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GAR 100 - 9th Edition

Herbert Smith Freehills

18 February 2016

Despite a senior departure in London, the practice is bigger and busier than ever

People in Who’s Who Legal: 15
Pending cases as counsel: 123
Value of pending counsel work: US$121 billion
Treaty cases: 10
Current arbitrator appointments: 30 (of which 22 are as sole or chair)
Lawyers sitting as arbitrator: 16

This firm was born of a 2012 merger between Freehills, one of the “Big Six” Australian law firms, and London-based Herbert Smith. Of the two, the latter was the better known for international arbitration, though Freehills has added more energy and natural resources expertise into the mix.

Herbert Smith was unique among London firms in that it initially built its reputation through dispute resolution. The firm pioneered the idea that a solicitor could offer value when most others simply farmed cases out to the English Bar. When it became clear that international arbitration was on the rise, the firm went out and recruited one of the few UK lawyers with a name in the field: Julian Lew (now QC), who joined from Coudert Brothers.

Lew duly taught the firm’s senior litigators how to handle international arbitrations. He also brought through a generation of younger lawyers (a role he later institutionalised by founding the School of International Arbitration at Queen Mary, University of London). Many of Lew’s protégés have emerged as leaders in the field, at Herbert Smith Freehills and elsewhere.

Despite that early step, Herbert Smith resisted the temptation to carve out international arbitration completely from its huge litigation group – a fact that became a bone of contention by the time some of Lew’s protégés had grown up and were champing at the bit. When Lew left to become a barrister in 2005, the firm finally created such a group. In doing so, it made London and Paris one in accounting terms for the purposes of arbitration – they book to the same profit centre – sidestepping problems that other firms had had with internal rivalry.

Nowadays, Herbert Smith Freehills’ commercial arbitration group is a force to be reckoned with. The firm has also grown a strong reputation in public international law and investment treaty arbitration, increasingly acting for sovereign states in intergovernmental negotiations and boundary and treaty disputes.

Possibly on the back of a high-profile win for the Malaysian government in 2014 (see “Track record”), the practice has seen an influx of high-value work recently. Its portfolio of pending counsel work has risen to US$121 billion – almost six times the figure it reported last year. This includes a single case worth more than US$80 billion, as well as several claims worth over US$5 billion each.

For a long time, the firm has had one of the strongest networks of any UK practice in Asia, where it has enjoyed a much stronger brand for international arbitration than at headquarters. That endures thanks to a spine of partners with arbitration experience across the region including in Japan, China, Hong Kong, Singapore and Seoul. Indeed, the firm’s global head of dispute resolution, Justin D’Agostino, resides in Hong Kong.

The team has also expanded into the Americas. It lured back partner Larry Shore in 2013 (a former head of the arbitration group who had defected to Gibson Dunn & Crutcher for a time) to staff a new office in New York. In 2015, partner Christian Leathley relocated to New York, where he’s developing the firm’s Latin America practice.

The international arbitration practice is headed by Paula Hodges QC in London, who is also vice president of the LCIA’s board of directors. Other names to know include Isabelle Michou in Paris, Brenda Horrigan in Shanghai and Bronwyn Lincoln in Melbourne.

Network

In Europe, the main offices for arbitration are London, Paris, Madrid, Moscow, Frankfurt and now Düsseldorf. In Asia, the key cities are Beijing, Shanghai, Hong Kong, Singapore, Tokyo, Bangkok, Jakarta and, to a lesser extent, Seoul. There are also arbitration practitioners in New York, Dubai, Melbourne, Sydney, Perth and Brisbane, while a new Johannesburg office opened in 2015, giving the firm its first office in Africa.

Who uses it?

Spain is using it to defend two large matters under the Energy Charter Treaty concerning cuts to solar energy subsidies. Other state clients include Tunisia, Malaysia and the US Department of Justice (in a softwood lumber matter against Canada that was the first state-to-state dispute under LCIA rules). It also advises China’s state-run oil company Sinopec, and the Chinese ministry of commerce.

On the corporate side, ICSID clients include Standard Chartered Bank (for a long-running dispute in Tanzania), water utility Tallinna Vesi (for a claim against Estonia); and voucher company Le Chèque Déjeuner (against Hungary).

Some other clients are Eurotunnel, Stagecoach, RWE Group, IBM, Mitsubishi Heavy Industries, Rio Tinto, BP, BHP Billiton, Chevron Texaco, AkzoNobel, Eni, EDF, GDF Suez, Huawei, Itochu and Premier Oil.

Track record

Though most of its wins aren’t public, the group achieved a spectacular victory for Malaysia in a sensitive public international law dispute with Singapore at the Permanent Court of Arbitration in The Hague. The case concerned a billion-dollar development charge on land formerly occupied by Malayan Railways.

It had a great win for Eurotunnel in the Sangatte dispute a few years ago over asylum seekers. Although the compensation was only medium-sized, the case took place in a febrile atmosphere and had a number of unusual elements, not least a five-member arbitral tribunal.

In Asia, the firm emerged on the winning side of Grand Pacific Holdings a landmark case on enforcement in Hong Kong. That same case also helped to determine Hong Kong law that parties who challenge awards unsuccessfully will generally be ordered to pay indemnity costs.

It helped Kuwaiti telecoms firm Wataniya defend its position in a Tunisian joint venture – an award worth at least US$1 billion – and helped BP and Rio Tinto defeat an unusual ICSID claim brought by an Indonesian provincial government about operations in Borneo.

In Australia, it obtained freezing orders worth more than US$700 million for a client in aid of an arbitration in Switzerland – the first time Australian courts had made such orders for a wholly foreign arbitration.

Recent events

The big departure of 2015 was London partner Matthew Weiniger QC, who left after 21 years with the firm to become co-head of international arbitration at Linklaters. Weiniger had been prominent in much of the firm’s investment treaty and public international law work. In Beijing, counsel Arthur Ma left to join DaHui Lawyers as a partner.

The practice gained a presence in Düsseldorf with the hire of former Clifford Chance partner Thomas Weimann. It promoted two new partners in Tokyo, Elaine Wong and Christopher Hunt. Partner Chris Parker relocated from New York to London, while London partner Andrew Cannon moved to Paris.

In Hong Kong, D’Agostino was part of a committee that produced a long-awaited report recommending reforms to allow third-party funding of arbitration in Hong Kong.

On the work front, the firm helped Sinopec settle an LCIA dispute with Russia’s Lukoil over the purchase of a US$1.1 billion stake in a Kazakh hydrocarbons producer.

New instructions came from German private equity fund Axos Capital Partners in the first ever ICSID case against Kosovo, relating to a failed privatisation in the telecoms industry. The claim is valued at €180 million. It’s also been advising London-listed Vedanta Resources in a potential treaty claim against India over a US$3.29 billion tax demand.

In the Hong Kong Court of Appeal, the firm defeated a challenge to the constitutionality of sections of the special administrative region’s arbitration ordinance.

It won a significant enforcement victory for Marriott International Hotels in the French courts, in a decision that clarified French case law on the standard of judicial review of awards on admissibility.

Client comment

Mining group BHP Billiton has used the firm on a range of international arbitration-related matters and development of major projects. “We have been impressed by their ability to give clear and deliberate advice based on complex fact patterns with lots of grey areas,” says in-house counsel Alistair Warren. Their advice “demonstrates a profound understanding of the company’s commercial priorities”. He says partner Leon Chung is “always very responsive”, while Christian Leathley has shown “a strong understanding of pre-arbitration strategy.”

Stephane Harmand, vice president of legal and compliance at Volvo Group Trucks Sales & Marketing in Japan, describes Herbert Smith Freehills as “a class act” that is “head and shoulders above the competition for arbitration work in the Asia–Pacific region”. He adds: “Their Asia practice, led by Peter Godwin in Tokyo, combines technical excellence with a deep understanding of our business,” he says. And while Herbert Smith Freehill’s “pre-eminent service” comes at a price, Harmand notes that it is worth every dollar, because it goes far beyond pure legal advice; the firm is also a trusted business adviser.

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