Quiet invasion

A&O and Herbert Smith entering Ireland has apparently not been the cause of any Northern Irish lawyers having sleepless nights.Joanne Harris finds that post-crunch matters are keeping them well occupied

The biggest talking point in the Belfast legal market over the past few months has been about something few think will actually have a direct impact on their professional lives – the arrival of City firms Allen & Overy (A&O) and Herbert Smith.

Herbert Smith announced in November 2010 that it was opening a small back office in Belfast to service its dispute resolution practice. The office was opened to manage costs associated with disclosure and to ­manage documentation more efficiently.

Just a few months later A&O became the second big firm to shift its back-office ­functions to Belfast, announcing that it would locate 250 support roles and 50 fee-earners in Northern Ireland by 2014. Managing partner Wim Dejonghe denied that the initiative was designed to save costs, despite the move saving A&O an estimated £10m over five years.

A firm carrot

The moves were supported financially by regional development agency Invest ­Northern Ireland, which gave A&O £2.5m and Herbert Smith £208,000 to help launch the offices. The sums involved were related to the number of jobs expected to be generated by the firms.

The nature of the services being offered by the City firms means lawyers at Northern Irish practices are relaxed about their entry. In fact, they say the arrivals could actually reduce pressure at the graduate and newly qualified end of the market, where there is now a severe over-supply of lawyers.

Tughans managing partner Ian Coulter reports that his firm received 40 applications for each of its five training contracts this year and is considering increasing the number of places on offer due to the high quality of the applicants. “Anything that can assist with that I’m in favour of,” he adds.

Northern Irish firms are confident they will be able to hold on to and attract the best-quality lawyers and support staff in the face of Herbert Smith’s and A&O’s recruitment efforts. McGrigors corporate partner Paul McBride says he does not think young lawyers would trade a place in a domestic firm for a more “back-office” role.

“They could be in the Cayman Islands or Timbuktu if this is the sort of operation they’re running,” states Amanda Wylie, a litigation partner at Kennedys.

Rather than be distracted by the bigger firms’ activities, Northern Irish lawyers are focused on making the most of difficult market conditions.
“We’ve picked up a lot of high-profile work,” notes Coulter. “A lot of it’s messy work – ­banking-related restructuring work, sales in insolvencies and so on. It’s not necessarily very good for the health of NI plc as a whole.”

McBride points to a slight pickup in corporate and M&A work, citing transactions such as the £67m acquisition in November 2010 of Tate & Lyle’s molasses business by Belfast grain trader W&R Barnett.

Brit popular

He thinks Northern Irish law firms, and the offices of UK firms in Northern Ireland such as McGrigors or Kennedys, are now an attractive proposition to UK clients.

“We have a lower-cost business in ­Northern Ireland and we can serve GB work at very attractive rates,” explains McBride. He cites how work for Croydon Council from Belfast took advantage of the pricing structures the firm can offer.

Work coming from other parts of the UK, and also across the border from the Republic of Ireland, are also keeping contentious practices busy. Kennedys’ Wylie, who joined the UK firm with her team from Arthur Cox’s Belfast office in late 2010, says a particular focus of the work in recent months has been professional negligence cases.

“Someone will be wanting to point the finger at someone,” she says, expanding on the theme. “I don’t think it’s peaked yet because we think there’ll be a lot more professional negligence cases coming to the fore. I think the banks have been absolutely shell-shocked by the financial crisis and are only now thinking about how to recoup some of their losses.”

Wylie says some of these cases will be fought in both the North and South, particularly when arbitration or adjudication is involved.

Although restructuring and litigation is top of the caseload list at present for ­Northern Irish lawyers, a bright spot on the horizon is the possibility that the country’s government will cut corporation tax. A ­consultation is underway, which closes on 24 June. It notes that devolving the ­corporation tax rate from that of the UK could result in additional investment into Northern Ireland, but could also cost the country in lost revenue.

Coulter believes a reduction in tax would be a major move. “If the corporation tax happens it could change this place overnight,” he says. “I just see this as a ­fantastic time for business and government to work together.”