Diary news, commentary, insights, appointments and arts from the legal world
August 12 2022 Editorial Contact: fennell.edward@edward-fennell
SHORT THOUGHT FOR THE WEEK: ‘The Immortal Part of Myself‘
As reported below, the CityUK has acknowledged this week that “The UK’s strong and independent judiciary and reputation as a centre for legal excellence attracts business.” And it remains true, as Shakespeare said in Othello, that ‘Reputation is the immortal part of myself’.
For that reputation to be maintained it needs to be secured and protected by Government and for the conduct of lawyers and Government alike to be beyond reproach. Cases like that of rip-off solicitor Timothy Schools, convicted yesterday for his abuse of ‘ATM Law’, chip away at the reputation of the profession with the public while cavalier conduct by the Government over international law endanger the esteem in which the British legal establishment is held. It may be a good time to remind ourselves that there is no room for complacency over either.
In this week’s edition
+ LEGAL DIARY OF THE WEEK
– Profits of Doom
– Fit for the Future at Kennedys
– CityUK: Likely to be disappointed
– Turning ‘Red Tape’ Blue
+ CONTRIBUTED ARTICLE OF THE WEEK
THE OVERSEAS ENTITIES REGISTER: TOO MUCH A SCATTER-GUN? asks JOHN BINNS
+ LEGAL COMMENTARY OF THE WEEK on the big legal row in golf and the risks of ‘no win, no fee’ litigation
+ APPOINTMENTS OF THE WEEK at Eversheds Sutherland and Davitt Jones Bould
LEGAL DIARY OF THE WEEK
Profits of Doom
Despite what seem like lottery-win salaries recently for partners in Magic Circle and associated law firms it seems that the profitability of firms generally is in decline. That’s the story anyway from The Thomson Reuters Law Firm Financial Index (LFFI) which has dropped for the fourth quarter in a row ‘marking the longest consecutive slide in the history of the index’.
In other words there are – as usual – two different stories running at the same time with the top firms seemingly doing better and being busier than ever while the rest of the market starts to flounder. So while across all practice areas demand saw a 0.5% annual decrease compared to Q2 2021 there are variations. For example, the post-Covid period meant that bankruptcy lawyers saw a significant drop in demand for their services (down 11.2%) while M&A fell 4.9% year-on-year. By contrast real estate was up 2.5% since last year (although the latest indications from the RICSare that this will quickly go into reverse – ‘Sales are already falling fast’.)
Other factors are also at work including notably the costs of technology and rising salaries – so it is no surprise that profitability is squeezed.
“Last year’s tailwinds have turned into this year’s headwinds,” said Mike Abbott, Head of the Thomson Reuters Institute. “Demand was inevitably going to drop following two years of exceptionally high growth. This combined with rising expenses, have dented profitability amongst law firms. In addition to the current inflationary economic environment, law firms are still having to grapple with issues stemming from the return to the office and hybrid working. The tight labour market has forced firms to increase compensation at associate level, in order to attract and retain the brightest talent. However, there are signs that this growth may be beginning to slow down.”
In truth it may be that everything is starting to slow down.
Fit for the Future at Kennedys
Change is the unchanging story at every dynamic law firm and maybe the circumstances of the last five years have accelerated the pace significantly. Which might explain why Kennedys is now appointing its first director of transformation (A ‘Transformation Tsar’?) to oversee a programme of business improvements.
The woman given the job is former Hogan Lovells partner Karen Peskett-Hall who, as the announcement puts it, ‘will be responsible for the successful delivery of projects across the Kennedys network, which employs more than 2,400 people in 44 offices worldwide’.
It’s a big role to fill especially at a time when the firm is planning major office moves in both London (into the Walkie Talkie) and Sydney. A key focus will be innovations to the firm’s WorkWise programme which will see investment to update the physical working environments as well as technology and people policies to ‘transform how colleagues think about how and where they work’. There will also be an emphasis on legal processing improvements.
“This is another step on our journey to create a future-fit workplace that both colleagues and clients can be proud of,” said Suzanne Liversidge, Kennedys’ global managing partner. “While the pandemic accelerated some of our improvement plans, in such a large business it is an ongoing process and Karen has a huge amount of experience in this area which will be a valuable asset moving forward. [Her] appointment just underscores our commitment to continuous improvement and elite performance.”
CITY UK – Likely to be disappointed?
It is probably not too controversial to suggest that the knock-about contest to get to No. 10 has not given over much time to mature reflection about the width of challenges the country is facing. Nonetheless from the sidelines a variety of interested parties has been trying to draw the candidates’ attention to issues other than tax. Amongst these has been CityUK which this week published its list of priority areas that the successful candidate (i.e presumably Liz Truss) should focus on.
Under the heading ‘Maintain and Enhance the UK’s Competitiveness’ CityUK has highlighted – and thank heaven someone has! – the importance of our legal system. “Continue to innovate and ensure the UK remains the jurisdiction of choice for international legal services and dispute resolution,” it says and then goes on to add, “The UK’s strong and independent judiciary and reputation as a centre for legal excellence attracts business. There should be strong and unambiguous support for the UK’s Rule of Law to secure this national advantage.”
Whether this will have much resonance with both candidates remains questionable. Mind you, CityUK might have slightly more success with one of their other recommendations that the new PM should ‘deliver the Financial Services and Markets Bill as soon as possible, ensuring that it preserves the day-to-day supervisory independence of the financial regulators while also providing them with a new secondary objective – accompanies by a clear set of KPIs – on economic growth and international competitiveness and ensuring that the government and Parliament can exercise appropriate oversight of their rule-making activities.” Well, it’s a hope anyway.
Turning ‘Red tape’ Blue
The CityUK is not the only body scrutinising regulation in the run-up to choosing the new PM. The think tank Policy Exchange has just published a new report arguing that the United Kingdom has a ‘unique opportunity to streamline and modernise regulation’ to deliver the high environmental and social standards citizens desire, while also giving the British economy the competitive edge it needs in the post-Brexit age. That might sound like ‘cakeism’ but others, no doubt, would call it ‘making Brexit Work – a mystery still to be solved’.
Anyway it consists in three elements:
“ONE: Streamlining the regulatory system to focus on outcomes, not process: A call for fewer, more authoritative regulators, with clear mandates, accountable to Government and Parliament, for promoting the health assuring the hygiene of their sectors, judged on impact not process, including through regular independent review by the National Audit Office.
TWO: Collaboration and triaging to target regulators’ interventions and cut red tape: Regulators should be required to collaborate with each other and with international counterparts to triage their interventions to minimise the regulatory burden on compliant individuals and institutions, support and coach the inadvertently non-compliant (especially SMEs), while putting most effort into tackling the deliberately abusive.
THREE: Ensuring regulation is responsive to evidence of success and failure: Regulators should be dynamic and responsive, establishing feedback loops and internal challenge, while drawing on data analysis and behavioural science, plus the experience of public servants at the sharp end and citizens and business on the receiving end, to ensure that their regimes and interventions are no more than is necessary to deliver the public safety and confidence in their mandate.”
Looks like a potential treasure trove for the regulatory lawyers out there. For the full report see www.policyexchange.org.uk
KINDness for Refugee Kids
Lawyers at Arnold & Porter have been lending their expertise to its pro bono client Kids in Need of Defense (KIND) to set up a branch of the organisation in Belgium. Central to KIND’s operation is assisting unaccompanied minors in immigration proceedings.
Arnold & Porter lawyers in its London, Brussels, Frankfurt, and Washinton offices helped KIND research the laws of European countries and identify local non-governmental organisations with which KIND might partner.
“Since our earliest days, Arnold & Porter has been essential to KIND’s ability to help unaccompanied children in need of protection outside the United States,” said KIND President Wendy Young. “With more children on the move around the world than ever before, Arnold & Porter remains steadfastly by KIND’s side as we help meet children’s needs wherever they are in their migration journey.”
Children fleeing from conflict, forced child labour or trafficking typically make up KIND’s caseload. And whether from Syria or Afghanistan or from Northern Africa they are all in great need of protection. The law can give them that.
CONTRIBUTED ARTICLE OF THE WEEK
THE OVERSEAS ENTITIES REGISTER: TOO MUCH A SCATTER-GUN?
The latest move to tackle ‘dirty money’ involves a new register for foreign companies which own land in the UK in the system. But will it work and is it worth it? asks JOHN BINNS
The introduction of a register of overseas entities that own land in the UK recognises two fundamental truths about money launderers. The first is that they remain particularly interested in the UK property market. The second is that they dislike transparency.
The new requirements on such entities to provide details of their beneficial owners are meant to weed out dirty money from the system, by building on existing requirements for UK entities to self-report their Persons with Significant Control (PSC) to Companies House, and for banks and others to report suspicions to the National Crime Agency (NCA)).
To do this, a set of new complex obligations has been placed on such entities. While the determined launderer may simply factor this into their existing risks, for legitimate businesses it represents a significant new set of worries and overheads.
The collateral damage extends to the beneficial owners themselves, who will be affected regardless of whether they are, in fact, criminals, kleptocrats, or launderers (the majority, it might cautiously be ventured, may not be).
The other potential drawback of the plan is that the real impact of requiring transparency depends on the enforcement side of the equation. The PSC register has faced some ridicule for the fact that it depends on self-reporting; the new register faces a similar challenge. A glut of reports about suspected laundering made to the NCA routinely sit unread by anyone.
That raises a distinctly uncomfortable prospect, that the new system may do more harm than good. To the determined launderer, the fact that it gives an appearance of transparency, while the real prospects of their being seized are slim, arguably represents the best of both worlds. For those with a genuine interest in cleaning up the sector, the real risk is that it represents the opposite.
John Binns is a partner at BCL Solicitors LLP, specialising in money laundering.
LEGAL COMMENT OF THE WEEK
TOPIC: The failure of Sir Frederick Barclay to pay £245,000 in maintenance and legal costs to his ex-wife
COMMENT BY: Deborah Jeff, Head of Family Law at Simkins
“The Barclay case highlights an issue that arises in UHNW divorce: winning an entitled award in court is merely a pyrrhic victory until it’s enforced. Webs of structures designed to place distance between the wealthy party and their money are common, as are pleas that the money has simply run out. If funds are located, they have often moved on elsewhere once more, resulting in a costly game of cat and mouse.
“Whilst it won’t help Mrs Barclay, these situations have led to structuring prenuptial and postnuptial agreements whereby the less wealthy spouse is paid lump sums during the marriage on certain key anniversaries, for example, to ensure they have some financial security if the marriage fails and a fighting fund for litigation in circumstances like those of the Barclay case.”
TOPIC: The conviction, following a SFO investigation, of former solicitor Timothy Schools, for diverting £20M. from a “no win no fee” litigation finance fund into his own personal account
“The collapse of Axiom Legal Financing illustrates that despite the paradigm shift of litigation funding as a key tool in pursuing high-value litigation, clients benefit from exercising considerable caution in choosing a funder for their claims. There are several notable funders with extremely impressive and long track-records that we work with, but the market has become increasingly congested with newer players, for whom this is not perhaps the case.”
TOPIC: The decision by the PGA was that players who wanted to play in the LIV series would face ‘disciplinary action’ .
COMMENT BY: Jonathan Compton, Solicitor Barrister and Litigation Partner, DMH Stallard LLP
“The PGA holds a powerful position in professional golf in the US. Indeed, it arguably holds a monopoly of all the events that actually matter to anyone. And if you are a player, you either sign over your exclusive media rights in the tour to the PGA Tour or you don’t play on the tour.
So among the questions to arise are:
+ Is the suspension of a player or players for playing in a competitive series (LIV) an abuse of that monopoly?
+ Is the refusal to release the media rights of players playing for a competitive series an abuse of that monopoly?
I think the answer to the first must be ‘yes’. The whole point of the anti-trust legislation in any jurisdiction is to increase competition. Now the PGA Tour can argue the moral position of the LIV Tour, funded as it is by Saudi Arabia. The counter to this is that the reputation of the PGA Tour is in no way directly affected by the decision of a player to play in either or both of the tours. Any reputational damage is a matter entirely, surely, for the individual.
But, what about the media rights?
Under their PGA Tour contracts, players agree: “Not to play in, and thereby contribute their media rights to, non-Tour golf events held in North America that conflict with PGA Tour events.”
LIV argues that this is an abuse of monopoly powers. In effect, the PGA Tour holds the right to deny players the right to play outside the PGA Tour, by denying them the ability to be filmed doing so.
On the face of it, this is a powerful argument. I think it one thing to monopolise rights in your product ‘ The Tour’, but it is quite another to hold the exclusive rights on the players themselves. The question arises as to why the PGA should govern which players play for which organisations and I fear that the PGA Tour has yet to justify its position in terms of competition/ anti-trust law.”
TOPIC: The decision by the High Court to grant permission to animal protection organisation, Cruelty Free International, to apply for a judicial review against the Home Office relating to animal testing.
COMMENT FROM: Kerry Postlewhite Director of Government and Regulatory Affairs at Cruelty Free International
“This Judicial Review is vital to establish whether there is a ban on cosmetics testing on animals in the UK. The Home Office admitted in its letter of August 2021 to us that it now allows most if not all animal testing for cosmetic ingredients – including those used solely in cosmetics.
The Government seems to be telling the public one thing – that cosmetics animal testing is banned in the UK – and doing something entirely different in practice. We know from poll after poll, that the British people are firmly opposed to animals suffering for beauty. A poll carried out by YouGov last autumn revealed that 85% find it unacceptable to test cosmetics ingredients on animals.”
APPOINTMENTS OF THE WEEK
Dr Steffen Schniepp is to join Eversheds Sutherland as partner for the launch of its new office in Frankfurt. A corporate and M&A lawyer, Schniepp was previously with PwC’s Legal practice where he was Managing Partner, PwC Legal Germany and led the firm’s global M&A practice.
In this capacity he had a range of DAX-listed corporates and large PE houses as clients across a number of key industries including health and life sciences, industrials including automotive and chemicals, and the TMT sector.
“Establishing a presence in Frankfurt realises a long standing ambition for the firm and for our team in Germany.,” said Alexander Niethammer, Managing Partner, Eversheds Sutherland Germany. “Steffen brings with him an outstanding reputation for client service excellence, and is committed to working closely with clients to better understand and support the strategic growth and expansion of their businesses. His arrival cements our determination to build on our collective ambition for Europe, and to identify new opportunities for both the firm and our clients.”
The new office is due to open open in January 2023.
DAVITT JONES BOULD
Nicola Boaden is to join Davitt Jones Bould (DJB), the UK’s largest firm specialising entirely in real estate law, as Partner. An experienced agricultural property lawyer she has worked with specialist agricultural property teams at a number of firms, including Blake Lapthorn and Burges Salmon, in full-time and consultancy roles over a period of 16 years. Outside of practice, she has held a lectureship at Oxford Brookes University teaching land law and commercial property modules and has also worked as a senior editor in the Agriculture and Rural Land team at Thomson Reuters Practical Law .
“Davitt Jones Bould is a progressive law firm that actively encourages its lawyers and support staff to engage with their personal and professional activities,” says Peter Allinson, Chief Executive Officer of DJB. “Nicola’s versatile interests and skills are a great fit for us in this respect. Furthermore, her experience of supporting various law firms as a consultant aligns with one of DJB’s service propositions to our law firm clients. Nicola’s addition strengthens our overall offering as it is important for us as real estate specialists to cover every aspect of the industry.”
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