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GAR 100 - 10th Edition

Herbert Smith Freehills

09 March 2017

After winning a solar case for Spain, the firm is taking on claims against Repsol and Botswana

People in Who’s Who Legal 15
Pending cases as counsel 137
Value of pending counsel work US$52 billion
Treaty cases 14
Current arbitrator appointments 48 (of which 31 are as sole or chair)
Lawyers sitting as arbitrator 19

This firm was born of a 2012 merger between the UK-headquartered international firm Herbert Smith and one of the “Big Six” Australian law firms, Freehills. Of the two, Herbert Smith was the better known for international arbitration, though Freehills has added more energy and natural resources expertise into the mix.

Herbert Smith was unique among London firms in that it initially built its reputation through dispute resolution. The firm pioneered the idea that a solicitor could offer value when most others simply farmed cases out to the English Bar. When it became clear that international arbitration was on the rise, the firm went out and recruited one of the few UK lawyers with a name in the field: Julian Lew (now QC), who joined from Coudert Brothers.

Lew duly taught the firm’s senior litigators how to handle international arbitrations. He also brought through a generation of younger lawyers (a role he later institutionalised by founding the School of International Arbitration at Queen Mary, University of London). Many of Lew’s protégés have emerged as leaders in the field, at Herbert Smith Freehills and elsewhere.

Despite that early step, Herbert Smith resisted the temptation to carve out international arbitration completely from its huge litigation group – a fact that became a bone of contention by the time some of Lew’s protégés had grown up and were champing at the bit. When Lew left to become a barrister in 2005, the firm finally created such a group. In doing so, it made London and Paris one in accounting terms for the purposes of arbitration – they book to the same profit centre – sidestepping problems that other firms had had with internal rivalry.

Nowadays, Herbert Smith Freehills’ commercial arbitration group is a force to be reckoned with. The firm has also grown a strong reputation in public international law and investment treaty arbitration, increasingly acting for sovereign states in intergovernmental negotiations and boundary and treaty disputes. Members of the firm are also actively engaged in the wider community, undertaking pro bono initiatives, maintaining a blog on arbitration and holding memberships with various international institutions.

On the back of some high-profile results, the practice has seen an influx of high-value work recently. The firm reckons its portfolio of pending investment treaty work is as large as it’s ever been. It also has 14 cases worth more than US$1 billion (including one worth US$18 billion).

For a long time, the firm has had one of the strongest networks of any UK practice in Asia, where it has enjoyed an even stronger brand for international arbitration than at headquarters. That endures thanks to a spine of partners with arbitration experience across the region including in Japan, China, Hong Kong, Singapore and Seoul. Indeed, the firm’s global head of dispute resolution, Justin D’Agostino, resides in Hong Kong.

The team also expanded into the Americas. It lured back partner Larry Shore in 2013 (a former head of the arbitration group who had defected to Gibson Dunn & Crutcher for a time) to staff a new office in New York. In 2015, partner Christian Leathley relocated to New York, where he’s developing the firm’s Latin America practice.

The international arbitration practice is headed by Paula Hodges QC in London, who is a vice president of the LCIA Court and member of that institution’s board of directors. Other names to know include new London group head Craig Tevendale, Brenda Horrigan (who has recently relocated from Shanghai to Sydney), Jessica Fei in Beijing and Patricia Nacimiento in Frankfurt.

Network

In Europe, the main offices for arbitration are London, Paris, Madrid, Moscow, Frankfurt and now Düsseldorf. In Asia, the key cities are Beijing, Shanghai, Hong Kong, Singapore, Tokyo, Bangkok, Jakarta and, to a lesser extent, Seoul. There are also arbitration practitioners in New York, Dubai, Melbourne, Sydney, Perth and Brisbane, while a new Johannesburg office opened in 2015, giving the firm its first office in Africa.

Who uses it?

Spain has been using it to defend a pair of Energy Charter Treaty cases triggered by reforms to the country’s renewable energy sector, with good results so far (see ‘Recent events’). Other state clients include Tunisia, Costa Rica, Malaysia and the US Department of Justice (in a softwood lumber matter against Canada that was the first state-to-state dispute under LCIA rules). It also advises China’s state-run oil company Sinopec.

On the investor side, ICSID clients include Standard Chartered Bank (for a long-running dispute in Tanzania), water utility Tallinna Vesi (for a claim against Estonia); and voucher company Le Chèque Déjeuner (against Hungary). It’s also acted for London-listed JKX Oil and Gas (against Ukraine).

Some other clients are UBS, Goldman Sachs Eurotunnel, Stagecoach, RWE Group, IBM, Marriott Hotels, Mitsubishi Heavy Industries, Rio Tinto, BP, BHP Billiton, Chevron Texaco, AkzoNobel, Eni, EDF, GDF Suez, Huawei, Itochu and Premier Oil.

Track record

Though most of its wins aren’t public, the group achieved a spectacular victory for Malaysia in a sensitive public international law dispute with Singapore at the Permanent Court of Arbitration in The Hague. The case concerned a billion-dollar development charge on land formerly occupied by Malayan Railways.

It had a great win for Eurotunnel in the Sangatte dispute a few years ago over asylum seekers. Although the compensation was only medium-sized, the case took place in a febrile atmosphere and had a number of unusual elements, not least a five-member arbitral tribunal.

In Asia, the firm emerged on the winning side of Grand Pacific Holdings, a landmark case on enforcement in Hong Kong. That same case also helped to determine that parties who challenge awards unsuccessfully will generally be ordered to pay indemnity costs under Hong Kong law.

It helped Kuwaiti telecoms firm Wataniya defend its position in a Tunisian joint venture – an award worth at least US$1 billion – and helped BP and Rio Tinto defeat an unusual ICSID claim brought by an Indonesian provincial government about operations in Borneo.

In Australia, it obtained freezing orders worth more than US$700 million for a client in aid of an arbitration in Switzerland – the first time Australian courts had made such orders for a wholly foreign arbitration.

Recent events

HSF obtained a terrific result on behalf of Spain in early 2016, in the first Energy Charter Treaty case concerning the state’s reforms to the tariff regime for solar power. An SCC tribunal threw out the €10 million claim, holding that the measures didn’t violate investors’ legitimate expectations. The claimants were also ordered to pay €1.3 million in costs. Other cases still have some way to run, however.

There were also some good results at ICSID. As co-counsel with Linklaters, the firm helped Standard Chartered win US$148 million in a case against Tanzanian state entity Tanesco after persuading a tribunal that it had been misled by the respondent in an earlier phase of the dispute. Annulment proceedings are pending.

Together with Quinn Emanuel, it helped an ICSID claim by French voucher services company Le Chèque Déjeuner (now known as Groupe Up) against Hungary clear the jurisdictional phase in March 2016.

Following a change in management, London-listed JKX Oil & Gas instructed Herbert Smith Freehills to replace Allen & Overy as counsel in a US$250 million investment treaty claim against Ukraine. However, a tribunal threw out the client’s main claim concerning a hike on gas production royalties and awarded it just US$11.8 million – less than 5% of what it had sought.

In the London courts, HSF won a freezing order against Russian businessman Ilya Reznik in support of an LCIA claim filed by Russia’s Alfa-Bank (part of Mikhail Fridman’s Alfa Group) to recover loans to Reznik’s shoe retail company. It later obtained a contempt of court ruling against Reznik, who was sentenced in his absence to 18 months’ imprisonment after failing to comply with disclosure obligations.

It obtained a €100 million settlement for a European client in a Geneva-seated ICC case against a state entity concerning the construction of a major hotel in Algeria. 

Members of the Tokyo, London and New York offices helped an international pharmaceuticals company prevail in a US$1 billion ICC arbitration seated in Singapore. The firm represented a major oil and gas client in a London arbitration and expert determination relating to an offshore Nigerian oilfield. For another multinational, it settled an ad hoc proceeding in London against a consortium involved in transport and processing services in the North Sea.

New instructions came from long-time client Sinopec on a US$5.5 billion claim against Spain’s Repsol relating to a joint venture operating off the Scottish coast. It is acting for the world’s largest nickel producer, Norilsk Nickel, in a US$271 million LCIA claim against a liquidated state mining company in Botswana.

Craig Tevendale took over as head of the London international arbitration group from Paula Hodges QC, who remains head of the global practice. Partner Dominic Roughton relocated to London from Tokyo. Public international law academic Antonio Pastor joined as a consultant in Madrid.

Partner Brenda Horrigan left Shanghai after five years to lead the Australian group from Sydney. Recently promoted partner Mike McClure moved from Dubai to Seoul. In Hong Kong, Kathryn Sanger joined from Clifford Chance, bringing the number of partners in the Asia practice to 13.

Patricia Nacimiento joined from Norton Rose Fulbright to co-head the German disputes practice in Frankfurt. Sports arbitrator and former athlete Sylvia Schenk joined as a consultant in the same office.

After London-based partner Matthew Weiniger QC left for Linklaters in 2015, there was another high-profile exit in the past year – the head of the Paris disputes practice, Isabelle Michou, who left for Quinn Emanuel Urquhart & Sullivan. Dubai-based partner James Bremen also moved to Quinn Emanuel to chair its construction and engineering practice. Meanwhile Bronwyn Lincoln left the Melbourne office for local firm Corrs Chambers Westgarth.

The launch of HSF’s office in Johannesburg attracted a new partner, Peter Leon, who co-heads the Africa practice and also sits as an arbitrator. He was recently asked to preside over a US$200 million claim by a group of South African investors against Lesotho brought under an investment protocol for the Southern African Development Community.

Client comment

Mining group BHP Billiton has used the firm on a range of international arbitration-related matters and development of major projects. “We have been impressed by their ability to give clear and deliberate advice based on complex fact patterns with lots of grey areas,” says in-house counsel Alistair Warren. Their advice “demonstrates a profound understanding of the company’s commercial priorities”. He says partner Leon Chung in Sydney is “always very responsive”, while Christian Leathley in New York has shown “a strong understanding of pre-arbitration strategy”.

Stephane Harmand, vice president of legal and compliance at Volvo Group Trucks Sales & Marketing in Japan, describes Herbert Smith Freehills as “a class act” that is “head and shoulders above the competition for arbitration work in the Asia–Pacific region”.

The Asia practice led by Peter Godwin in Tokyo “combines technical excellence with a deep understanding of our business,” Harmand says. Though their services come at a price, he says it is worth every dollar.