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GAR 100 - 5th Edition

Freshfields Bruckhaus Deringer

05 March 2012

No other firm invests so much in international arbitration

People in Who’s Who:
14
Pending cases as counsel:
260
Value of pending counsel work:
US$80 billion*
Treaty cases:
71
Current arbitrator appointments:
87 (of which 61 is as sole or chair)
No. of lawyers sitting as arbitrator:
25
* includes ConocoPhillips v Venezuela

If any firm is a pioneer in international arbitration, it is Freshfields Bruckhaus Deringer.

Tracing its origins to 1743, the modern firm came into being in 2000 when Bruckhaus Westrick Heller Löber merged with the recently coupled Freshfields and Deringer Tessin Herrmann & Sedemund firms.

However, its international arbitration roots go back to the 1970s, when partners Alan Redfern and Martin Hunter became part of the Aminoil case. The government of Kuwait was sued by Aminoil over a construction project, in what became a leading case in public international law.

The partners later proposed to management that it would make sense for international arbitration be recognised as a discrete skill set, unrelated for the most part to domestic litigation. (The connection with Redfern and Hunter remained even after they moved to the English Bar, through the eponymous book, Redfern & Hunter. Two of the firm’s younger international arbitration stars, Nigel Blackaby and Constantine Partasides, co-edited the most recent edition.)

While working on Aminoil, Redfern and Hunter met a rising star of the Paris scene, Jan Paulsson. London was emerging as a major commercial and financial centre, but Paris was the home of international arbitration, thanks to the presence of the ICC. “Alan and Martin liked the tale of two cities and Jan liked the two of them, so by the end of the 1980s they had joined forces to extend the London-based international arbitration practice to Paris,” a person familiar with the situation recalls.

In an era when few firms had even one partner covering international arbitration full-time, Freshfields had three.

Over the next 10 years the group grew steadily, helped by a string of major cases – many for the government of Kenya – and the supernova of Paulsson’s reputation, in the process becoming something of a university of arbitration. Many of the heads of international arbitration at rival firms today got their start at Freshfields Bruckhaus Deringer in Paris.

Legend has it the Paris team even put together an investment arbitration claim around 1994, a decade before it became the vogue. (It’s sometimes forgotten that many were openly sceptical of the value of BITs to business in that era, and expropriation had a precise meaning: “They haven’t been expropriated!” snorted one London partner (not at Freshfields) after a hopeful client had just visited to complain about the difficult situation his foreign subsidiary was in.) The target of those early treaty claims? Russia.

The group also branched into the US – recruiting the eminent Lucy Reed, who had been a senior lawyer at the US Department of State (today she co-leads the practice).

However, when the decade closed, although the group was in a pre-eminent position in London, Paris and New York, there were rumours that some of its offices were competing for clients.

In the 2000s, the group tackled those sorts of issues and placed the offices on a more equal-footing in terms of talent, with a bit of reshuffling. During that time, some of the big names moved away from Paris.

But the years spent in one office perhaps, plus the fact that so many of the firm’s bigger matters now float across several offices, mean that the group nowadays has a reputation as one of the more harmonious and close-knit. It likes to think that it has almost transcended offices and become a virtual organisation. At the same time, however, its leadership has written that “clients can and do come from everywhere” – so it is continuing to seek critical mass in more places.

The most recent era has seen – as well as increased litigation about arbitration in the US – the group branching out into the Middle East and starting to strengthen in Asia (though it remains early days) as well creating some sub-practices. Those include a gas price review disputes group; a Spanish language practice group; and a construction arbitration practice. It launched a Portuguese-language practice group at the ICCA meeting in Rio de Janeiro.

Meanwhile, the US group has become one of the largest in the country.

From the outset, the group’s leaders have emphasised the need to study and write and grow as a practitioner, away from client work, and younger members of the team are expected to do all those things. The firm itself produces two helpful handbooks – The Freshfields Guide to International Arbitration, and The ICSID Guide. It also sponsors the School of International Arbitration’s annual lecture, which has come to be known by most as “The Freshfields Lecture”.

Network

As described, the bigger offices for the international arbitration team are London, Paris, New York, Washington, DC, Dubai, Bahrain and Hong Kong – but Cologne, Düsseldorf, Frankfurt, Madrid, Milan, Moscow, Rome and Vienna also all have people with a reputation in the field.

Who uses it?

Kenya, Tanzania, South Africa, Cambodia, Grenada, Guatemala and Turkey all like using Freshfields. South Africa retained Freshfields for a claim related to black-empowerment policies.

Corporations that instructed it regularly include CMS Energy; ConocoPhillips and subsidiaries; BG Group; AztraZeneca; National Grid; Boeing Satellite Systems; BP; Danone Asia; Deutsche Bahn; Deutsche Bank; Emaar Properties; ENI; ETECSA (the national telephone company of Cuba); MTN Group; Petrobras and subsidiaries; Siemens; and Total.

Track record

Long – and illustrious, as you might expect. It used to be said that Jan Paulsson had never lost a case. True or not, innumerable firms have cause to be happy after they chose Freshfields to be their international arbitration counsel. Two obvious examples are Boeing and BP.

Between 2004 and 2008, the firm helped Boeing avoid all liability to a group of insurers over a lost satellite. The satellite – in its pomp – had been the biggest and most expensive put into space. After four years of arbitration, a US$300 million claim was dismissed. Boeing also received US$15 million in indemnity costs.

Around the same time, it was also helping BP get back on its feet over a project in Algeria. A local partner had withheld hydrocarbons because targets hadn’t been hit. Freshfields persuaded arbitrators that the issue was “unexpected reservoir reactions” letting BP avoid a minimum production profile and get back it’s full entitlement.

However, both of those pale in comparison against the rip-roaring yarn of Megafon. In that, the firm engineered a dramatic turnaround that ensured its client could keep hold of Russia’s third-largest telecoms company. After losing round one (an arbitration in Geneva), the team managed to cancel that result (after producing evidence of wrongdoing by the Russian telecoms minister for the Swiss courts). It went on to win rounds two and three, enriching the client considerably. The saga culminated in Freshfields helping to have the opponent put into liquidation and wound up in Bermuda, using anti-money laundering rules.

The group has also proved something of a machine in BIT disputes – notching up six wins to date against Argentina in claims arising from the state’s financial crisis. (In three other cases, tribunals have already ruled on Argentina’s liability but have yet to decide the damages.) Those six wins include the first award to survive the annulment process (CMS) to date and also the largest ($185 million plus interest, for BG Group), although a problem has arisen there.

The firm’s been no less successful on the defence side. In 2008 it became the first defence team to stop an ICSID case on the grounds of offence to public policy (rather than the more usual lack of jurisdiction). In World Duty Free v Kenya, the battle line became whether a corrupt payment (which, curiously, was disclosed by the claimant early on) could be considered part of the bargain, or else a local norm.

Freshfields argued “no” on policy grounds – and the arbitrators agreed.

More recently, it stopped three weighty cases against Turkey dead in their tracks, also getting Turkey back some of its defence costs.

Recent events

The firm promoted Sylvia Noury – a GAR editorial board member – to the partnership in mid-2011. It also hired three German partners who focus on the area: Boris Kasolowsky in Frankfurt, Roman Mallmann in Cologne and Michael Rohls in Munich.

Responding to an increase in work in the Middle East and Asia, it also relocated partner Jonathan Rawlings to Dubai. Rawlings will help to turn the practice built up by Reza Mohtashami (also a GAR editorial board member).

Meanwhile, in Moscow, the firm laterally recruited Maxim Kulkov as counsel to restore its strength after the loss of a senior associate.

Meanwhile, spurred on by the policy of self-development, members of the practice spoke at an amazing 76 arbitration events.

Lucy Reed was elected to the LCIA court, and Jan Paulsson became president of ICCA.

Massimo Benedettelli in Milan was nominated as a member of the International Law Commission’s international committee on international commercial arbitration.

And in a testament to the fertile atmosphere that still prevails, four members of the practice – Noury, Mohtashami, Georgios Petrochilos and Noah Rubins – were selected for the new GAR “45 under 45”, giving Freshfields largest firm representation of any firm (repeating a trick from the first edition of the “45 under 45”).

The firm hit an unprecedented number of treaty instructions – 71 – in late September 2011, of which 43 are active and 28 in the advisory stage.

It also continues to rapidly accumulate experience before the US courts on enforcement and costs issues: defending various Argentina awards (plus another costs matter) from challenges. Although most of the time these occasions go off smoothly (Argentina has been knocked back by the US Supreme Court in one case), there was a recent blip. In January 2012, an appeals court in Washington, DC, set aside the US$185 million award for BG over the arbitrator’s failure to respect a BIT provision requiring claimants to pursue 18 months of litigation in the Argentine courts before bringing an arbitration claim.

In September 2011, a Freshfields team defeated a US$10 billion Energy Charter Treaty claim by Libananco Holdings – one of a cluster of ICSID claims relating to the Turkish government’s feud with the Uzan family. The five-year case also has the distinction of being the most expensive case in the centre’s history – costs on both sides totalled US$60 million.

The group’s members had their usual cosmopolitan year; asked to select some high points, answers ranged from dancing the night away in Athens to meeting presidents (an occupational hazard when working for FBD).

Client comment

Jason Doughty, deputy general counsel at ConocoPhillips in Houston, told us that the firm’s “written and oral advocacy was superb” when he used the team, singling out Jan Paulsson, Lucy Reed, Brian King and Alex Yanos for doing “a brilliant job”. Doughty concludes, “Freshfields are expensive, but I feel that we did receive value for money.”

Jonathan Neal, a legal manager for BP International, said he was “impressed on many fronts by the Freshfields team.”

In particular, he highlighted “their depth of legal knowledge, industry experience, attention to detail and rigorous case preparation”. He was particularly impressed by Constantine Partasides, who “understands the need to stick to the budget”, and Shaparak Saleh in Paris, “who is very intelligent and commercially astute.”

Meanwhile, Charles Wheeler of mobile phone operator MTN is using the firm for a number of disputes and says “the team has put together persuasive pleadings and handled difficult settlement negotiations well.” Sylvia Noury, Nigel Rawding and Reza Mohtashami “combine top-notch legal minds with cultural and commercial awareness, fielding a team that speaks the languages – both literally and figuratively – of the emerging market jurisdictions where our disputes arise,” he says.

And a client from Asia said that the firm had “solid experience and good understanding of business practice in China” and was “very responsive and client-oriented.”

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