’t think he’s done any damage to the firm. This is a human interest story and a salutary lesson.”
Summertime, and the panel reviews were coming thick and fast. Eversheds won out in the Transport for London (TfL) review, but in-house lawyers at TfL were not so lucky. As revealed on 2 August by The Lawyer, the appointment of the national firm for regular work sparked a wave of redundancies at TfL, with 40 lawyers losing their jobs.
A week later (9 August), The Lawyer revealed that Tyco had also launched a searing review of its global legal advisers after taking the axe to its US law firms. And on 23 August, The Lawyer made known that US technology company Cisco Systems had announced a move to the DuPont-style legal model by aping the ‘one-firm-fits-all’ strategy.
On 2 August, The Lawyer revealed that A&O had dashed the hopes of London-based corporate associates after announcing that there would be no new partners made up next year.
While Squire Sanders & Dempsey and Coudert Brothers pulled the plug on their international merger plans, the DLA juggernaut rolled on. This time, the firm again raided its former German ally Görg to launch a three-partner Hamburg office after hiring Addleshaw Goddard’s head of private equity Darrell Cooke (The Lawyer, 9 August).
Clifford Chance made the front page (The Lawyer, 16 August) after its salaried partners scored a victory with the introduction of a new process for promotion into the equity. In short, no more vote, no more two-day ‘boot camp’ and more clarity as to how long partners can expect to sit within the salaried band.
Private equity lawyers were the flavour of the month in September, as The Lawyer revealed (6 September) that US firms were paying top dollar for the cream of UK talent.
Weil led the charge, offering David Aknin of Linklaters’ Paris office a whopping $1.5m (£77,000). But offers of $2m (£1.03m) apiece for Clifford Chance’s Matthew Layton and James Baird were not enough to lure them away. And in a watershed for Latham & Watkins, the firm lured Ashurst star Thomas Forschbach for a reported $2m.
In-house teams whirled themselves into a panel review frenzy, with no fewer than six reviews announced in September. As revealed by The Lawyer, Deutsche Bank, France Telecom, Hermes, Legal & General, Tesco and Zurich all launched reviews that left firms with the jitters.
In other panel review fun, Clifford Chance edged out Freshfields and CMS Hasche Sigle to be named 3i’s top German adviser on major leveraged buyout work. Also in Germany, Norton Rose offloaded its Cologne office to Hasche Sigle (The Lawyer, 27 September).
Meanwhile, the election season was in full swing, with contenders vying for management positions at Dickinson Dees, Herbert Smith, Lovells and Simmons & Simmons.
The Law Society played dog in the manger. It attempted to block a bid by accountants to claim legal privilege to limit their duty to report client information under anti-money laundering legislation, as revealed by The Lawyer on 13 September.
And finally, The Lawyer set off a media frenzy (27 September) when it revealed that anyone wanting to sue one of the UK’s five big banks would have an uphill battle to find a firm willing to take the instruction. Of the top 30 firms in The Lawyer UK 100 Annual Report, only four would not be forced to turn down instructions to act against one of the major clearing banks. As The Lawyer editor Catrin Griffiths said in her leader column: “For the City to function properly, there needs to be a proper choice of law firms to act.”
October saw yet more big-hitting Clifford Chance partners leaving, including its US managing partner and UK head of real estate in consecutive weeks. Former US managing partner Jim Benedict, along with former litigation head Sean Murphy, moved to Milbank Tweed Hadley & McCloy in New York, leaving Clifford Chance to fight a rearguard action aimed at keeping key clients Alliance Capital and Merrill Lynch.
Back in London, BLP created a splash by taking Clifford Chance’s Robert MacGregor as its new real estate head. MacGregor was the firm’s relationship partner for Canary Wharf. The magic circle firm also witnessed more departures from its communications, media and technology practice.
As September ended, The Lawyer revealed that a team of 11 DWS media and IP partners were jumping ship for DLA. During October, the full scale of the exodus became clear: 11 partners and some 30 assistants were leaving, causing management to consider the closure of the media team’s office and to check their election manifestos.
David Gold fought a good campaign and emerged victorious in Herbert Smith’s senior partner election. Hammonds’ managing partner-elect Peter Crossley had to deal with Leeds’ moans about London, while an election-free A&O held a banking vs corporate revenues inspired showdown that sparked the largest witch-hunt this side of Salem.
DLA’s senior partner Roger Lane-Smith decided he was better off out of it, announcing his retirement after 27 years at the firm.
The Lawyer Global 100 unveiled the world’s 100 largest law firms, and the very biggest, Clifford Chance, announced that it planned to expand in California now that everyone had left. Tulkinghorn asked if anyone had seen former West Coast boss Snow, prompting one sighting in Hawaii.
In Europe, the Clifford Chance partners kept on leaving. French corporate wizard Dominique Bompoint joined Sullivan & Cromwell, while the firm closed its Berlin office. Magic circle rival Freshfields looked on enviously and decided that it was too difficult for it to get rid of partners. It proposed a vote to make sure that a vote was no longer necessary to oust underperformers.
The Lawyer revealed the City’s half-year results. While revenues were flat at Clifford Chance and Freshfields, Slaughters’ turnover was up a stunning 47 per cent.
Lovells’ new managing partner David Harris had a nasty welcome, with the news that revenues were down 6 per cent on the previous year and the firm was running 21 per cent below budget.
DaimlerChrysler snubbed all of the above and the rest of the City as UK general counsel Chrissi Evans decided that City firms do not offer value for money. She dumped Herbert Smith and Richards Butler and called instead on Pinsents and Shoosmiths. Cisco Systems also dispensed with some City expertise and plumped for a DuPont-style relationship with Eversheds.
Cost-cutting was also the order of the day in government as New Labour decided it had recruited far too many lawyers. Tony Blair and Jack Straw are thought to be unaffected by the cuts.
December kicked off with DLA and Piper Rudnick finally voting yes to their transatlantic merger, just as Pinsents and Masons went live with their UK tie-up.
They may soon be partners at DLA Piper Rudnick Gray Cary, but the 11 media and IP partners departing DWS are still eligible to vote in DWS’s management elections. Counsel was retained to try to avoid such an outcome, but to no avail.
Baker & McKenzie (B&M) and Linklaters were left ruing their involvement in races of a different kind. The Lawyer (6 December) revealed that the two firms were facing negligence claims from Formula 1 teams Williams and McLaren.
Meanwhile, Herbert Smith was counting £5m in fees gathered from the Government’s nuclear clean-up programme. The Law Society managed a far better deal, paying just £58,000 for the Three Rivers case, but it spent a whopping £2m on complaints-handling.