Shearman & Sterling

The Yukos matter went to “trial”, but a long-standing member of the team resigned.

Shearman & Sterling’s huge name for international arbitration all started in the mid-1980s, when Emmanuel Gaillard joined from Bredin Prat. Originally hired for litigation, Gaillard opted to focus on international arbitration, which he’d handled a few times for Algeria’s Sonatrach, thus making Shearman & Sterling one of the first firms to devote itself to the area (along with Gide Loyrette Nouel, Coudert Brothers and soon Freshfields).

The gamble paid off. In 1992, Gaillard landed two huge cases – a billion-dollar construction dispute and eight arbitrations for an energy firm – which gave the practice a boost. The burgeoning team then appeared on a series of seminal cases in the late 1990s and early 2000s, becoming prominent in the (then) new area of investment arbitration.

In 1998, the team acted for a British investor against Egypt in the Wena Hotels case, defeating Freshfields and winning US$20 million. It then blocked Egypt’s annulment request too. Wena is often credited as the first significant ICSID case of the modern 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 emerged in their own right. The most obvious was Philippe Pinsolle, Gaillard’s first associate (and, some think, a future leader of the Paris Bar) – but he recently left the practice. Todd Wetmore, who joined in 1995 and focuses on projects and technical disputes, and Yas Banifatemi, recruited in 1997, who co-developed the firm’s investment arbitration practice, are big names in their specialist areas.

Nowadays, Gaillard is a totemic figure and his team, in Paris, consists of 55 lawyers who work full-time on international arbitration – probably the largest single concentration anywhere. It enjoys the pick of the recruitment market and is one of those firms that at times serves as an unofficial university of arbitration – numerous arbitration partners trace their start in the business to there.

Towards the tail end of the 1990s, the practice began to branch out from Paris. It hired the head of Jones Day’s international arbitration group, Richard Kreindler, in Germany. In 2002, it ventured into the Asia-Pacific region. It has also created a Spanish-language arbitration team, built around former Garrigues partner Fernando Mantilla-Serrano, a Colombian national.

More recently the US part of the practice has begun to show signs of life – with more partners working on cases and some good results.

Not all the forays into new cities have worked – London was a false start and Singapore is now without a partner in charge of Asian work. But nevertheless it continues to be ambitious – London is due to get new people this year, and the practice is minting sub-practice areas (in projects and IP).

Despite these structural issues, Shearman & Sterling is considered by many the class of the current field; even more than Freshfields, it has earned a reputation as the place to go when defeat would be intolerable – the proverbial “bet the company” case.

Who uses it?

Sonatrach, Total, EDF, Thales, Areva and Rhodia are all regular clients, as are the Dow Chemical Company, Enka, ABB, General Electric, Credit Suisse First Boston, Enka, Orascom, Linde, Daimler Chrysler and IPIC.

Interestingly, instructions from states have recently picked up. Lithuania, Egypt, Algeria, Venezuela and El Salvador have all retained it.

Then there’s Yukos. Shearman & Sterling is bringing the US$114 billion dollar claim by former shareholders of the oil company against Russia. It’s 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 coincidence.

As well as the Wena Hotels victory, in 2004, Gaillard and co reversed the result in Malaysian Historical Salvors after taking the case over at the annulment phase.

In Yukos, the team won the vital first round – on jurisdiction and admissibility. It managed to persuade the tribunal that Russia is bound by a treaty it had never actually ratified.

In 2012, the team won the first round in SAUR International v Argentina, persuading the tribunal to uphold jurisdiction. The panel is now considering damages which could be up to US$140 million.

It also won US$2.16 billion for Dow Chemical in an ICC dispute over the collapse of a joint venture with a Kuwaiti state-owned petrochemicals company (King & Spalding was co-counsel on that case). A number of the firm’s US arbitration names worked on the case.

Another ICC matter saw Shearman help Areva win an early round of its €2 billion dispute with Finnish power utility TVO. The panel ordered TVO to pay Areva and co-claimant Siemens (represented by Baker & McKenzie) €125 million – but the bulk of the case has yet to be decided.

Recent events

The firm picked up some new instructions in 2012. It is defending Algeria in two new investment treaty claims relating to the long-running battle for control of local mobile operator Djezzy. The first is an UNCITRAL claim brought by Egypt’s Orascom Telecom; the second is at ICSID, where a Luxembourg company owned by Egyptian magnate Naguib Sawiris is seeking US$5 billion.

Alongside Cleary Gottlieb, Shearman is defending EDF against a €2 billion ICC claim over the sale of its stake in a power utility to the southern German state of Baden-Württemberg.

It’s also helping Lithuania bring a US$2 billion gas price review arbitration against Russia’s Gazprom at the Stockholm Chamber of Commerce – after a separate SCC tribunal told the Lithuanian energy ministry it couldn’t pursue such a review in its own courts.

Otherwise, much of the year was spent building up to the Yukos hearing. It took place amid great pomp over five weeks in the autumn.

On the personnel front, the big news in 2012 was the departure of Philippe Pinsolle for the new Paris office of US firm Quinn Emanuel Urquhart & Sullivan. It is unclear what the full impact of that will be; to say Pinsolle was highly regarded is an understatement (one source recently described him to GAR as “the Jan Paulsson of his generation”).

In Singapore, the firm bid adieu to counsel Yu-Jin Tay. He’d been with the firm for 11 years and was a key member of its Asian arbitration team. He’s left to become co-chair of international arbitration at DLA Piper in Singapore.

Meanwhile in London, partner David Reed left for Arnold & Porter. He’d been a key part of Shearman’s efforts to build a London practice, having relocated from Paris in 2005.

Katia Yannaca-Small, a public international law specialist and former senior counsel at ICSID, joined the Washington, DC, office as counsel.

The group enjoyed a second year of success in partner elections. Christopher Ryan was promoted in DC in 2011 and Alexander Bevan from the London office was promoted in May last year. Bevan will relocate to Abu Dhabi and will focus on construction and projects disputes.

The group launched two sub-practices: projects (led by Todd Wetmore) and IP (led by Mark McNeill).

Last, but not least, the team helped launch a fantastic new website about the New York Convention: www.newyorkconvention1958.org. It’s well worth a look.