Water Works

British Waterways has announced its best set of financial results since it was created by statute some 40 years ago. The quasi-governmental body, responsible for managing Britain’s 2,000-mile canal and river network, reported a 30 per cent increase in self-generated income to around £60m, driven by commercial activity on or along Britain’s waterways.

The organisation suffered the effects of flooding and the Foot-and-Mouth outbreak, but the bigger picture is that of a body less reliant on government and third party funding than ever before.

Britain’s decaying waterways, it seems, have entered a renaissance. They are no longer seen as a liability but as central to the Government’s regeneration policy. And they are being restored at the same rate as they were built at the height of the Industrial Revolution’s canal mania.

British Waterways’ in-house team of specialist lawyers are integral to this transformation. Legal director Nigel Johnson says: “This is an organisation that has gone through tremendous change recently and is now in a period of real growth and development. From a legal point of view that brings along a fascinating range of work. We’re setting up partnerships to enable regeneration to take place and we’re looking at other ways of generating revenue.”

Blended with this innovative stance is an acute awareness of the organisation’s historic legacy. Johnson delights in the fact that the earliest statute affecting the waterways is the River Lea Improvement Act of 1424 – he keeps a copy in his office, translated from the old legal French. Other relevant statutes date back to the Elizabethan period, while the vast majority go back to the 18th century.

Johnson joined British Waterways in April 2000, after three years at the Church Commissioners and a longer stint as chief solicitor for Cheltenham & Gloucester. For his current position he went through a 12-month handover period before the retirement of Jeremy Duffy, who remains a consultant to the organisation.

The departure of two more of British Waterways’ lawyers has enabled Johnson to shape a new team to fit the rapidly changing organisation. “Historically, the main areas of the department were in the property field, focused on our operational property and to a lesser extent the investment property we have,” he says. “As far as the core areas of the department are concerned I’m looking to bring in much more on the environmental and regeneration side. The legal challenges out there are changing. A greater environmental duty is being placed on us by UK and European law. We’re having to gear up to manage that.

“My philosophy for the department is that there is no point trying to match the capability of a commercial firm. What I want to concentrate on – in addition to our corporate duties – are the areas that are unique to British Waterways.”

Two additions to the legal team earlier this summer have brought in the environmental expertise he was looking for. Barrister Jackie Lewis joined from heavy building material supplier RMC UK and was previously an environmental litigator at Clifford Chance. Stephen Mendham joined from Thames Water Utilities.

Johnson has also taken the first-time step of awarding a training contract at British Waterways. This helps to balance the department’s skill levels. “As a public sector body it is difficult for us to compete in the market, so it is important that we home grow our expertise,” he says.

The team’s third lawyer, Christopher Peachey, works primarily on property matters, which remain a crucial activity of the department.

British Waterways’ unique remit, combining the guardianship of the waterways with business innovation and regeneration, generates a diverse mix of legal work. Its activities overlap with the retail and leisure industry, the engineering sector, the public sector and Parliament, and both the property and telecoms industries.

Work ranges from prosecuting in magistrates courts for breaches of waterway bylaws – for which a small local firm would be instructed – to British Waterways’ cutting-edge telecoms joint venture that originated with Marconi, on which it was advised by Eversheds. This venture involved the use of canal tow-paths to run more than 650km of fibre optic cables. Marconi has since reversed its 92 per cent owned broadband cable network Ipsaris into Easynet, the European telecoms and internet service provider. British waterways is now an Easynet shareholder. The telecoms initiative was a major driver behind the recent growth in revenue and has continued to evolve. It now encompasses the use of canals as sites for 3G mobile telephone masts.

“Our work ranges from parochial level right up to our involvement with some of the biggest players in the country. It is a challenge managing that full range. You have to ensure quality standards across the board,” says Johnson.

In addition to the Easynet deal, there are two other major projects making particularly heavy demands on the department’s time. Both have just reached a critical stage.
The first is the Water Grid scheme, aimed at dramatically increasing the amounts of water available to industry and other commercial customers for uses such as cooling. A shortlist of prospective partners for the scheme was announced last month, comprising Anglian Water Consortium, Northumbrian Water and United Utilities. British Waterways is being advised on the deal by Herbert Smith, with the aptly named Trevor Turtle leading the team.

The second is a public private partnership (PPP) to develop its £300m waterside property portfolio, named P4. British Waterways is being advised by Ashurst Morris Crisp.
The recently-announced shortlist of bidders includes Axa Reim, Chelsfield and Morley Fund Management’s joint venture with Amec.

“We’ve always sought to develop the property alongside the canals, such as old warehouses, but now we are stepping it up a gear by going into a PPP,” says Johnson.

He is closely involved in the structuring of British Waterways’ partnerships with the private sector. “My role is to be a bridge between the legal and business environment. To be an efficient bridge I have to have knowledge of both. I have to know the needs of British Waterways to make sure that the challenges we face in the legal environment are being faced in the correct way,” he says.

For these large projects, strict public procurement exercises were used to select legal advisers, in line with EU requirements. “We were looking for particular fields of expertise,” says Johnson. “All of our firms are involved in property, for example. We were looking for lawyers able to show an innovative approach to joint venture property work.
In terms of telecoms and other areas we need people with expertise in those fields. Equally, we need firms with enough strength and depth to deal with wider issues, for example, in corporate and competition. There are issues that pose particular challenges to the public sector, such as state aid. We need a mixture of specialist expertise and strength in depth.”

Both Ashursts and Eversheds also happen to be longstanding panel firms of British Waterways. High-end property work goes to Ashursts, Denton Wilde Sapte and more recently Norton Rose, following the arrival of former Ashursts assistant Raj Mangat as a partner. Mangat is involved in two of British Waterways’ key London estates at Canary Wharf and Paddington.

The organisation also uses DLA and Nabarro Nathanson for both property and litigation. And for parliamentary work, it uses Westminster firm Winckworth Sherwood.

Eversheds works particularly on the telecoms side and on property matters in some regions. Shoosmiths is instructed on employment work.

This panel is particularly important in the regions, where the organisation does not have its own lawyers on the ground. British Waterways is a heavily devolved structure. Its five regional directors are expected to develop ongoing relationships with advisers and value for money fee arrangements. Johnson says that it uses around a dozen other firms in addition to the panel firms mentioned. However, using firms located in a particular region is becoming less important.

Johnson says: “What we’ve tended to find is that for medium to high-level work, there is a preparedness to instruct lawyers who have performed well in other regions. There is a move towards being less directly geographically-based.”
The size of the main panel is something that concerns him. “It does perhaps need some better management to it, but you can’t restrict yourself and there are procurement requirements to comply with. We’ll have a review, but before I start picking and choosing between firms, we want to decide precisely what our needs are.

“We’ll have to have a review. But if I say I’m going to cut it down, my phone will not stop ringing. We’ve no intention of cutting a swath through it, but it is a while since the panel was set up and clearly we need a review.” Wannabe advisers, you have been warned, so don’t pick up the phone just yet.
Nigel Johnson
Legal Diector
British Waterways

Organisation British Waterways
Sector Public corporation responsible to the Department for Environment, Food and Rural Affairs
Employees 2000
Legal Capability Four lawyers (including one barrister), one trainee and three paralegals
Legal director Nigel Johnson
Reporting to Chief executive Dr David Fletcher
Main law firms Ashurst Morris Crisp, Denton Wilde Sapte, DLA, Eversheds, Herbert Smith, Norton Rose, Nabarro Nathanson, Shoosmiths and Winckworth Sherwood