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GAR 100 - 9th Edition

Freshfields Bruckhaus Deringer

18 February 2016

The practice seems in ferocious health even as it enters a new era

People in Who’s Who Legal

14

Pending cases as counsel

259

Value of pending counsel work

US$80 billion

Treaty cases

76

Current arbitrator appointments

38 (of which 16 are as sole or chair)

Lawyers sitting as arbitrator

15

Freshfields Bruckhaus Deringer topped every edition of the GAR 30 ranking between 2008 and 2014, only slipping to second place in last year’s edition.

How has it managed such a consistent run of success? Where did all of this work and all the people to do it come from? And why didn’t they congregate somewhere else?

A bit like the Beatles, Freshfields seems to have pulled off a clever trick: being both first into a new pursuit, and somehow “best”. Or at least the best so far. Because lately it seems that Freshfields’ easy dominance is less assured.

But first things first. Why is it accurate to call Freshfields the “first”? That requires a trip back to the 1970s, when two of the firm’s London partners, Alan Redfern and Martin Hunter, found themselves representing Kuwait in the Aminoil dispute, in which the US oil company sued the state over a construction project. It remains a leading public international law case.

The experience convinced Redfern and Hunter to pitch the idea that the firm treat international arbitration as a discrete skill set, fenced off from litigation. That in turn led them to propose to Jan Paulsson (a rising star of the Paris arbitration world who they’d met while working on Aminoil) that he join their project. A London–Paris connection would make sense, they all reasoned, as Paris was where all the action was.

“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 all joined forces,” remembers a person familiar with events.

So before most firms even had one partner “specialised” in this area, Freshfields had three – in charge of their own stand-alone international arbitration group.

The next 10 years saw strong growth, fuelled by a string of major cases (international arbitration and public international law) and by the gravitational pull of Paulsson’s reputation, which attracted young lawyers from around the world who were curious to try this “new and sexy” area of law. Freshfields became an unofficial university for international arbitration (ask many of the big names at other practices where they got their start and you’ll hear something like “in Paris, working for Jan”).

Paulsson also recruited the eminent Lucy Reed (from the US Department of State) as his co-chair.

Of course, Paulsson and Reed weren’t the only ones building a name for themselves in international arbitration during this period. But where they seem to have differed from their rivals at other firms was in their willingness not to micromanage. They didn’t insist on signing every brief (something a few big practices struggle with to this day). As a result, from 1999 onwards, an entire generation of homegrown international arbitration partners emerged (this may explain why Freshfields has had the largest contingent in GAR’s “45 Under 45” ranking of leading younger practitioners).

That was healthy, but it also meant that, by the early 2000s, the practice had a problem. It was very Paris-centric (in part because Paris lawyers had lower charge-out rates so clients wanted to go there), while all the opportunities (clients and underserved markets) seemed to be everywhere else (the US, the UK, the Middle East and Asia). The group tackled the issue head-on, moving some of its new names to those places.

So by 2012, Reed and Paulsson had together achieved what nobody else had – and built a network of international arbitration teams dotted around the world, all of them seemingly friendly and collaborating.

However, all good things must come to an end.

At this point, Paulsson was well past the Freshfields retirement age (he had remained thanks only to special consulting deals). In 2013, it was agreed that the time was right for him to part company from the practice that had accreted around him.

What happened next was interesting. Outside of soccer, few organisations can have spent so long talking about “succession”. The assumption was, therefore, that all would go to plan. But this was not quite the case.

In 2014, two people who were seen (at least by the rest of us) as a key part of the post-Paulsson era left the firm: Constantine Partasides and Georgios Petrochilos. Even worse: they left to join Jan Paulsson. The three, plus others, are now trading at their own shop – Three Crowns (also in the GAR 100).

To say it was a surprise is an understatement. Few GAR stories have ever received so many hits as the newsflash about Three Crowns. But is the interest justified? One would think a small, albeit Paulsson-led, competitor would not pose much of a threat, at least in the short term. Freshfields, even without these high-profile figures, has a 160-strong arbitration group, of whom 14 are highly regarded enough in their own right to be in GAR’s sister publication Who’s Who Legal: Arbitration.

What’s more, Three Crowns has made clear it doesn’t want to grow too large. So there ought to be room for both firms. Indeed, the space created at partner level at Freshfields may even be good news for some of the younger talent.

But at a symbolic level at least, the reverberations are being felt. If anyone had seemed like Paulssons-in-waiting, it was Partasides (as co-chair of the practice) and Petrochilos. For them to fall out of love with the Freshfields approach doesn’t look good.

And it’s led to some soul-searching (not just within Freshfields) about where the best place is for an international arbitration lawyer: at a big full-service firm, or at a hard-charging firm with a disputes “niche” (it turns out there are about the same number of arguments in favour of each).

Freshfields has responded sensibly, appointing Nigel Blackaby as the new co-head of the group. Blackaby, based in Washington, DC, has been with the firm for more than 20 years and has long been at the forefront of its Latin America-related investment treaty work. Another veteran partner, Nigel Rawding QC, has replaced Partasides as head of the London arbitration practice, which has been further strengthened by the relocation of Reza Mohtashami to London from Dubai. Meanwhile, Paris-based Ben Juratowitch has replaced Petrochilos as co-head of the public international law group.

A further sign that Freshfields is entering a new era came in early 2016 with the news that Lucy Reed is to retire from the partnership to take up an academic post in Singapore (where she has been based since 2014). She will, however, retain an exclusive senior consultant role with Freshfields alongside her full-time university role.

It’s still too early to say what the long-term effects of these departures will be. In the short term, though, there are no signs of a serious dent in the arbitration group’s prowess – at least judging by the run of good results in the past year, detailed below.

Network

The main locations for the international arbitration team are London, Paris, various German and Austrian offices, New York, Washington, Dubai, Hong Kong and Singapore. Madrid, Milan, Moscow, Rome and Amsterdam are more peripheral, but nevertheless play their part.

Who uses it?

As one might expect, the client list is a who’s who of states and global corporations. Of late, a lot have been energy companies. One reason for this is gas-pricing arbitrations, where the practice was one of the first to build a name in the area. Another reason is the team’s expertise in Africa – where more and more infrastructure and resources disputes are under way. Freshfields can now point to experiences in Nigeria, Kenya, Tanzania, South Africa and Madagascar, along with several Portuguese-speaking former colonies.

Clients (current and past) include Abertis, Alpiq, Anglo American, AstraZeneca, BG Group, Boeing Satellite Systems, BP, China National Offshore Oil Corporation, CMS Energy, ConocoPhillips, Credit Suisse, Crescent Petroleum, Danone Asia, Deutsche Bank, Dubailand, Electrabel, Eni, EVN, Maersk Oil, MTN Group, Marubeni Corporation, National Grid, Repsol, Rurelec, Shell, Siemens, Tata Group, Techint, Tiffany, Total and Tullow Oil.

The practice also represents governments, conflicts of interest allowing. Notable states that have instructed it include Cambodia (defending the state’s first ICSID matter), Chile, Guatemala (for whom it won and secured substantial legal costs), Grenada, Kenya, Romania, St Lucia, South Africa (on a case relating to black-empowerment policies), Tanzania, Turkey and Vietnam.

Lately it’s also been acting for state entities including Brazil’s national oil and gas company Petrobras (in a claim against Ecuador) and Oman’s State General Reserve Fund (in an ICSID case against Bulgaria).

Track record

Freshfields certainly has an illustrious record that began during the Paulsson era. A few of the greatest hits are:

  • the Megafon dispute, in which Freshfields turned around an initial loss in a Russian telecoms “war” into a much bigger victory, leading to the unseating of a Russian minister amid corruption allegations;
  • multiple wins for investors against Argentina in the wake of its financial crisis;
  • acting in the first investment treaty claim by a Japanese investor (Nomura v Czech Republic), obtaining a US$236 million settlement for the client;
  • the World Duty Free case at ICSID, in which Freshfields absolved Kenya from liability despite evidence that its then president had received a bribe; and
  • defending Turkey in three ICSID claims under the Energy Charter Treaty worth a combined US$17 billion.

In the last of the Turkey cases, Libananco, the firm stopped one of the largest ICSID claims ever filed at the jurisdictional stage, and also secured the largest costs award seen at ICSID (US$25 million). In addition, the team successfully defended Turkey in ancillary litigation before the European Court of Human Rights.

More recently the team has:

  • won the only investment treaty arbitration matter ever heard by the US Supreme Court (BG v Argentina);
  • obtained a US$2 billion award for ExxonMobil and Shell in a dispute with the Nigerian National Petroleum Corporation;
  • inflicted Bolivia’s first loss in an investment treaty case (US$29 million for UK power producer Rurelec) and negotiated the state’s highest-ever settlement with a foreign investor (US$357 million for Pan American Energy);
  • enabled the Karachaganak oil and gas field consortium to continue operating in Kazakhstan;
  • helped Repsol settle its YPF expropriation claim against Argentina for US$5 billion; and
  • defeated a US$300 million claim against Cambodia, winning the state over US$5 million in cost.

Recent events

As this book went to press, it was announced that Lucy Reed is to leave the partnership in April 2016 to become director of the Centre for International Law at the National University of Singapore. She was also recently elected a vice president of the SIAC Court.

There were a few departures in 2015, though none as seismic as the Three Crowns moves of the year before. Counsel Mark Mangan left the Singapore office to become a partner at Dechert. The head of the Russian disputes practice, Maxim Kulkov, left with his team to set up a new boutique in Moscow. Freshfields has since restaffed its Moscow office with a pair of senior associate hires.

The firm has been increasingly focused on developing its teams in Asia and the Middle East. Two arbitration-literate partners were promoted in the region in 2015: Nicholas Lingard, who divides his time between Singapore and Tokyo and has co-authored the first Japanese textbook on commercial arbitration; and Erin Miller Rankin in Dubai, who’s been acting on a number of large-scale construction disputes.

In early 2016, it also minted three new counsel: London-based Argentinian Jean-Paul Dechamps, Australian Kim Rosenberg in Dubai and Paris-based Shaparak Saleh.

Nigel Rawding in London was one of only three solicitor-advocates in England and Wales to be named Queen’s Counsel in 2016. Peter Turner in the Paris office also took silk a year earlier.

On the case front, the practice seems in great shape, particularly in Latin America-related work. It’s acting in 10 investment arbitrations against Venezuela, with claims worth a combined US$30 billion, and various cases against Argentina. It also continues to act for Conoco subsidiary Burlington Resources in a case against Ecuador (in which the state has introduced environmental counterclaims). There are also various commercial matters on its books relating to Brazil, Colombia and Ecuador.

The firm has brought in some very good results recently. A London and Dubai-based team helped the UAE’s Crescent Petroleum and Dana Gas win US$1.98 billion in an LCIA claim against the Kurdistan regional government of Iraq over payment for gas deliveries. (Three Crowns have been co-counselling on that one.) Around the same time, the team won an English Commercial Court ruling that Kurdistan couldn’t invoke sovereign immunity or its refugee crisis to evade compliance with an order to pay Dana Gas and Crescent Petroleum US$100 million.

In another eye-catching result, Freshfields helped a group of European water utilities including Suez, Vivendi and Anglian Water Group win US$405 million plus interest in a pair of ICSID and UNCITRAL claims against Argentina. It is now defending the awards against the state’s annulment efforts.

Meanwhile the firm helped pipeline operator Eastern Mediterranean Gas win US$324 million in an ICC claim against two Egyptian state entities over the termination of a gas supply agreement in the wake of the Arab Spring. The firm is also acting in two related treaty claims against Egypt brought by investors in EMG, as well as a Cairo-seated contract case.

There was also a landmark jurisdictional win on behalf of two Spanish-Venezuelan nationals bringing an UNCITRAL claim against Venezuela. It is thought to mark the first time a tribunal has allowed a dual national to bring an investment treaty claim against their country of nationality. The case concerns an investment in a food distribution business.

Another ICSID case saw the firm successfully defend an award in favour of Guatemala in annulment proceedings. The award dismissed claims by Spanish power company Iberdrola and granted the state US$5 million in costs.

On the commercial side of things, the firm helped a South African client, Econet Wireless, win US$132 million in a long-running shareholder dispute over the sale of a stake in a major Nigerian telecoms company. The Lagos-seated arbitration began in 2007 and involved four weeks of hearings and 21 respondents.

It also succeeded in overturning a US$450 million award against US jeweller Tiffany in the Dutch courts.

The firm obtained 18 major settlements in the past year. These included helping Tullow Oil settle an ICSID case against Uganda over capital gains tax, with the company agreeing to pay US$250 million to the state. The firm helped an international oil consortium settle a dispute with the Nigerian National Petroleum Corporation in May 2015, after winning a favourable ruling on liability. A Paris-lead team also helped Ukrainian oligarch Igor Kolomoisky settle an US$800 million LCIA dispute with his former business partner Victor Pinchuk over a ferroalloys venture.

Away from the coalface, members of the practice are also proud of their pro bono work. This includes assisting a London-based charity in providing legal aid to destitute asylum seekers, and appearing in US immigration cases. The firm is also acting for an AIDS charity in an arbitration.

Client comment

Amro Khaldoun Al Jayousi, assistant director in charge of legal at Dubai Properties Group, used Freshfields’ arbitration team on a dispute that he describes as a “10 out of 10” in importance.

Today, Al Jayousi says he is “very impressed” with the practice. The Freshfields lawyers he saw “shone far above the other side in etiquette manner and advocacy and were in command at all times.”

“They’re not cheap,” he says, “but the work product is worth so much more. I recommend them to colleagues and friends.”

Erick van Egeraat, the founder of (designed by) Erick van Egeraat, a leading architectural firm, had a similarly positive experience. He hired a Freshfields team for a dispute that he puts as a seven out of 10 in seriousness for his company. And when a certain “harmful document appeared entirely unexpectedly,” the Freshfields team wasn’t fazed. “They reviewed our options and agreed to go forcefully on the offensive,” he recalls.

That strategy “paid off wonderfully”. Throughout the entire proceeding “it was Freshfields that was in command.” Van Egeraat now would recommend the practice to a friend, and says he got value for money. “Actually,” he says, “we got more than we hoped for.”

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