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GAR 100 - 10th Edition

King & Wood Mallesons

09 March 2017

Despite the collapse of the firm’s European arm, the arbitration team has been salvaged

People in Who’s Who Legal 4
Pending cases as counsel 143
Value of pending counsel work US$9.4 billion
Treaty cases 8
Current arbitrator appointments 32* (of which 13 are as sole or chair)
Lawyers sitting as arbitrator 8

*Excludes 28 cases at mainland Chinese institutions

King & Wood Mallesons, or KWM, was the product of two tie-ups that saw Mallesons Stephen Jaques in Australia and King & Wood in China join forces with UK-headquartered SJ Berwin, creating a mega-firm with a footing in Asia, Australasia, Europe and the Middle East.

KWM’s European arm (the legacy SJ Berwin) was put into administration in January 2017 with £35 million in debts, more than 90 partners having already left the firm amid reports of its financial troubles. Several arbitration partners were among those who left, including the London-based global head of dispute resolution, Craig Pollack, who went to Covington & Burling.         

It hasn’t meant the dissolution of the arbitration team, however. The Chinese and Australian arms of KWM have launched a new outfit that will allow the remaining members of the practice in Europe and the Middle East to continue trading as King & Wood Mallesons.

That means KWM has retained an arbitration team in London headed by Ukrainian Andrei Yakovlev, and a group in Dubai overseen by Tim Taylor QC (founder of the legacy SJ Berwin practice), as well as partners in Madrid and Brussels. 

All three legacy firms have a strong track record in international arbitration. Mallesons was one of Australia’s “Big Six” commercial law firms, with offices in all the major cities and in Beijing and Hong Kong.

Its international arbitration work grew out of the construction practice established by David Bateson and Paul Starr in Hong Kong in the early 1980s. The firm later added the likes of Max Bonnell and Alex Baykitch in Sydney (Baykitch is president of the Australian Centre for International Commercial Arbitration).

King & Wood was one of the first law firms established in China in the modern era, with founding partners who had been working at the state-sponsored China Council for the Promotion of International Trade when the government permitted private ownership of law firms.

The firm was famous for representing China’s leading beverage manufacturer Hangzhou Wahaha Group and its chairman Zong Qinghou in eight parallel arbitrations brought by its French former joint venture partner, Danone, before tribunals at the Stockholm Chamber of Commerce.

SJ Berwin’s international arbitration practice was founded by Taylor in London in 2005. The practice made a name for itself in some high-profile Russia and CIS-related disputes, including the US$2 billion battle for control of telecoms operator Megafon.

Network

Despite the collapse of KWM in Europe, the arbitration practice still has members in London, Dubai, Riyadh, Madrid and Brussels – but it has lost partners in Paris and Frankfurt to Reed Smith.

The rest of the team is concentrated in Sydney, Hong Kong and Beijing, though it also has members in Singapore, Perth, Brisbane, Melbourne, Shenzhen and Guangzhou.

Who uses it?

King & Wood Mallesons appears on the Chinese government’s list of preferred counsel for investment treaty work. Kyrgyzstan and Ukraine have repeatedly sought the firm’s counsel in treaty cases and related enforcement proceedings, while Panama and Malta have used it on law of the sea matters.

State-backed entities turn to the firm too. Chinese insurer Sinosure is using the firm for an investment dispute with Bulgaria, while KWM is defending Ukrainian state energy company Naftogaz in a high-stakes shareholder claim at the LCIA brought by companies linked to oligarch Igor Kolomoisky.

Past clients include BHP Billiton and Glencore, among other energy and mining outfits, as well as the Carlyle Group, Walmart, GE Healthcare and the UAE’s Meydan Group.

The London office carries on the SJ Berwin tradition of acting for companies and high net worth individuals in Russia and the CIS.

Track record

Kyrgyzstan turned to KWM after finding itself hit with a US$118 million award under a little known regional treaty, the Moscow Convention for the Protection of Investors’ Rights. A team led by Andrei Yakovlev succeeded in obtaining an authoritative ruling from a CIS economic court in Belarus that the treaty didn’t contain a free-standing consent to arbitration – leading to the set-aside of the award in the Russian courts.

On the back of that result, KWM won a tender to represent Kyrgyzstan in all its investment arbitration matters, including a set-aside action in French courts that saw eye-catching results in early 2017 (see ‘Recent events’).

Mallesons also had a significant victory for Australian mining company White Industries in an investment treaty claim against India, which concluded in 2011. It was the first-known victory for an Australian firm in a BIT claim and the first-known investment treaty award against India.

The Wahaha dispute handled by King & Wood pre-merger was the biggest Sino–Western arbitration to date, with total claims exceeding €1.8 billion. Following hearings on liability in 2009, the parties reached an amicable settlement.

The teams in London and Dubai are known for helping Mobile Telesystems resist enforcement of a US$200 million LCIA award in favour of Nomihold Securities in three jurisdictions as part of a convoluted dispute over control of Kyrgyz telecoms company Bitel.

Recent events

It would be a shame if the extensive press coverage of KWM Europe’s collapse took attention away from the remarkable results the arbitration practice has achieved in the past year.

These include helping Ukraine to reduce a US$250 million investment treaty claim by London listed oil and gas company JKX to an award of less than US$12 million, with the tribunal rejecting the main claim relating to a hike in gas production royalties. (Herbert Smith Freehills were on the other side.)

On behalf of Kyrgyzstan, a Yakovlev-led team also succeeded in setting aside a US$16.5 million investment treaty award in favour of Latvian businessman Valeri Belokon. The Paris Court of Appeal found that the bank at the heart of the dispute had been established to facilitate money laundering – giving weight to allegations by Kyrgyzstan that had failed to sway an arbitral tribunal chaired by Jan Paulsson. (Clifford Chance acted for the claimant.)

Partner Ramón García-Gallardo in Brussels led the Maltese government to a victory when a tribunal in The Hague held the West African archipelago state of São Tomé and Príncipe liable for the detention of an oil tanker on smuggling charges. An award on damages is pending.

On the commercial side, KWM defended Chinese aluminium processing group Qixing against a HKIAC claim brought by Australia’s Stonewall Mining. Although the client lost on liability, it succeeded in reducing the US$110 million damages sought to an award of less than US$13 million.

The firm continues to represent Chinese state-owned enterprises, including in two disputes worth US$1 billion. In one Singapore-seated dispute over a coal-fired power plant, the firm replaced Herbert Smith Freehills and Reed Smith as lead counsel.

A team in Australia led by Max Bonnell is acting for a subsidiary of one of Vietnam’s largest natural resources companies in a US$170 million SIAC claim relating to a mineral processing plant.

As mentioned, there were a number of departures from the practice before KWM in Europe became insolvent in early 2017. Most notably, the firm’s global head of dispute resolution Craig Pollack went to Covington & Burling in London, only a few months after financial services disputes specialist Greg Lascelles left for the same firm.

Also in London, Paul Stothard left for Norton Rose Fulbright while energy and infrastructure partner Stuart Jordan moved to Baker Botts. In Dubai, Mark Hoyle went to Gateley.

The Chinese arm of the firm also lost Liu Xiangwen, Denning Jin and Zhang Lijie. 

In Sydney, Peter Pether was promoted to managing partner of the Australian dispute resolution practice; while in Dubai, Joanne Strain was promoted to partner.