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GAR 100 - 4th Edition

Shearman & Sterling LLP

18 February 2011

Shearman & Sterling arbitration practice began in the mid-1980s when Emmanuel Gaillard joined from Bredin Prat. Originally hired to build a litigation practice, Gaillard – now a totemic figure (see box out on opposite page) – opted to focus on arbitration clients, making Shearman & Sterling one of the first firms to devote itself to the area along with Freshfields, Gide Loyrette Nouel and Coudert Brothers.

People in Who’s Who:
7
Pending cases as counsel:
85
Value of pending counsel work:
US$135 billion*
Treaty cases:
10
Current arbitrator appointments:
23 (of which 11 are as sole or chair)
No. of lawyers sitting as arbitrator:
6

In 1992, Gaillard landed two major cases – a billion-dollar construction dispute for a European consortium and a set of eight arbitrations for an energy group – which got the practice off the ground. His expanding team went on to appear on several seminal cases in the late 1990s and early 2000s, and became particularly prominent in investment arbitration.

In 1998, the team acted for a British investor claiming against Egypt in the Wena Hotels case at ICSID – defeating Freshfields and securing a US$20 million award. The team also successfully blocking Egypt’s subsequent request for annulment of the award. Wena is often pinpointed as the first significant ICSID case of the current era.

A year later, Gaillard published Fouchard, Gaillard, Goldman on International Commercial Arbitration, still considered one of the seminal works on that topic.

In the meantime, the team’s associates began to emerge in their own right. Its first associate, Philippe Pinsolle, is nowadays spoken of as a future leader of the French arbitration bar.

Nowadays, the team in Paris includes over 50 people dedicated to international arbitration: including six partners, two counsel and 10 to 15 trainees. It has a reputation for having the pick of the recruitment market and has served as one of the unofficial universities of arbitration – many partners at other firms earned their spurs there. It boasts lawyers of 15 nationalities and its team of interns has been referred to as a “mini United Nations”.

Towards the tail end of the 1990s the practice started pushing into other markets. That began with the hiring of the head of Jones Day’s international arbitration group, Richard Kreindler, in Germany. In 2002, it ventured into the Asia-Pacific, building a practice in Singapore now led by Yu Jin Tay. The firm is also home to one of the premier Spanish-speaking teams following the recruitment of former Garrigues partner Fernando Mantilla Serrano (he works from Paris). In the late 1990s, the group hired Yas Banifatemi as head of public international law, an indication of its intent to steer even further into investment law. It has made attempts, too, to build capability into its London office and parts of the US – not always with complete success.

Although some of the foreign forays have yet to catch fire – London comes to mind – the firm’s core arbitration team remains the class of the field. Arguably even more than Freshfields, Shearman & Sterling is regarded as the place to go to when you have a seriously problematic case – the proverbial “bet the company” situation.

For that, the group itself thanks its practice manager, Nanou Leleu-Knobil in Paris, whom Gaillard says has been fully recognised for her contribution in the past, calling her “truly instrumental in the development of our practice”.

In rankings, researchers regularly make Shearman & Sterling one of two clear global leaders with Freshfields. The two firms admit enjoying a healthy rivalry, which has played out in a number of hearings over the years, most recently in a dispute between Algeria’s state oil company Sonatrach and BP.

Who uses it?

The practice’s first client was Sonatrach, which Gaillard brought from Bredin Prat. It’s remained a regular client ever since (joined by many other states and state-owned companies). The firm is also popular with France’s corporate establishment. Energy company Total has used the firm in disputes relating to its interests in Asia and Latin America in particular, EDF has retained it for disputes with Hungary and relating to its acquisition of interests in Italian energy company Edison, and defence company Thales has instructed it on a number of matters, including a high-profile claim against Taiwan concerning a kickback scandal arising from the sale of frigates. Other clients are industrial conglomerate Areva and chemical company Rhodia. It’s also worked for General Electric, Credit Suisse First Boston, Enka, Orascom, Daimler Chrysler and IPIC. In general terms the group prides itself on being a magnet for major strategic arbitrations in which clients have a great deal to win or lose (the former Yukos majority shareholders are a prime example). The most famous current clients are the former majority-shareholders of Yukos, who are pursuing arbitration against the Russian state. (Gaillard told Legal Business Magazine: “When we were first approached we knew that taking on a case like this would have certain downsides. We knew it would mean that we wouldn’t work for the Russian Federation or any of the major state-owned oil companies for the foreseeable, but when I approached the management board the response was unanimous. It’s the largest arbitration ever – it’s well worth it.”) The Yukos team consists of Gaillard, Banifatemi and Pinsolle. Without an office in Moscow Sherman has no fear of repercussion and the firm is said to have billed US$10 million annually for work on the case since it started five years ago.

Big wins

In late 2009, the firm won a hugely significant award for Sonatrach in a dispute with Repsol and Gas Natural. It has also now won round one – on jurisdiction and admissibility – in the Yukos arbitration. The tribunal held that Russia is bound by the provisional application of the Energy Charter Treaty.

At ICSID – in a matter that the firm took over at the annulment phase – the Malaysian Historical Salvors case, the firm managed to turn the result around, getting an unfavourable decision against the investor rendered by a sole arbitrator cancelled, and giving the UK salvage company a second chance to claim against Malaysia. The tribunal said the sole arbitrator who rendered the award had manifestly exceeded his powers and ordered the state to pay the costs of the annulment proceeding. The firm itself regards the SGS-Philippines ICSID case from 2004 as one of its more memorable results – it was the first case in which an “umbrella clause” was upheld. In a similar vein, Wena v Egypt produced one of the first ICSID decisions on the meaning of “investment”.

Recent events

2010 saw fewer merits hearings than 2009, but a similar overall figure for hours billed (reflecting the fact the firm works chiefly on large cases with a long run-up duration). The team brought in a number of substantial new assignments, including the representation of Areva in two disputes with Finland’s TVO over the construction of a nuclear power plant – a case that had previously been assigned to Freshfields, a billion dollar construction dispute from a project in the Middle East, an energy dispute for a state-owned company in sub-Saharan Africa, a dispute between Middle Eastern and Bangladeshi groups that includes litigation before the Supreme Court of Bangladesh about a locally issued anti-suit injunction, and a multi-jurisdiction matter unfolding in Santiago, Chile, featuring the laws of New York, England, BVI and Chile.

Personnel-wise, Mark McNeill, a former US State Department lawyer, was elevated to the partnership in Paris from 1 January 2010. McNeill is leading the two Areva/TVO arbitrations with construction and project specialist Todd Wetmore. The Paris office also promoted two senior associates to counsel – Coralie Darrigade and Jennifer Younan – and added 10 associates. In Washington, DC, Christopher Ryan was appointed counsel. For Yas Banifatemi, the year brought an increase in requests for her to consider arbitrator appointments in investment cases. Meanwhile, the English version of Gaillard’s book, Aspects philosophiques du droit de l’arbitrage international, was launched over the summer (as The Legal Theory of International Arbitration). The book argues that international arbitration is an autonomous transnational legal order that is independent of the law of the seat of arbitration and unaffected by regional legal impediments – whether they be antisuit injunctions, the Brussels Regulation or domestic law – that militate against Kompetenz-Kompetenz. Philippe Pinsolle meanwhile represented French interests in the “London vs Paris vs Hong Kong …” segment of the GAR Live conference, resulting in a lively debate with Stephen Jagusch of Allen & Overy.

Partner Todd Wetmore, meanwhile, deserves some special recognition for enduring a 25-hour bus ride from Stockholm to France with the entire cast of an ICC arbitration when an ash cloud over Europe led to the closure of airspace: possibly the only cloud to blight the practice in the last 12 months.

Client comment

Frans Mol, general counsel of Bunge Asia in Singapore, used a team led by Todd Wetmore and says it was “focused, sharp and to the point” and “extremely well organised”, displaying mastery of a case file running to thousands of pages – “a genuine dream team!”

“In a nutshell” he says “Shearman made a very complex case, that was messily presented by the claimant, very simple for the arbitral panel to understand with a straightforward and well substantiated line of defence.” While the award in that case has yet to be rendered, Mol said the cross-examinations ended in “a bloodbath for the claimant.”

Rezaul Haque, chair of Lahmeyer International Pally Power Services, instructed Shearman & Sterling in Asia for a claim over the expropriation of a power plant construction business in Bangladesh – winning an award worth over US$20 million. “They outclassed their opponents at every turn,” he says. “What stood out was the team’s holistic approach to advising me in a time of urgent need and personal stress – including on matters that were indirectly related to the arbitration,” he says. “They have become my trusted advisers.” Haque said he was also impressed by the speed and practicality of the team and by partner Yu Jin Tay’s accessibility. “He kept me closely informed about the team’s strategy and every step in the process so that I never felt lost.”

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