General Electric (GE) is forcing its external lawyers to sign an agreement prohibiting firms from litigating against any of the US giant’s group companies or affiliates in return for a place on its coveted UK panel.
The move is part of an online tender exercise launched by GE’s financial services arm (formerly GE Capital) last spring to select law firms in the UK.
As first revealed on www.thelawyer.com (19 January), GE completed
the convoluted electronic auction in a bid to rationalise the company’s legal roster and to slash its UK legal spend, which is understood to be as high as £50m. Around 37 firms, including Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer and Slaughter and May, were appointed to its panel.
According to several well-placed sources, the blanket waiver is a clause contained in GE’s standard terms of engagement and is not up for negotiation, although historically it has not been strictly enforced in the UK.
The waiver has attracted criticism from a number of firms, which argue that the clause is being used to prevent a huge slice of the City from taking instructions to sue the bank.
The practice of using panels to preclude firms from taking instructions against clients in the banking sector was highlighted by The Lawyer last September. Research conducted by The Lawyer (30 September 2004) revealed that any company wanting to sue one of the UK’s big five commercial banks would find it virtually impossible to instruct a top law firm.