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GAR 100 - 5th Edition

Shearman & Sterling

05 March 2012

The firm saw an explosion in hours billed in the early part of the year – and a new client in the form of Venezuela.

People in Who’s Who:
7
Pending cases as counsel:
80
Value of pending counsel work:
US$145 billion (includes Yukos claims)
Treaty cases:
12
Current arbitrator appointments:
24 (of which 12 are as sole or chair)
No. of lawyers sitting as arbitrator:
6

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

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. 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 in the field.

In the meantime, other members of the team began to emerge in their own right. Its first associate (now partner), Philippe Pinsolle, is nowadays spoken of as a future leader of the French Arbitration Bar. Todd Wetmore, who joined in 1995, is a leading construction specialist, while Yas Banifatemi, recruited in 1997, has developed the firm’s investment arbitration practice and heads an expanding public international law team.

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 in Paris. The group also has a presence in London and a steadily growing US practice spearheaded by partner Christopher Ryan in Washington, DC.

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 partly thanks its practice manager, Nanou Leleu-Knobil in Paris, whom Gaillard calls “truly instrumental in the development of our practice”.

In rankings, researchers regularly make Shearman & Sterling one of two clear global leaders along 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; and an investment dispute brought by the Micula brothers against Romania.

Who uses it?

Sonatrach was the practice’s first client and remains a regular customer. Since then it’s been linked with big and small businesses alike – as long as they have enough to lose (or win) – and some states. The practice prides itself on being a magnet for those with the largest or most strategically important matters.

The big corporate clients include French names: Total; EDF, for gas price review disputes, an Energy Charter Treaty dispute with Hungary and the fallout from an acquisition in Italian energy company Edison; Thales, including on a high-profile dispute with Taiwan concerning a kickback scandal arising from the sale of frigates; Areva, in a US$3.5 billion dispute with Finland’s TVO, among the largest pending construction arbitrations; and chemical company Rhodia. Non-French clients include ABB, General Electric, Credit Suisse First Boston, Enka, Orascom and Daimler Chrysler.

States to have retained the firm include Lithuania (in a dispute with Gazprom), Peru and, most recently, Venezuela (for three ICSID claims).

An interesting recent addition to the list is TNK-BP, which has instructed Yas Banifatemi for an arbitration against its joint venture partner BP. Fried Frank Harris Shriver & Jacobson is co-counsel.

Then there’s Yukos.

Shearman & Sterling is the firm that agreed to represent the former majority shareholders of Yukos as they pursue arbitration against the Russian state over the loss of their stakes in that company.

Discussing the pros and cons of taking on Russia – one of the world’s wealthiest nations – Gaillard told a UK legal 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 [future], 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. Shearman & Sterling is believed to have billed US$10 million annually for work on the case since it started six years ago.

Track record

The firm’s reputation as a miracle worker is no accident. In 2004, it was Gaillard and colleagues who won the ICSID case of SGS v Philippines – the first case in which a tribunal held that a BIT’s umbrella clause gave it jurisdiction over breach of contract claims. In a similar vein, their work in Wena v Egypt produced one the first ICSID decisions on the meaning of “investment”.

More recently, again at ICSID, the firm reversed the result in the Malaysian Historical Salvors case after stepping in at the annulment phase. An award rendered against a UK salvage company by a sole arbitrator was duly cancelled.

And in the Yukos case, the team has also won round one – on jurisdiction and admissibility. The tribunal allowed the case to proceed, holding that Russia is bound by the provisional application of the Energy Charter Treaty even though it was never ratified.

2009 saw the firm win US$580 million for Sonatrach in a dispute with Repsol and Gas Natural.

2011 saw two strongly favourable awards – one for an international agribusiness and the other a Turkish industrial conglomerate (the latter included the dismissal of counterclaims and significant legal costs).

In another case, Avax v Tecnimont, Gaillard and colleagues persuaded the Reims Court of Appeal to set aside an award against a Greek client on the grounds that one of the arbitrators lacked independence.

Recent events

Christopher Ryan – who is acting on five multimillion-dollar ICC arbitrations in the chemical industry and is active in arbitration-related proceedings before US courts – was elected to the partnership in Washington, DC, from 1 January 2011. Two senior associates were added in late 2010 and in 2011, both with a strong background in public international law. They are Scott Vesel (who returned to the firm after time spent in Warsaw and at the US Department of State) and Ketevan Betaneli, who joined the Paris practice fresh from advising on arbitrations at the Georgian Ministry of Justice.

In January 2012, Philippe Pinsolle was awarded the Swiss Arbitration Association’s annual prize for advocacy in international commercial arbitration. ASA vice president Elliot Geisinger said, “According to the testimonials we received on Philippe, his advocacy is intelligent, he focuses on the real issues, he is never inflammatory, he avoids unnecessary discussion of peripheral matters, he has a clear case strategy which he successfully adapts to the facts of the case, and he has a realistic approach to the file.”

Gaillard and Yas Banifatemi were both driving forces in the launch of the Paris-based International Academy for Arbitration Law, a French Arbitration Committee initiative that offers advance teaching in international arbitration.

A Paris associate on secondment to Singapore is representing more than 50 civil parties in proceedings before a UN tribunal to prosecute key members of the Khmer Rouge regime led by Pol Pot.

The firm had to cope with a spectacular surge in hearings as 2010 and 2011 began, as a number of large cases hit the merits phase. Those hearings plus a wave of new instructions caused the hours billed for international arbitration to explode, it says. The new instructions included a matter for Areva against TVO over the construction of a nuclear power plant; a multi-jurisdictional case that had previously been assigned to Freshfields; and a US$5 billion arbitration in London arising from an M&A transaction. It also took on three new cases for Sonatrach, a trademark dispute between a major European fashion brand and an Asian textile company, and a trade secret dispute between European and US chemical companies (which has given rise to four arbitrations).

Issues the firm will be tackling on the new cases include – the interaction between EU law and investment treaties (a matter on which Gaillard has strong views); the responsibility of states for acts or failures to act during civil insurrection; windfall profit taxes; and fraudulent trademark registration.

As this edition of the GAR 100 went to press, news also broke that Venezuela had instructed Shearman & Sterling to represent it in three pending ICSID cases, brought by the UK’s Vestey Group, the US’s Koch Industries, and US bottle maker Owens Illinois.

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