Three Crowns’ launch in 2014 marked one of the biggest litigation shakeups in the market that year.
The six founding partners left their “comfortable jobs” running the arbitration practices at various magic circle and leading firms to set up the boutique last February. And they didn’t start slow.
Three Crowns (3C) entered the market with three offices in London, Paris and Washington DC right off the bat – an “ambitious venture”, co-founder Constantine Partasides QC recalls – but one year on it looks like a clever strategy.
3C is now made up of 40 lawyers across its offices, has taken one further partner, Carmen Martinez Lopez from Covington & Burling, won clients including ExxonMobil, Boeing and BP, and its global average profit per equity partner recently hit magic circle plateau partner levels of between £1.3m and £1.6m.
Global revenue, which will be revealed officially in the firm’s first consolidated LLP filings next year, has hit a “double digit million-pound figure”, according to Partasides.
“We had a conviction that, having worked for blue chip clients, what they were most interested in from arbitration service providers was something they weren’t getting in big law,” says Partasides. “They wanted distinguishing advocacy and a structure that gave weight and support to their big disputes.”
The firm was born out of the belief that the in-house legal teams of FTSE 100 corporations made their arbitration relationships with individuals, not law firm brands.
“Those disputes lawyers who win the most difficult cases tend to be big name individuals,” Partasides continues, “more so than corporate partners and transaction lawyers. It made sense to create an environment that would allow those types of individuals to survive and be more comfortable than they would be in large institutions.”
As Freshfields Bruckhaus Deringer’s London arbitration head, Partasides’ name carried a big weight in the disputes world. He left with colleagues Giorgos Petrochilos, who had worked at Freshfields’ Paris office, and co-arbitration chair Jan Paulsson.
Gaetan Verhoosel left Covington, Todd Wetmore left Shearman & Sterling’s Paris office and Luke Sobota left Jones Day to join the new venture.
Despite the growing trend for disputes partners leaving full service firms to set up boutiques, the exits were not a product of frustration over conflicts, says Petrochilos.
“Conflicts were of course an issue but it wasn’t the main motivation,” he says. “There was a much more existential fundamental reason.”
That reason is what has come to be called the “3C way”: a manifesto soon to be included on 3C’s website as a pledge to clients about its Rolls-Royce service.
“What sets us apart is that we approach our cases with a much smaller team than our competitors,” says Sobota. “The type of cases we get are complex and require hard strategic thought by people who are experts in that area.
“At law firms you can start adding seven or eight associates to work on a dispute and they’re only seeing a portion of the case. What we do is dedicated, partner hands-on focus.”
Just 12 months after the six partners first started trading, 3C has had over 100 instructions, including 60 currently active matters. In 30 per cent of those disputes the amount at stake exceeds $1bn, Partasides says.
“A client said to me recently that our challenge now will be to turn away cases,” says Petrochilos, adding turning down potentially profitable work is integral to the firm remaining “true to its promise of excellence”.
“The quality of the delivery we promise poses a problem for our optimum size” he adds. “There’s no magic number for our final headcount, it could be 15 partners or it could be 10. I can’t answer yet but we’re certain it’s not 50 partners.”
Maintaining its reputation for headline mammoth arbitration work has not proved difficult so far, as the scope of the dispute resolution format only grows in popularity worldwide, particularly in the energy and construction industries.
“The firms we left might have prioritised profitability over all, and of course this is important,” says Partasides. “But we are building a firm with other criteria we think we should value as heavily: the identity of the client, the strategic nature of the instruction, the time the partners have to handle it properly.”
One current instruction that “ticks all those boxes”, says Partasides, is one he is running alongside Sobota – the “largest ICC arbitration in history” in which the amount in dispute tops $20bn.
“About 50 per cent of the arbitrations we do is energy related,” adds Petrochilos. “There is a lot of financial services; a healthy dose of technical and construction disputes; some health, and quite a bit opening up in IT and IP disputes.”
International arbitration is a market expanding across the board, particularly following the financial crisis and with growing wealth in the Far East and Africa.
In Europe, traditional arbitral institutions such as the London Court of International Arbitration (LCIA) have also seen significant growth, with 87 cases in 2000 and 290 by 2013 – the highest number of cases in the centre ever. In the Paris International Chamber of Commerce (ICC) the number of cases rose from 541 in 2000 to a peak of 817 in 2009, with a slight drop in 2013 to 767 cases.
“The arbitration process certainly has room for improvement,” says Partasides, “but the reason it has advantages over any other system isn’t because it’s cheaper or quicker or more confidential, but because you end up with an internationally enforceable award. There’s no court equivalent of that.
“The consequence is that the exponential growth we’ve seen won’t slow down for a while,” he adds. “Ongoing discussions about improving the system will only improve it.”
Tapping into this market so deeply means 3C does not compete with its former employers, Partasides says. Indeed, he thinks its competitors have diminished with the population explosion of arbitration users instead of growing.
Debevoise & Plimpton, King & Spalding and White & Case are the firms Partasides says 3C counts among its main competition for work, although he adds: “It’s worth bearing in mind that in those firms it’s the individuals making a difference, not the institutional knowledge of the firm.”
This focus on individuals is also driving 3C’s recruitment strategy. 3C has started offering summer intern positions for associates, with Sobota saying this is the “best way to get your foot in the door” at the firm.
“We received 1,200 applications for intern positions this year. Associates know they will learn here and there is a very serious prospect you will be hired at the end.”
Its recent intake includes a junior barrister who was “attracted by the possibility of doing her own advocacy here”. All of 3C’s advocacy is done in-house.
“We’re bringing in people who are very excited about a different way of practising law,” Sobota adds. “It’s heartening to watch it grow.”
Despite opening with three offices, the global scope of arbitration means “geography is becoming less relevant to sophisticated users of arbitration services,” says Partasides.
“Companies are choosing individuals, not locations of firms. That said, our practice is already global and we’re doing disputes in every single continent.”
The Far East is the only geographical ‘gap’ in its bases, and the partners have mooted opening further offices. “We’re open to it,” Partasides adds. “The question of opening an office in somewhere like Singapore has not been answered yet.”
3C’s aim for the next year is a 30 per cent uptick in revenue. Its mission is also to take on more pro bono and cause-based work, building on recent work that includes a review of judicial independence in Cambodia, judicial training in Ramallah and its involvement with a women’s rights NGO in the UK.
“We are trying to develop a reputation in the arbitral field for providing rigorous, sophisticated and candid argumentation that will exist years into the future,” says Sobota. “We do not want to be seen as corporate counsel, we want to represent investors and corporations across the spectrum.”