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GAR 100 - 5th Edition

Covington & Burling

05 March 2012

2011 saw the firm’s claim for Perenco against Ecuador pass to the merits phase – but a win for ExxonMobil was seen by some as a hollow victory

People in Who’s Who:
4
Pending cases as counsel:
20
Value of pending counsel work:
US$15 billion
Treaty cases:
4
Current arbitrator appointments:
6 (of which 3 are as sole or chair)
No. of lawyers sitting as arbitrator:
3

In 1919, when Covington & Burling opened, one of its first clients was Norway, in an arbitration with the United States at The Hague. Edward Burling and Dean Acheson, soon to be US Secretary of State, won their client a then-enormous payout of US$12 million. The Norwegian Shipowners case is still taught in law schools.

The PIL work continued in the 1930s and 1940s when Acheson, back with the firm again after his time in government, won a boundary dispute for Cambodia against Thailand.

During the 1960s and 1970s, the firm cemented its reputation for pro bono work and began to expand the partnership. It opened in London and Brussels in the late 1980s and early 1990s, largely for insurance and life-sciences work. The international arbitration practice, however, continued to have its centre of gravity in Washington, DC.

In the 1990s and early 2000s, the firm became one of the first US practices to handle major international disputes on a regular basis. As well as offering legal advice, it seeks to provides a holistic service that includes discussion of diplomatic alternatives to legal processes, provided by ex-ambassador of counsel. When GAR began in 2005, Covington was one for the few DC players with a pre-existing reputation in commercial and investment arbitration.

That reputation was boosted when ExxonMobil turned to it for parallel ICSID and ICC claims against Venezuela after the Chávez government expropriated its assets in the Orinoco Belt. More recently, the firm has been tapped by BP for insurance matters arising from the Gulf of Mexico oil spill and by Spanish investors in Yukos Oil Company for an SCC claim against Russia.

Around three years ago, the group branched into Europe with a pair of significant lateral hires in London. Those added included Stephen Bond, former head of White & Case’s arbitration team in Paris, and Gaëtan Verhoosel, a well-regarded member of the Debevoise & Plimpton European arbitration group. Verhoosel now co-chairs the international arbitration group alongside Allan Moore and Thomas Johnson in Washington, DC.

Network

The firm has five US offices and operations in London, Brussels and Beijing.

Who uses it?

As well as ExxonMobil, the practice has worked for Occidental Petroleum (and its exploration arm); Perenco Ecuador Ltd; Norfolk Southern; Kokums AB; Newmont Mining; Merck AG; and Sumitomo. It has also represented the Republic of Jordan in a fractious ICSID proceeding. Lately, US media group Emmis has turned to it for a treaty claim against Hungary.

Track record

The case for Jordan panned out well. Although the claimant, a Turkish construction company, contested the meaning of the award on the merits, a subsequent interpretation and costs award were in Jordan’s favour.

But ExxonMobil’s ICSID case against Venezuela hasn’t gone so smoothly. The arbitrators have agreed the case can proceed, but excluded claims that predated a 2006 restructuring, significantly lowering the amount of damages that can be claimed. On the other hand, ExxonMobil could still win as much as US$10 billion. The company’s parallel ICC claim also concluded in early 2012 with mixed results (see “Recent events”, below).

The firm can be proud of its work for the Spanish investors who lost money in Yukos. It persuaded a panel consisting of Jan Paulsson, Charles Brower and Toby Landau QC to let part of a “test” case against the Russian government proceed. Although it does so again short of parts of the original claim, commentators noted that the arbitrators were persuaded to go against the run of previous decisions on a key jurisdictional point.

On top of that, a few years ago Covington & Burling won US$500 million for Merck & Co in a dispute about the withdrawal of its painkiller, Vioxx, with the company’s insurers.

Recent events

In March 2011, Gaëtan Verhoosel was named third co-chair of Covington & Burling’s international arbitration group. He was also named president of a newly established UK chapter of the Spanish Arbitration Club. In August, he was included in GAR’s “45 under 45”, a list of leading practitioners in the younger arbitration bar.

The firm promoted Argentine special counsel Miguel López Forastier to partner in late 2011.

The Perenco v Ecuador case took an unusual turn in June 2011. The tribunal upheld jurisdiction over claims brought by Covington’s client, a Bahamian subsidiary, under two oil contracts – but it put off a decision on whether the company could also invoke the France-Ecuador BIT. The arbitrators have asked the French government to shed light on the treaty’s negotiating history.

ExxonMobil’s ICC case against Venezuelan state oil entity PDVSA concluded in early 2012 with a win for Covington’s client – but the final sum fell well short of the US$7 billion it was asking for. The tribunal awarded Exxon US$908 million – but after various deductions and counterclaims, PDVSA says the final payout will be more like US$250 million. It remains to be seen what effect this will have on Exxon’s ICSID case.

The firm also picked up a new instruction from a US media group and two private equity funds concerning an investment dispute with Hungary over radio licences.

In the sports arena, partner Eugene Gulland in Washington, DC, was retained by Qatari football official Mohammed bin Hammam to help contest his lifetime ban from national and international football. The case will go to the Court of Arbitration for Sport in March 2012.

As this book was going to press, GAR learned that practice co-chair Thomas Johnson in Washington, DC, has been picked by President Obama to sit as a judge at the Iran-US claims Tribunal at The Hague. He leaves Covington at the end of March 2012 after 37 years at the firm. Partner Eugene Gulland in Washington, DC, will take over as practice chair.

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