CDR (Commercial Dispute Resolution) - Q3 2010 - Issue 1
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Issue 1 of CDR (Commercial Dispute Resolution), a unique magazine for litigation and arbitration professionals.

Issue 1 of CDR (Commercial Dispute Resolution), a unique magazine for litigation and arbitration professionals.

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  • 1. Q3 2010 Issue 1 T o arms! Akzo Nobel and the battle for privilege GOODBYE INVEST IN TOUGH SOCIAL CAUTION UNREST ACT SCIENCE Has Jackson Third-party The Bribery Bill Get the best out of introduced risk-free litigation funders puts the FCPA in Twitter and litigation? p10 eye up Europe p14 the shade p16 LinkedIn p26 REGION FOCUS Spain & Portugal p38
  • 2. Akin Gump Launches in Geneva We are a global law firm that emphasizes cross-border, cross-practice collaboration across 14 offices and over 85 practices. Our Geneva office is the headquarters of our global international arbitration practice, anchors our international tax planning and restructuring practice on the European continent and serves as a platform for our international trade practice. Our office also offers services in Swiss transactional, financial, regulatory and litigation matters, as well as access to the knowledge and experience of over 800 Akin Gump attorneys worldwide. 3, rue François Bellot, 1206 Geneva
  • 3. Editorial When is a Editor: lawyer not a Ben Lewis Contributors: Chiara Albanese lawyer? Elizabeth Bailey Nick Benwell Greg Bousfield The impact of advocate-general Kokott’s opinion on the Commission’s dispute Philip Clifford with Akzo Nobel - that in-house lawyers are not entitled to protection under legal Alan Cox privilege - will be limited. After all, most corporate counsel avoid writing down Sarah Garvey anything that could come back to bite them. Joanna Goodman But that’s hardly the point. The esteemed AG has delivered a deft slap in the Alex Hamilton face for a profession whose members often struggle for recognition in their own Anastasia Hancock companies, as legal diligence often finds itself at loggerheads with quick business. Gregory Leonard At a time when companies depend on their in-house teams more than ever, we Irina Maisak can ill afford to undermine them for the sake of scoring points in litigation. Julian Matteucci In the first printed quarterly edition of CDR, we hear from an Osborne Clarke Douglas Peden lawyer who calls the opinion an “insult” (page 32). We also speak to in-house Ben Rigby lawyers and those at the forefront of the case, including those representing the Alexander Vaneev Association of Corporate Counsel and Dutch competition lawyers (page 28). Also in this edition we take a detailed look at the state of dispute resolution in Production: Spain and Portugal (page 38). With Iberian courts buckling under a mountain of Jodie Mablin insolvencies, will judicial reforms and an arbitration revolution be enough to relieve the pressure? Perhaps the key is technology: as Portugal has found, an Advertising & sales: efficient computer system can make all the difference. Mathew Hance Speaking of technology, we investigate the social networking phenomenon and give five ways lawyers can use websites such as Twitter and LinkedIn to boost Managing editor: their business (page 26). CDR interviewed the European managing director of Alan Falach LinkedIn for his insights. Other highlights include the implications of Jackson LJ’s civil costs review both Publisher: for commercial disputes (page 10) and e-discovery (page 24); and a comparison of Richard Firth Asia’s arbitration rivals in China, Hong Kong, India and Singapore (page 20). Finally, we have a host of regular features, including all the latest partner Cover image: moves, expert briefings, legal events and jobs. Don Troiani But it doesn’t stop there: don’t forget to keep checking back on our website ( for all the latest articles, and to sign up for our free weekly newsletter. Published by: We hope you’ll become a loyal reader and we welcome your ideas and feedback. Global Legal Group Ltd 59 Tanner Street London SE1 3PL, UK Tel: +44 20 7367 0720 Ben Lewis, Editor Fax: +44 20 7407 5255 +44 20 7367 0728 CDR (Commercial Dispute Resolution) Printed by The Magazine Printing Company Plc, June 2010 Copyright © 2010 Global Legal Group Ltd All rights reserved No photocopying This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken ISSN: 2044-5121 from a qualified professional when dealing with specific situations. 1
  • 4. The CEDR Certificate in Advanced Negotiation Enhancing expertise, ensuring impact Programme Outline ... This course ensures guided learning, greater reflection and re-examination of real world negotiations. This is a unique opportunity to explore the best theory and principles of negotiation integrated with key skills developed MODULE 1: Essential skills for the negotiator’s toolkit from CEDR’s practical experience of working with 15,000 Days 1 and 2 - build a core knowledge base, practice complex ‘deadlocked’ negotiations. We have identified a and receive feedback on a range of approaches, skills pressing need for a comprehensive programme that ensures and strategies. you reach your full potential as a negotiator to deliver results for you, your clients and your organisation. MODULE 2: Dealing with the human factor Days 3 and 4 - learn how individual communication The structured programme enables delegates to develop styles, personality types, approaches to conflict, emo- insights into critical areas of negotiation practice and theory, tions and persuasion impact the negotiation process. exercise some of the key skills, reflect on concepts in the real world of corporate and professional life, and to work MODULE 3: The bigger picture alongside an expert faculty of negotiation and conflict - adding layers of complexity management professionals. The course is structured on a Days 5, 6 and 7 - learn why effective negotiation is modular format across seven days over a period of several not just about what happens across the negotiating months, to allow time for reflection and practice between table but also about longer term relationships. teaching elements. Who should attend? Those explicitly involved in complex negotiations (deal Dates, venue and cost makers, dispute professionals, procurement managers, HR Autumn 2010 specialists) and those for whom negotiation is a simple reality Module 1: Thursday 9 and Friday 10 September 2010 of daily life (executives with a leadership role in a unit, Module 2: Thursday 11 and Friday 12 November 2010 department or business, senior civil servants or others who Module 3: Thursday 20, Friday 21 have to satisfy a range of stakeholder groups). Bar Council and Saturday 22 January 2011 and Law Society CPD points available. The course will be run on a residential basis at the 4-star Our approach Selsdon Park Hotel, located on Addington Road, Sanderstead, Highly interactive, involving extensive participation through Surrey CR2 8YA. demonstrations, role-plays, feedback and coaching, every module includes ‘negotiation clinics’ at which participants The cost of the course is £4,750 + VAT (£5,463 inclusive) bring problems and experience from their own practise. For more information or to book your place, visit: Faculty The Course Director, Dr Karl Mackie, is an internationally renowned mediator and Chief Executive of CEDR. Throughout core faculty, special guest lecturers and observers will be invited to join in sessions, to enhance the practical insights gained from the faculty, participants and course materials.
  • 5. Contents Litigation Funding Strategy & Technology 10 Jackson’s reactions 24 Jackson on e-disclosure Tackling one of the thorniest What the funding reforms issues in legal costs mean for commercial cases 14 New frontier 26 Social networking: Third-party funders are five tips for lawyers finding opportunities in Think “Twitter feed” is a Europe bag of seeds? Here’s help 28 Cover Feature Financial Litigation Competition & EU Akzo Nobel 16 Stand aside, FCPA? 32 Kokott’s unwelcome Battle for privilege The UK’s Bribery Bill may be tougher than its US opinion One lawyer’s take on the With Akzo Nobel, the Commission cousin latest from Akzo Nobel is stirring up an in-house revolt. 18 Vulture clash Ben Rigby surveys the battle lines The murky world of – and meets some of the key com- vulture fund litigation batants Arbitration & ADR Collective Redress 20 Stars of the East 34 Turning American? Inside Asia’s arbitration UK business turns against hotspots the Financial Services Act 5 Jobs 50 Expert Views BSkyB v EDS 38 Region Focus 7 Comment How to avoid a liability cap The Jackson Review Spain & Portugal 8 People & Firms A commercial lawyer’s perspective CDR (Commercial Dispute Resolution) Rivals in crisis Russia Iberian courts are swamped with 58 Country Reports Sevmash case shows growing acceptance of foreign awards insolvency. Will a growing ap- petite for arbitration be enough to drag them out of the mire? Ben 62 Conference Diary Economists Three cases reshaping patent licensing Lewis reports from Madrid and practice Lisbon 64 Profile 3
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  • 63. Featured Jobs For Europe’s top dispute resolution professionals Recruiter: Cogence Search Ltd Vacancy: Partner International Arbitration Salary: £200,000 to Full Equity Circa SGD $4-900,000 Location: Singapore Lateral Opportunity: Our clients have a long standing and highly regarded presence in South East Asia and Mainland China and a clear strategic aim of growing their arbitration practice in the region. There is an expectation that a Partner making a lateral move into the prac- tice will have developed a profile in the jurisdiction and be able to bring on board reliable client relationships. This practice is in a position to competitively compensate its Partnership and is happy to consider hires into the equity partnership where the business case exists. To apply for this opportunity in complete confidence please contact Mark Husband, Director at Cogence Search Ltd on +44 (0)207 397 1592 or email: Reference: Cogen43878. Recruiter: Hudson Legal Vacancy: Contentious Financial Services Regulatory Associate Salary: Competitive Location: London This Silver Circle law firm is looking to recruit a financial services regulatory associate into their team. The role will focus on providing advice and assistance to the firm’s financial services clients, both nationally and internationally. There may be an element of civil disputes and criminal investigations in relation to the financial services sector. The successful candidate will ideally have 2-5+ years’ PQE gained within a top City firm, predominantly within the financial services sector. A solid understanding of the UK financial services regulatory regime is essential. To apply please email your CV to or call Baqer on +44 (0)207 187 6205. / Recruiter: Turner Marke Vacancy: Head of Dispute Resolution Salary: To $1m+ Location: Moscow Requirements for the role are as follows: - Significant experience as an advocate in Russia, representing clients in the Russian courts and domestic arbitration tribunals. - Extensive prior consultancy experience at counsel or partner level in the litigation field at a major international or Russian law firm. - Additional international arbitration experience preferred. - A degree of portable client business, to assist with the continued development of the Russian dispute resolution practice. To apply please email or call +44 (0)7971 486 014.
  • 64. Comment No alternative? T he term “alternative dis- Reason two: nobody can agree Reason three: it’s insular pute resolution” is part of what it means The idea of “alternative dispute resolu- the parlance of law. But Because of the jumble of concepts em- tion” is hopelessly parochial. In many what exactly is alternative bodied by the term, it never seems to countries, litigation is the foreign con- about it? mean the same thing twice. For some cept. Perhaps we should take a leaf from (particularly in the US), “alternative dis- Japanese parties must find it jarring the book of John Sturrock QC, a barris- pute resolution” is synonymous with to hear chotei (conciliation), wakai (com- ter who recently told delegates at a mediation; for others, arbitration. promise) and chusai (settlement-focused Scottish conference that the term That’s just those in the know. Many arbitration) referred to as alternatives to should be "consigned to the waste bin clients in Europe and beyond are still litigation – not that they would ever be of terminology". getting to grips with the concepts, let so confrontational as to tell you so. One can see his point. Here are alone the labels. In the Middle East there is a similar three reasons why we might want to Legal practice hinges on definitions. attitude. With legal systems built consider the term to be past its sell-by If the term “alternative dispute resolu- around amicable settlement, litigation is date. tion” is to be retained, it should at least not a default option but a last resort. have a global definition, particularly as It’s tough selling a concept. Just ask Reason one: it’s gone mainstream the practice of commercial arbitration is the Spanish Arbitration Club and the According to Fulbright & Jaworski’s inherently international. Portuguese Arbitration Association: as last litigation survey, more than half their members make clear in our feature of UK companies prefer to arbitrate on page 38, some litigators are dyed in than litigate – and that leaves out the growing core of mediation, adju- The idea of the wool. But it’s even tougher when the con- dication and other out-of-court methods. “alternative cept itself is unclear. So where do we go from here? Stur- Even if arbitration is on the wane, as dispute resolution” rock suggests replacing “alternative” CDR (Commercial Dispute Resolution) Fulbright concludes, that’s a hefty chunk of the market that hardly justi- is hopelessly with “complementary”, “supplemental” or “early”. fies “alternative”. What’s more, arbitration has parochial. In many Nevertheless, it’s hard to avoid the thought that if lawyers and lawmakers changed. While once it was fast and countries, litigation are serious about promoting arbitration cheap, the modern process has become and mediation, they should stop charac- ever more similar to litigation, making is the foreign terising them as something different al- further nonsense of its “alternative” status. concept together. With that in mind, how about just… “dispute resolution”? CDR 7
  • 65. People & Firms People and firms UK and Ireland Snelling of Freshfields Bruckhaus De- ter as Sophie Havard Duclos, an IP and ringer and Kelwin Nicholls of Clifford technology specialist, left Freshfields Herbert Smith’s management shake- Chance. Bruckhaus Deringer to join Laude Es- up saw insurance litigator Martin quier Champey as the litigation firm’s Bakes take up the new role of general Austria and CEE fourth partner. counsel. Baker & McKenzie reversed the Michael Scott, a competition partner, It’s been a quiet market for lateral hires trend with a lateral hire from a boutique has succeeded David Gold as the in Eastern Europe’s dispute resolution – namely Courtois Lebel. Eric Bory- firm’s senior partner. market. Wolf Theiss did, however, sewicz, a specialist in industrial litiga- The firm’s annual promotions make a double promotion – litigators tion and arbitration, made the move round focused heavily on dispute reso- Holger Bielesz and Clemens Trautten- along with a team of three lawyers. lution, with a number of the new part- berg joined the firm’s partnership in Meanwhile Ashurst promoted ners based in London. They include Vienna. The appointments came Christophe Lemaire, an antitrust Karen Anderson and Nik Kiri (finan- shortly after the firm hired a senior lawyer with experience in the French cial-services litigation); Susannah Cog- competition litigator in Brussels (see competition authority, to the firm’s man (white-collar crime); John Benelux, below). Paris partnership. Whiteoak (insolvency); Chris Parker Linklaters rewarded its competition US-qualified arbitrator and public (arbitration); Kim Dietzel (competi- head for Poland and CEE, Malgorzata law specialist Noah Rubins became a tion); and Jeremy Garson (commercial Szwaj, with a promotion to partner. new partner in Freshfields Bruckhaus litigation). Deringer’s Paris office. There was a boost in London for White & Case’s insolvency team, Benelux which poached bankruptcy partner Germany Christian Pilkington from its US rival Having just lost its London arbitration Skadden Arps Slate Meagher & head (see UK and Ireland, above), Allen & Overy stepped up the rhetoric Flom. Howrey suffered a second walkout as as it announced a “swift repositioning” Rachel Couter, a banking disputes Brussels-based competition litigator in the German market. The firm raided partner, joined SJ Berwin from Gibson Peter Camesasca left for Covington & Lovells (now Hogan Lovells) for part- Dunn & Crutcher. Burling. Howrey had only recently ner Daniel Busse, who will be Meanwhile Howrey took a blow launched a competition practice in based in Frankfurt and lead the firm’s with the departure of the firm’s UK arbi- France, hiring six lawyers from Clif- German disputes practice. The move is tration head Melanie WIllems to Chad- ford Chance. one of several concurrent hires in Ger- bourne & Parke, soon followed by a The Austrian firm Wolf Theiss many by Allen & Overy , which second loss in Belgium (see Benelux, hired cartels specialist Jochen Anweiler als o to o k o n a corporate partner below). from O’Melveny & Myers in Brussels. and a finance partner in Düsseldorf The moves are a setback for the US In Luxembourg Allen & Overy pro- and Frankfurt respectively. That disputes boutique, which has enjoyed moted Katia Manhaeve, an IP technol- should more than make up for the loss recent successes including the hire of ogy specialist with experience in of Marcus Grosch, the Mannheim- competition litigator Shaun Goodman dispute resolution, to the firm’s part- based patent litigator who left Allen & from Cleary Gottlieb Steen & Hamil- nership. Overy for Quinn Emmanuel earlier ton, and a six-lawyer raid on Clifford Paul Kuipers, an insolvency lawyer this year. Chance’s Paris office. who has advised PricewaterhouseC- Lovells made some promotions in Watson Farley & Williams sought to oopers on the collapse of the European advance of its merger with Hogan & take advantage of London’s shipping arm of Lehman Brothers, has been Hartson. Three of the new dispute reso- disputes market, as Robert Platt joined elected partner in the Amsterdam of- lution partners are in Germany – they CDR (Commercial Dispute Resolution) the firm from Curtis Davis Garrard, an fice of Linklaters. Also in Amsterdam, are Kim Mehrbrey (Düsseldorf), and Se- energy and transport boutique. The Clifford Chance made litigator Alvin bastian Lach and Christian Herweg move reflects the thriving market for Khodabaks a partner. (Munich). shipping litigation: Ince & Co, a firm Freshfields Bruckhaus Deringer specialising in that area, promoted four also sought to strengthen its German dispute resolution lawyers to its part- France offering with the promotion of Frank- nership. furt arbitrator Boris Kasolowsky and Other promotions in London in- The recent trend in Paris for boutique- Düsseldorf competition lawyer Uta clude Mark Clarke of Ashurst, Tom bound defections continued this quar- Itzen to the partnership. 8
  • 66. People & Firms Michael Kremer of Clifford Chance Alberto Fortún and Manuel Monzó was promoted to the firm’s partner- were appointed as equity partners. ship in Düsseldorf. In Portugal Morais Leitão Galvão Teles Soares da Silva & Associa- Russia and CIS dos announced its annual promo- tions, which included disputes Russia and CIS lawyer Miguel de Almada. The firm also hired litigator Carla Os- ório de Castro in Oporto. Switzerland A rare mass defection in Geneva led to a lift for Akin Gump Strauss Hauer & Feld. The firm’s hire of seven lawyers from a merger-ready Hogan & Hartson (now Hogan Lovells), including veteran arbitrator Charles Adams as well as arbitration partner Michael Stepek, gives the Moscow’s litigation market welcomed firm’s nascent Geneva office a strong a new face in April – that of Nicholas start in ADR. Munday, formerly the UK dispute res- olution head of Clifford Chance. The firm relocated Munday to cope with a Middle East and Asia-Pacific surge in local demand. He has prior experience of handling Russian dis- Seems like everyone’s heading for Sin- putes, having already been based in gapore these days. Among the latest Moscow for three months. arrivals is David Llewelyn, White & But the celebration was short-lived. Case’s IP and technology specialist. A month later Clifford Chance’s head Llewelyn will join the firm’s new of dispute resolution in Russia, Ivan Singapore arbitration practice, which Marisin, defected to Dechert’s year-old was established with the relocation Moscow office – which must be a relief of energy disputes lawyer Aloke Ray for Dechert following the firm’s earlier in the year. abortive attempt to hire Chadbourne Norton Rose made a more modest & Parke’s Russian senior partner advance by promoting arbitrator KC Mikhail Rozenberg last year. Lye to the partnership. There were also promotions in Her- bert Smith’s Asia offices. The firm elected May Tai as an arbitration part- ner in Shanghai and Gavin Margetson Spain and Portugal as a general dispute resolution partner in Tokyo. CDR (Commercial Dispute Resolution) The annual promotions round at Cua- Fai Hung Cheung, a specialist in trecasas Gonçalves Pereira saw complex financial disputes at Allen & Expanding? seven litigation lawyers promoted Overy, became a partner in the firm’s to the partn e rshi p – a h e ft y Hong Kong office. ch un k of t h e S pa n i s h firm’s 18 Clifford Chance promoted dispute Please send details of partner appointments. Cuatrecasas also resolution lawyers James Abbott and moves to Ben Lewis at took the opportunity to make Cameron Hassall to the partnership, changes among its existing partners: in Dubai and Hong Kong respec- litigators Ferrán Cerdà, Pedro Claros, tively. CDR 9
  • 67. Litigation Funding Jackson’s reactions Debate rages on At the Law Society’s dispute resolution conference a Clifford CDR (Commercial Dispute Resolution) Chance partner shared his insights on what Jackson’s reforms mean for commercial cases. Ben Rigby was there. 10
  • 68. 11 CDR (Commercial Dispute Resolution) Litigation Funding
  • 69. Litigation Funding L ord Justice Jackson’s magis- ability to recover success fees and ATE the case. terial review on costs opens insurance premiums from unsuccess- This concept of risk-free litigation is doors for private individuals ful defendants. problematic and outside the spirit of to seek justice they are cur- However, the higher fees and there- access to justice, said Davis. rently denied. fore risk associated with commercial He pointed out that the Jackson re- But they are not the only ones it will cases makes conditional fee arrange- forms are likely to be good for compa- affect. Though less trumpeted, the re- ments (CFAs) less attractive to com- nies, more often sued by CFA-backed port also has implications for high- mercial lawyers. One report by insurer claimants than using such arrange- value commercial litigation. First Assist puts the uptake of CFAs at ments themselves. These implications are big enough just 7% of commercial cases. Companies will not have to take that the Law Society’s dispute resolu- When they do use CFAs, commer- into account the risk of paying up to tion section costs conference was cial litigators also tend to structure double normal costs if the case proves awash with lawyers from Slaughter them differently, he said. Often this successful, thus the risk of fighting liti- and May, Linklaters and other high- involves being paid about 75% of gation is reduced. profile commercial law firms. normal fees with an uplift to 125% if Davis also supported making suc- Among them was Clifford Chance successful. cess fees payable by the assisted party. litigation partner Simon Davis, who He acknowledged that whether or spoke in a personal capacity at the con- not this was a good thing depended on ference. He took a proportionate approach The concept of whether one took a claimant or defen- dant standpoint. to his subject, acknowledging that risk-free litigation Looking at damages and cost shift- commercial litigation is a fragment of the dispute resolution market. is problematic and ing, given that most commercial litiga- tion is about money, having less costs But to Davis, Jackson LJ’s proposals outside the spirit to factor in was a benefit, he said. must genuinely enhance commercial Commercial defendants will there- justice just as it aims to do for individ- of access to justice fore benefit from not being obliged to ual justice. pay the opponent’s success fees if they He cited a comment made by Lord But financial pressures resulting lose a case, while avoiding increased Neuberger, the Master of the Rolls, in from the credit crunch mean even com- damages. January. “The time for discussion and mercial parties with ample resources He suggested the cap on success debate is over,” said Neuberger. “It is are beginning to use CFAs to reduce fees was unlikely to be of concern to now time for action.” their legal bills. commercial defendants, and may actu- Action, he argued, that should be One concern about CFAs shared by ally prove a benefit if it means CDR (Commercial Dispute Resolution) swift but not hurried: in many places commercial claimants and defendants claimant lawyers ponder cases more Jackson’s review prescribes a frame- is that they give the assisted party the carefully. work, leaving the detail to be worked ability to pressure the opposition - out. As every lawyer knows, small de- much like the legal aid of old. Inducing settlement: Part 36 offers tails can later turn out to be critical. Davis called this “no-risk litiga- Davis suggested that Lord Justice Jack- tion”. Parties that are insured against son’s suggestions on offers to settle Success fees and ATE insurance loss could avoid paying onerous legal might open up defendants to black- Jackson’s report proposed that success- fees while also avoiding any serious mail. ful claimants should be denied the risk of having to pay costs if they lose He drew similarities with using the 12
  • 70. Litigation Funding obligation to pay success fees as a the point of settlement. “The language weapon in litigation. of rewards and penalties is inappropri- Davis outlined the existing situation ate,” he said. regarding Part 36 offers - when a de- In his eyes it would be acceptable fendant makes a formal offer to settle a for a claimant to benefit from a bonus case - and their cost consequences. only if the defendant had required an If this offer is not accepted and the actual adjudication on the dispute. unsuccessful defendant is ordered to This, he said, “is what courts are for”. pay less than the offer made, the claimant pays the defendant’s costs Contingency fees from the time of the offer. Davis also commented on contin- Lord Justice Jackson proposes that gency fees. He noted the recommen- dation that the losing party should “The language of not be obliged to pay the contingency fee. rewards and But he did raise an eyebrow at the possible need for independent legal penalties [used by advice when entering into such agree- Jackson] is ments. This was despite Jackson’s claim inappropriate” that contingency fees will not lead to lawyers taking advantage of their clients. this leaves claimants “insufficiently re- Commercial clients are sophisti- warded” for making Part 36 offers and cated ones. The review was ambigu- defendants “insufficiently penalised” ous about whether this will only Simon Davis for rejecting them. apply to private litigants or to compa- But Davis believes Jackson misses nies. CDR Expert partners CDR is partnering with leading law firms and service providers to bring you incisive analysis of dispute resolution topics.
  • 71. Litigation Funding New frontier eye Third-party funders up Europe Investors may be piling money into London-listed litigation funds, but their eyes have been firmly fixed on lucrative American disputes. Now third-party funders are seeing increasing potential in Europe, writes Greg Bousfield. D Support from Jackson espite another round of media rumours triggered “Although the That is as concrete as it get at this by the Jackson Review, Europe still seems to offer opportunities in stage, but funded cases will continue to fall into Juridica’s strictly commer- investors little compared with the US the US seem to be cial litigation framework, which in- for third-party litigation funding (TPF). larger, we are cludes international arbitration. Competition law damages cases are But Europe, and particularly the UK, is gaining credibility as a TPF thinking about of particular interest, Fields adds, stressing that Juridica does not fund market. Juridica Capital Management how to adjust our retail areas like class actions arising announced in January it is getting seri- ous about the UK and earmarked $50 processes to fit from personal injury (which are ex- cluded from consideration by the So- million for local projects. the UK market” licitors’ Code of Conduct), product Juridica, which has more than $200 liability or mass tort claims. CDR (Commercial Dispute Resolution) million under management, was the In the US, Juridica targets cases first litigation fund to list in London with potential recovery between $15 (on the LSE’s Aim board) in December have made the company aware of UK million and $25 million. This threshold 2007 and has funded three UK cases. possibilities: “We need to have more would have to be substantially lower Juridica chairman and chief execu- presence in London and a more robust in the UK, where cases generally in- tive Richard Fields says that “several business there. Although the opportuni- volve smaller sums, says Fields. “Right opportunities a week” are now coming ties in the US seem to be larger, we are now we are interested in who the lawyers Juridica’s way in the UK. thinking about how to adjust our and barristers are we can deploy, as He says multinational law firm clients processes to fit the UK market.” opposed to the size of the case.” 14
  • 72. Litigation Funding “Right now we are interested in who the lawyers and barristers are we can deploy [in the UK], as opposed to the size of the case” Richard Fields, Juridica Lord Justice Jackson’s review of the full amount of adverse costs, sub- cused on trying to resolve things out- civil litigation costs was “most en- ject to the discretion of the judge, side the courts whereas the US is a couraging” for the TPF industry, he which would likely add the major cost very court-orientated country with far says, as are the future possibilities of of after-the-event (ATE) insurance to more litigation than any country in the alternative business plans under the whatever part of the claim that was world, with cases that are much vaster Legal Services Act. funded. and complex than anywhere else with Jackson concluded that the cur- “We have done two deals without much larger damages,” he says. rent low volume of TPF does not jus- insurance but most cases would in- “Billions of dollars are needed to tify regulation, which would likely volve some element of ATE,” Fields fund US litigation; there is a huge focus on capital adequacy require- says. gap between need and available capi- ments. tal.” Although abuse-of-process rules Market potential in Europe Contrary to the clichés, acceptance (champerty and maintenance) would Burford Capital has a similar busi- of TPF is weak among the American not be scrapped, nor would they auto- ness model to Juridica. Like its com- public and lacks legislative support. matically exclude TPF under the pro- petitor, the company successfully Third-party funding of US class ac- posals laid out in the report. floated on Aim last October, attract- tions, which are already notorious, is Jackson’s view that TPF is most ing £35 million from UK institutional likely to be regarded as abusive. “TPF really started in Australia in 2003 then moved to the UK and then Burford has no immediate plans to fund to the US at the end of 2007,” Seidel says. “Public acceptance of litigation UK cases - the US is more dynamic and funding is good in the UK. It’s amaz- lucrative. But change is on its way ing in the US how little law firms CDR (Commercial Dispute Resolution) know about TPF; it’s really just arriv- ing there.” readily obtained for high-value cases investors. This relative maturity keeps Europe with good prospects of success also One difference is that Burford has attractive for Burford Capital. “Keep corresponds with the commercial no immediate plans to fund domestic in mind that the UK is a very impor- focus of funders like Juridica. UK cases. For now, the US is simply a tant market where we will be operat- Less appealing for them was his far more dynamic and lucrative mar- ing in the future,” Seidel says. recommendation that third-party fun- ket, says chairman Selvyn Seidel. He seems certain that future is on ders should potentially be liable for The UK and Europe are very fo- its way. The only question is when. CDR 15
  • 73. Financial Litigation Stand aside, FCPA? The UK’s Bribery Bill received royal assent in April. Writing as the Bill reached its second reading, Nick Benwell of Simmons & Simmons explains its implications for companies in the UK - and abroad. W hen the Bribery Bill be- Long-arm jurisdiction Systems and controls comes law as expected A remarkable aspect of the new corpo- It is therefore clear that the key for any in 2010, it will be the rate offence, however, is its long-arm organisation which has a UK presence toughest anti-bribery jurisdiction. In a move the US would will be to ensure it has adequate sys- law in the world. Unlike the US For- have been proud of, the offence applies tems and controls in place. This begs eign Corrupt Practices Act 1977 not only to companies incorporated in the question, what systems and con- (FCPA), it will apply both to public the UK, but to any organisations which trols will be considered as adequate? and private sector corruption, and carry on any part of their business in Following a report by a joint parlia- there will be no exception for facilita- the UK. mentary committee on the Bill, the tion payments. To take a couple of examples - if a Government appears to have accepted In both these respects, it will be no US bank or a Chinese industrial con- that guidance on this issue must be different from existing UK laws. The glomerate operates a small branch in published before the Bill comes into main change (and it is a fundamental London, the bank or conglomerate will force, in order to allow businesses time one) will be the introduction of a new be criminally liable in the UK if an em- to ensure they have adequate systems corporate offence. ployee, agent or subsidiary were to and controls in place. The Bill is set to impose criminal lia- pay a bribe, whether in the public or It is probably too much to hope that CDR (Commercial Dispute Resolution) bility on organisations in the event that private sector, anywhere in the world. the guidance will provide a complete employees, subsidiaries, agents or con- There is no requirement that the code - it is more likely that principles sultants pay bribes in relation to the bribe be approved by or paid through will be published. organisation’s business anywhere in the UK branch - the mere fact of hav- The systems that may reasonably be the world. ing a UK branch will give the UK pros- expected of a multinational will clearly There will only be one defence - if the ecutors and courts jurisdiction. And, as differ from those that may reasonably organisation can prove it has adequate indicated above, the only statutory de- be expected of a small engineering anti-corruption systems and controls in fence will be to prove the existence of company which trades overseas on place. More on that point below. adequate systems and controls. only a few occasions each year. 16
  • 74. Financial Litigation The guidance is unlikely to be sur- penses defence; and plainly unrealistic) or permitting crim- prising - there has developed a broad • as mentioned above, there will be no inal acts, on the basis they are unlikely consensus on what constitutes interna- exception for facilitation payments. to be prosecuted. tional best practice in this area. This is a difficult area. The Serious Having said that, it is important Fraud Office has made it clear that Cross-party support to ensure that any organisation with prosecutions are highly unlikely if While there are aspects of the Bill that a UK presence will be compliant companies are trying to “do the right may change as it proceeds through the with UK laws - not just FCPA com- thing” by reducing facilitation pay- Parliamentary process, there seems to pliant, given the broader scope of ments. The making of such payments be cross-party support for the Bill. And UK laws. is, however, a criminal offence under despite electoral uncertainty, the Bill the Bribery Bill (as indeed, it is under looks set to come into force this year - Other developments existing laws). probably in the autumn. There are several other aspects of the This leaves organisations with the Through the Bribery Bill, the Gov- Bill that it is important to note: choice of insisting on zero tolerance ernment is trying hard to restore the (and facing the accusation within the UK’s reputation as a country which is • it contains a specific offence of brib- business that such an approach is tough on corruption. The Bill will be CDR (Commercial Dispute Resolution) ing a foreign public official. It will be a the toughest anti-corruption law in the defence to prove that the payment was world, with the ability to catch organi- permitted by local written laws - but not (as had been hoped by many) if the The Act may soon sations which have any presence in the UK. payment was based on a reasonable be discussed in the If the UK Serious Fraud Office is belief that it was permitted under local laws; same tones as the sufficiently funded to rise to the chal- lenge, the UK’s Bribery Act may soon • unlike under the FCPA, there will be no marketing and promotional ex- FCPA be discussed around the world in the same tones as the FCPA. CDR 17
  • 75. Financial Litigation Vulture clash What happens when the credit rot spreads from companies to countries? Greg Bousfield assesses the chance of vulture fund litigation. G reece and several other No barriers for vulture funds arrangements, prefacing litigation. Eurozone countries are Traded sovereign debt came into exis- The IMF has been criticised for re- unlikely to default on tence in 1989, as part of a failed at- peatedly failing to get agreement on a their debts any time soon. tempt by US treasury secretary sovereign debt restructuring mecha- But if they did, could private holders Nicholas Brady to address national nism which would tie all creditors to a of sovereign debt litigate to get their debt in South America. So-called common restructuring programme. money back? Brady bonds allowed syndicated bank “I never believed that they would In theory they could, says Ioannis debt to be exchanged for traded sover- come up with a single mechanism be- Alexopoulos, head of litigation at DLA eign bonds. cause that would involve a buy-in of all Piper in London. But given the circum- But during the last decade, in the the major economies and that is un- stances they would more than likely context of various African debt relief likely for political reasons, especially in find themselves unable to stand aside initiatives and NGO campaigns, the the case of the US,” says Alexopolous. from a debt restructuring programme. G8, the World Bank and IMF, and the In any case the days of vulture Paris Club have expressed concern funds buying up discounted sovereign over vulture fund practices. debt from creditor banks, typically of In 2007 the Paris Club resolved to heavily indebted poor countries (HIPCs), and often successfully relying avoid the sale of its claims on HIPCs to other creditors who do not intend to Nothing stops CDR (Commercial Dispute Resolution) on litigation or the threat of litigation provide debt relief under a Paris Club funds taking to get back the original debt plus large interest payments are in the past, he HIPC initiative. But this concern hasn’t yet yielded holding out of says. “The political climate has now any major international agreement on debt restructuring which might hinder restructuring changed. And courts are also rejecting banks from selling distressed debt to arrangements, onerous default provisions imposed by creditors in the secondary debt vulture funds. Nor does anything stop funds tak- prefacing market.” ing holding out of restructuring litigation 18
  • 76. Financial Litigation Interest or penalties? But courts can deem onerous interest “It’s safe to say rates as penalties and therefore unenforceable. English courts will The pivotal UK case was an attempt continue to strike in 2007 by fund Donegal Investments to enforce a government bond debt out onerous default claim in the English courts against provisions” Zambia for $55 million. Donegal had purchased the dis- Ioannis counted Zambian debt from Roma- nia, a creditor of Zambia. The UK’s Alexopoulos, High Court objected to how Donegal DLA Piper had calculated interest and costs on the debt, re-calculating it at $15.5 mil- lion. “Although the court upheld the in an attempt to freeze $284 million of gives funds first bite of the (litigation) new agreement they stuck out the new $1 billion Argentinean distressed debt cherry over debt restructuring arrange- default provisions which would have it holds. ments, has not been judicially ques- been very generous to the new debt The UK’s Court of Appeal ruled on tioned. owners by finding they had the nature a technical issue: the bond contract had And the trade in distressed sovereign of penalties,” says Alexopoulos. “I not submitted Argentina to the juris- debt continues. “Not much of this will think it’s safe to say English courts will diction of the English courts as re- stop vulture funds buying and banks continue to strike out onerous default quired under the State Immunity Act. selling, if the price is right,” Alex- provisions.” Yet despite a tough environment for opolous says. The original vulture fund, Elliot As- distressed sovereign debt litigation, the If these vultures find their way into sociates, has coincidentally lost out fundamentals remain in place. the courts, they may yet get their taste earlier this year in the Court of Appeal The doctrine of pari passu, which of meat. CDR September 12-14, 2010 | Red Rock Casino Resort & Spa | Las Vegas, NV Maximizing the Commercial Potential of Your IP Portfolio through Value-Creation Strategies IP experts today are faced with managing a crucial portion of their organization’s capital during the harshest economic downturn in recent history. This summit will highlight current challenges and opportunities through visionary conference sessions, panel discussions and keynote presentations delivered by your most esteemed peers and thought leaders from Americas leading corporations.
  • 77. Arbitration & ADR Stars of the East Asia’s ADR centres compared A sia has become the scene of an same period. Hong Kong. May Tai, a senior associ- arbitration gold rush. Meanwhile Cietac (China Interna- ate of the firm’s arbitration team, has tional Economic and Trade Commis- left London to Shanghai and Patrick The shift in global economics and sion) managed 1,230 cases compared to Zheng, an arbitrator with experience at mounting expenses are increasingly 979 in 2005. Cietac, has joined Herbert Smith’s Bei- driving investors away from tradi- jing office as a disputes consultant. tional arbitration centres such as New Law firms relocate resources Similarly, Allen & Overy has relo- York, London, Paris and Geneva. International law firms are relocating cated dispute resolution lawyers to Now Singapore, Hong Kong, India key people and resources to respond to Singapore and Hong Kong. and China are gaining reputation as the growing demand for commercial places where an arbitration case can be arbitration services in the region. Following trade flows successfully settled. White & Case has recently launched “The growing interest of international Between 2005 and 2008, the number an international arbitration practice in firms for East Asia is similar to what CDR (Commercial Dispute Resolution) of arbitrations seated at the Hong Singapore with partner Aloke Ray, happened for Japan in the 1980s,” says Kong International Arbitration Centre who has left the firm’s London office Shourav Lahiri, a partner at Pinsent more than doubled from 281 to 602. to head a four-lawyer team. Masons. The firm has been in Hong The growth has been mirrored on a Other international firms have im- Kong for 25 years and has had a pres- smaller scale in Singapore, whose main plemented similar strategies. ence in Singapore for more than a arbitral institution, Siac, saw a sharp Herbert Smith has moved Justin decade. increase from 45 to 71 cases in the D’Agostino, an arbitration partner, to “The UK market is shrinking and 20
  • 78. Arbitration & ADR The ADR community is looking east. Widespread relocations of lawyers and a boom in cases have made Hong Kong, Singapore and their neighbours a battleground for arbitration supremacy. Chiara Albanese compares their offerings. the trade flows are likely to be directed Dominant seats other origin. towards and between China and India It is these two jurisdictions - Hong “It is especially prominent for India- and Southeast Asia,” says Lahiri. “Ar- Kong and Singapore - that have related disputes. Indian and Indonesian- bitration lawyers want to follow that emerged as the strongest contenders in related matters have a natural gravity trade because it will naturally lead to the region. towards Singapore because Hong Kong an increase in the ADR and disputes “Hong Kong is perceived by most is not a viable choice for international workload.” clients as a neutral venue with a stable investors to seat India-related arbitra- He points to arbitration costs as a and reliable legal system,” says Her- tions due to enforcement issues,” says catalyst for the shift. These range from bert Smith Hong Kong dispute resolu- Nicholas Peacock, a partner at Herbert the fees charged by the institution, the tion partner Justin D’Agostino. Smith’s Singapore practice. fee for the arbitrators and the cost of He adds: “It is a happy middle Frances van Eupen, an Allen & the lawyers. ground for disputes between a Chinese Overy senior associate who moved “Most major arbitral institutions party and a non-Chinese party. Hong two years ago from London to Hong CDR (Commercial Dispute Resolution) charge similar fees, but a cost advan- Kong is acceptable to Chinese parties Kong, says the competition between tage can be achieved for the legal ad- because it is ultimately part of China Hong Kong and Singapore is palpable. vice and for maintaining the team and has the added convenience of “Seat decisions should be based necessary to support the arbitration. being close to home and therefore less more on legal factors rather than The associated cost is likely to be lower costly.” purely geography,” says Van Eupen. in Singapore and Hong Kong [than in Singapore has a similar promise of “Two criteria for a good seat are that established non-Asian forums].” impartiality, but for disputes with an- the local laws and courts should be 21
  • 79. Arbitration & ADR “Hong Kong is acceptable to Chinese parties because it is ultimately part of China and is close to home” Justin D’Agostino, Herbert Smith pro-arbitration and the state should and has published a set of rules to Asian governments are also seeing have ratified the New York Conven- make it cheaper and more effective. the economic benefits of arbitration tion.” Korea and Japan see a relatively and are trying to promote their coun- Both are true for Singapore and small number of international arbitra- tries’ credentials as attractive seats Hong Kong. tions, but the will is there: Seoul for arbitration. hosted a major regional conference last Most notable among these is Sin- Other regional contenders year and is keen to promote itself as an gapore, whose government is no But the two jurisdictions’ appeal for par- international venue. stranger to economic opportunism. ties in mainland China and India is The Korean Commercial Arbitration The city state has recently introduced slowly eroding, according to Lahiri - a Board has been actively promoting its a 50% tax break for law firms’ income growing number of disputes are simply services. It is a possible area of growth from arbitration. staying at home. in the future. Meanwhile Hong Kong has re- “India and China are still not cho- formed its court rules and engaged sen by foreign parties as a seat for an International bodies react in a programme to promote media- arbitration where the parties are not They had better move quickly. tion. otherwise connected with the country, Like the global law firms, international In January 2010 the jurisdiction in- but if you have a project there and you arbitration institutions have responded troduced Practice Direction 31, follow- are required to arbitrate locally, this is with an aggressive push into Asia. ing reforms to the civil justice system, becoming less and less of a problem.” The ICC International Court of Arbi- implemented in April last year. CDR (Commercial Dispute Resolution) Last November, London’s Char- tration has invested in the region and it Parties are now obliged to consider tered Institute of Arbitrators (CIArb) now has an office in Hong Kong and one whether mediation is an appropriate set up a chapter in New Delhi, fol- in Singapore, launched last January. way to settle their dispute. lowing the launch of a dedicated arbi- During the inauguration ceremony Those who fail to mediate without tration centre by the Delhi High Jason Fry, the ICC court secretary gen- good reason, or fail to give proper con- Court in November. eral, stressed the importance of the sideration to mediation early on in the For the Chinese arbitration body, Asia-Pacific region, pointing to a 13% proceedings and on an ongoing basis, Cietac, the future is online. The organi- increase in ICC arbitration numbers risk having adverse costs orders made sation is investing in online arbitration, during 2009. against them. CDR 22
  • 80. Arbitration & ADR Asia’s ADR competitors Singapore International Arbitration group of business people to focus on pervision of the Delhi High Court. In the Centre: India’s go-to Asian dispute resolution. It is independ- first weeks of operation it has already re- ent and financially self-sufficient. ceived a number of cases. As India at- Characteristics - Siac was established in Trump card - Being simultaneously a tracts international investment the 1991 to respond to the growing demand common-law jurisdiction and since 1997 a caseload is likely to increase. for dispute resolution by the international part of the People’s Republic of China, community. It is a not-for-profit organisa- whose law is based on German civil law Cietac: vast market potential tion overseen by a board of directors. Hong Kong is perceived as a group com- Trump card - It has recently moved to promise for different parties. Characteristics - Formerly known as the Maxwell Chambers, a specially developed The Uncitral Model Law is applied as Foreign Trade Arbitration Commission, complex. the statutory regime for international Cietac was set up in 1956 under the China It is considered a neutral and arbi- commercial arbitration. It is especially Council for the Promotion of International tration-friendly location and local prominent for China-related disputes. Trade. It is headquartered in Beijing and courts actively support ADR. Singa- has three sub-commissions in Shanghai, pore’s International Arbitration Act is Delhi High Court Arbitration Centre: Shenzhen, and Tianjin, respectively. based on the Uncitral Model Law. It is strong start Trump card - The level of international especially prominent for India-related investment in mainland China is in- disputes. Characteristics - Launched on 25 creasing. Last May the organisation November 2009 to provide institutional published a set of rules for online arbi- Hong Kong International Arbitration arbitration under the framework and pro- tration and local courts are becoming Centre: independent, common-law cedures laid down by a committee set up more supportive of ADR. The potential by the chief justice of the court. market is vast and the scope for growth Characteristics - Established in 1985 by a Trump card - It will operate under the su- is extremely high. Champions of dispute resolution With 12,000 members worldwide, we are the professional home for dispute resolution, setting global standards for dispute management. Membership CIArb is the global membership body for everyone with a professional interest in alternative dispute resolution. Professional Training There are several routes to CIArb membership through the Pathways programme, a progressive training ladder for the newcomer right through to the experienced practitioner. CIArb offers a tiered range of professional membership Conferences & Events ADVERT qualifications which provide public recognition for various levels of expertise. CIArb delivers a wide range of conferences, events and breakfast briefings on the topic of ADR, all offering CPD points. To become a member or to register for one of our courses or events: W T +44 (0)207 404 4023 E M E D I AT I O N • A R B I T R AT I O N • A D J U D I C AT I O N • I N T E R N AT I O N A L A R B I T R AT I O N
  • 81. Strategy & Technology Jackson on e-disclosure The Jackson Review made tough proposals on e-disclosure, to the relief of many a lawyer. Joanna Goodman finds out what they mean in practice. E -disclosure is a significant el- factorily; Alison Potter, a commercial changes will save time and money. ement of litigation costs. barrister at 4 Pump Court, who re- When he presides over a case, he looks Lord Justice Jackson’s final searched the chapter on e-disclosure in through all the documentation and Report on Litigation Costs the preliminary Jackson report; and puts a yellow sticker on the small per- acknowledges this with proposals for Chris Dale, an e-disclosure expert and centage of files that he considers the a clearer, more efficient and cost-ef- a member of Whitaker’s drafting most relevant and pertinent. “Under fective system of managing electroni- group. the new system, I am hoping to review cally-stored information (ESI) The timing of events over the past only the files with a yellow sticker,” he supported by training for solicitors, year has produced a cohesive package explained. barristers and judges. of proposals. The drafting group was The idea is to reduce the volume of The Jackson report endorses the already working on the draft practice paper documentation and the related draft practice direction and ESI ques- direction and questionnaire when Jack- work it creates by applying relevant tionnaire prepared by a working party, son LJ started his review. processes and technology at an early chaired by Stephen Whitaker, the Sen- Simon Brown has been involved in stage with a view to reducing costs ior Master of the Supreme Court, and the pilot scheme at Birmingham Civil and increasing access to justice. submitted to the Civil Procedure Rule Justice Centre. The scheme sought to Because courts and judges have been Committee which in February ap- control costs before they were spent by slow to move from paper to ESI and pointed a sub-committee to consider applying costs management at the ini- judges are not necessarily IT-savvy, he them further. tial case management conference acknowledged that judges, barristers Notwithstanding the fact that they (CMC) and encouraging cooperation and solicitors would benefit signifi- have not yet received approval, the between the parties in relation to han- cantly from the proposed training. proposed changes put e-disclosure at dling ESI. the top of the agenda for litigators and Three themes judges. Disclosure: a judge’s view Alison Potter, who worked on the e- Earlier this year, CDR attended In a speech in 2008, Brown hit at the disclosure chapter of the report, high- Women in eDiscovery, a meeting spon- crux of the issue: “The judge is the end lighted the sections that recognise the CDR (Commercial Dispute Resolution) sored by e-disclosure support provider user of all this disclosure activity. inevitability of e-disclosure – due to Trilantic at the offices of Clyde & Co. What I want to know is this: what is the fact that most documents are The purpose of the meeting was to out- the case about? Which of the pleaded stored electronically – and endorse the line what the proposed new system issues really matter in getting to the draft practice direction and ESI ques- would mean in practice. The speakers heart of the dispute? Can we split the tionnaire. were Judge Simon Brown QC, who in case up and limit disclosure to the sub- Taken together, these focus on three Earles v Barclays Bank imposed costs jects which matter or which matter key themes: sanctions on the successful defendant most?” 1. early and informed costs assess- for failing to conduct disclosure satis- Brown believes the proposed ment; 24
  • 82. Strategy & Technology Lord Justice Jackson 2. a less combative approach; and and rebalancing the costs burden be- have had the relevant discussions and 3. more rigorous case management. tween claimants and defendants. judges a way of checking this has hap- The proposed new rules would re- pened, fortifying Jackson’s recommen- quire solicitors to be familiar with the Strengthening existing rules dations for active case management. relevant terminology and technology Finally, Chris Dale focused on the e- to discuss the options for managing disclosure process itself, emphasising A valuable tool the e-disclosure process. that costs management was at the Another focal point of the meeting was Jackson refers to the value of a heart of the draft practice direction and proportionality. “The rules do not re- demonstration by three specialist questionnaire. quire that no stone should be left un- turned,” said Dale. “For example, a “The judge is the end-user of all this party can state that they have particu- lar information without actually dis- disclosure activity. Can we limit closing it.” Following the presentations, some disclosure to the subjects which solicitors who had struggled through matter most?” the disclosure process highlighted the problem of complexity. The logistics of Judge Simon Brown QC reproducing large amounts of docu- mentation and getting them to court providers of how their software “could He summarised the existing rules impedes efficiency and increases search, sample, categorise and organ- relating to disclosure, which would be costs, they said. For them, Jackson’s ise the data to whittle down as far as strengthened by the draft practice di- proposals on e-disclosure are a wel- possible the potentially relevant docu- rection. The rules proposes additional come element of effective costs man- ments”. obligations relating to communication agement. For large commercial claims and between the parties, who would be re- Nigel Murray, CEO of Trilantic, sug- other actions where costs are poten- quired to discuss sources before the gested Jackson’s proposals should apply tially disproportionate, Jackson recom- first CMC and co-operate to decide the to the disclosure of all documents, and mends a pick-and-mix approach to format for exchange. not be confined to ESI. His point was narrow the scope of e-disclosure at the The draft practice direction is a that although nearly all documents are outset of a case. complete code for e-disclosure, while stored electronically, the term e-disclo- There would be no default option – the questionnaire provides a formal sure might discourage lawyers and the courts would have the ability to de- context for the investigations into a judges who are less tech-savvy. cide between six possible options and party’s sources, including an early ob- Regardless of what happens with CDR (Commercial Dispute Resolution) apply the best approach to e-disclosure ligation to list sources before case man- Jackson’s proposals in general, Dale for each particular case. Although agement, rather than simply to discuss. highlights the important message that judges already have the discretion to According to Dale: “The existing the questionnaire is still a valuable do this, the draft practice direction practice direction is meaningless if the standalone tool. It can be used and rec- clearly sets the parameters of e-disclo- parties have not investigated what ommended by judges to fulfil and doc- sure. their sources are, evaluated their po- ument the existing obligation to discuss Potter then moved on to other pro- tential weight as evidence and the sources, thereby moving towards the posals including reducing and simpli- costs involved in handling them.” objective of more efficient and cost-ef- fying protocols, clarifying thresholds It gives parties a way of stating they fective litigation. CDR 25
  • 83. Strategy & Technology Social networking Five tips for lawyers For enterprising legal professionals, social networks hold a wealth of information and contacts. Chiara Albanese meets those in the know, including a director of LinkedIn, to create a five-step plan. 1. Find the professional and Mediation Exchange”, “Legal IT contacts mentioning the group as a community within the Network”, “Legal Marketing” and common interest,” says Kevin Eyres, community “Leadership for Lawyers” groups all the European managing director of The largest social networks have mil- have memberships in the thousands. LinkedIn. lions of users and it is important to Each offers a forum for discus- In order to develop their network, focus your interaction on members sion, and sharing of relevant expert- Eyres advises users to pay heed to that share the same professional in- ise and articles. Beyond that, they LinkedIn’s suggestions. terests. are a useful tool for building con- “The website automatically sug- LinkedIn, the most popular pro- tacts - and for keeping an eye on gests potential contacts with whom fessional network, boasts more than your peers. the user shares interests and back- 60 million members in over 200 The profile of each user has details ground,” Eyres says. countries, but users can narrow this of professional history, education, and “It is also possible to search for down by joining special-interest affiliations. people or companies using name, ed- groups. “It is possible to add the other ucation, geographic area or key- The “ADR, Conflict Resolution members to the personal network of words as filters.” 2. Let Twitter do your work just those with a Twitter account - your website,” says Alan Sharland, Conceived as an “information and can be tagged using “hashtags” director of Hillingdon Community network” by its CEO Evan Williams, (such as #adr or #litigation), making Mediation. Twitter has increased in size by them easier to find. He manages two different Twitter CDR (Commercial Dispute Resolution) 2,800% in one year according to a The service is of particular interest accounts: @hcmediation, which is recent study by Opera, a search for lawyers because it allows them linked to the Hillington website and engine company. Users send short not only to reach a larger audience, has almost 3,000 followers, and dispatches of 140 characters known but also to stay up to date with mar- @alan_sharland, a personal account as tweets, often containing a link to a ket trends and news by reading other which shows up as the second-highest website or article. users’ tweets. result when searching for his name Updates are public - they can be “Twitter can also provide free on Google. viewed by any internet users, not publicity, because it drives people to “The aim is to get as many fol- 26
  • 84. Strategy & Technology These continuous updates will Twitter allows lawyers to reach a increase the number of followers of larger audience, but also to stay up the profile without the need to man- ually send the updates. As a result, to date with market trends and news Sharland says he doesn’t spend more than an hour a week manag- ing the professional account. lowers as possible that are inter- identify the keywords you are inter- The downside to this strategy is ested in your area of expertise,” ested in and then set the account to that there is no control over others’ he explains. automatically send a stream of tweets: it is therefore important to “To do so, the first step is to posts related to the selected tags.” choose the keywords very carefully. 3. Join profession-specific members can post their CVs and re- boasts more than 4,800 members in networks ceive job opportunities by email. 163 countries. Each profession has its own online The website also offers access LawLink, founded in 2007 by platforms, but relatively few social data, marketing and networking US lawyer Steven Choi, is another networks have so far targeted the features, and research tools. The social network developed for the legal community. basic features are free but the most legal community. It consists of Disputes Loop is a social net- advanced require a premium sub- four separate but interconnected work for ADR professionals, but scription. social networks (attorneys, expert also allows external users to search A similar idea underpins witnesses, law students and law the profile they need for a specific, which allows lawyers to professionals). It claims to receive case. post their profile, make connec- over 50,000 unique visitors a After joining the community, tions, and join groups. The website month. 4.Target your audience and checking their professional status, it made, invest in interacting with don’t leave it alone is possible to understand their needs them. New followers appreciate di- The audience is an asset and it and come up with timely sugges- rect messages thanking them for the should be consistent with your tions and proposals. Journalists are interest, and like to be followed professional identity. The first step also good contacts. The media use back. is to try to replicate your offline Twitter as a source and being Finally, all social networks pro- network. quoted in a publication can immedi- vide a direct messaging service that Connect with actual or potential ately increase visibility and web can be used to engage in a private clients and follow their Twitter pro- traffic. conversation that can lead to a busi- files. By reading clients’ tweets or Once the right connections are ness opportunity. 5. Link it all together simultaneously across all the plat- Already networking? Managing your social network iden- forms. Follow CDR on Twitter for regu- CDR (Commercial Dispute Resolution) tity can be difficult and time-con- Several third parties have also de- lar litigation and arbitration up- suming. There are ways to alleviate veloped applications - such as dates: this, however. TweetDeck and FriendFeed - that LinkedIn, Twitter and Facebook all perform a similar function. They You can also join the discussion allow users to connect their pro- can be downloaded for free and on our LinkedIn group. Just log in files together. This means an up- they allow users to manage multi- and search for “Commercial Dis- date or a link can be sent ple accounts at the same time. CDR pute Resolution”. 27
  • 85. 28 CDR (Commercial Dispute Resolution) Competition & EU
  • 86. Competition & EU Battle for privilege The Commission’s assault on in-house legal privilege in its prosecution of Akzo Nobel has rocked an entire profession. Ben Rigby meets the corporate and private-practice lawyers on the front line. T he 13 judges of the Euro- Company Lawyers Association. sion, and therefore subject to its disci- pean Court of Justice have After a long series of hearings, the plines and ethics, then he should be seen many momentous cases (then) Court of First Instance found treated in the same way as a private- argued before them. against the against the applicants, up- practice lawyer. Yet no subject has gathered as much holding an ECJ decision dating back to The key test of Slynn’s opinion was attention for in-house lawyers as the 1982, in AM&S v Commission. that professional responsibilities case they heard this February. The court held that the advice of in- should take precedence over employ- Akzo Nobel Chemicals Limited & Ors v house counsel was not covered by ment status. Commission of the European Communities LPP, since in-house counsel lacked a The court held differently. An in- has become a key battleground on sufficient level of independence. house lawyer’s status as an employee, legal professional privilege. On LPP, it said the protection only it maintained, erodes his independ- applied to the extent that the lawyer is ence, and therefore distorts “the Background of the case independent - and “structurally, hier- lawyer’s role as collaborating in the The origins of the case go to the heart archically and functionally... is a third overriding interests of justice”. of the relationship between a company party”. Many lawyers now believe that and its in-house legal advisers. This meant that in-house lawyers Slynn’s interpretation was the right The dispute arose from an investi- should not be bound to their clients by one. As one senior in-house lawyer gation by the European Commission a relationship of employment and ex- says: “The role [of in-house lawyers] into alleged anti-competitive practices. pressly excluded communications with has changed since the time of AM&S.” During the investigation, legal pro- in-house lawyers. He adds: “The in-house lawyer can- fessional privilege (LPP) was claimed not aid that process and keep his over emails between the company’s The road back from AM&S client’s nose clean if he can’t write any- management and a Dutch in-house However, many disagree with the thing down.” lawyer, a competition law adviser. AM&S ruling that privileged commu- Another in-house lawyer says: The Commission’s investigating nications must be made for the pur- “Companies often need responsibilities CDR (Commercial Dispute Resolution) team and the company contested their pose and the interest of the client’s to be discharged with legal help, which disclosure, and Akzo Nobel took the rights of defence - and that they must now has to come exclusively from out- matter to court, supported by in-house emanate from external lawyers. side lawyers.” legal organisations. The ECJ also differed from the opin- Nor are such views limited to Highly respected bodies intervened. ion of its own advocate-general, the ECLA, ACC and the IBA; the Law So- Among them were the International late Gordon Slynn QC. ciety made its opposition clear, as did Bar Association, the Association of Slynn held that if an employed the governments of the UK, the Corporate Counsel and the European lawyer is a member of a legal profes- Netherlands and Ireland. 29
  • 87. Competition & EU As Maurits Dolmans of Cleary Got- acknowledgement by a lawyer and his strict ethical codes that lawyers agree tlieb Steen & Hamilton’s Brussels office employer that the lawyer is employed to abide by. makes clear: “Their intervention was to give independent legal advice. The CCBE has suggested that the particularly appropriate since Dutch in- If that is so, then there is no differ- concept of a lawyer must be applied house counsel privilege is at stake, and ence between corporate lawyers and consistently across the member states. the documents were seised in the UK.” in-house lawyers as to their profes- It cites the Lawyers’ Establishment Many interested parties sought sional standing and obedience, rea- Directive, since it applies to in-house leave to intervene, although the ECJ soned the Dutch government. So the as well as private-practice lawyers. limited the number of interveners in rules for LPP should be the same for Hugh Mercer QC is the leader of the interests of managing the court’s both. the UK’s delegation to the CCBE. He time and resources. Given that more than 25 years has says: “The argument in favour of passed since the decision in AM&S, it widening privilege beyond AM&S is is fitting also that the constitutional strongest when the lawyer in question “An in-house position be brought up to date. is a member of a Bar.” lawyer cannot The Irish government argued that the impact of the Lisbon Treaty brought Mercer says this is particularly the case for in-house lawyers who are keep his client’s the Charter of Fundamental Rights into members of the Dutch Bar as their po- nose clean if he play - making it fully justifiable. This meant that the difference in sition arguably provides stronger safe- guards than is usual. can’t write treatment between in-house lawyers and private practice was potentially He also argues that all of those EU lawyers bearing the label of lawyer anything down” discriminatory, it said. should remain members of their re- spective Bars and law societies. Principled objections The in-house view Win or lose, he feels the issue needs Unsurprisingly, the Commission dis- Dolmans, together with his colleague to be addressed, because a common agrees. As a recent report in the Law John Temple Lang, has been advising position would have strengthened the Society’s Brussels Agenda newsletter ECLA on a pro bono basis since the applicant’s arguments. makes clear, the Commission repeated beginning of the dispute. its AM&S arguments before the ECJ. He argues that changes since the Commercial realities The Commission also argued that Lisbon Treaty emphasise one of There are also business reasons why any extension of LPP should be down ECLA’s key arguments. “The ECJ the ECJ should consider reversing the to the European Parliament as a mat- cannot prescribe a one-size-fits-all rule decision, say other advocates who ap- ter of public policy. to determine who is a lawyer entitled peared before the court. Debate in opposition focused first to privilege,” he says. Georg Berrisch and David Hull, on arguments made by national gov- Member states are competent to de- partners in Covington & Burling’s ernments. The Dutch government fine who is or who is not a lawyer, Brussels office, represented ACC in went first. says Dolman. He points to the diverse the Akzo case. It argued that the employment of position within the EU on recognising Hull comments: “The striking irony Dutch in-house counsel had been ex- LPP. in the European Commission’s posi- amined and legislated for subsequent “The Akzo judgment should not de- tion is that it emphasises the para- to AM&S. prive certain lawyers of their national mount importance of compliance, and Legal independence and regulatory law rights and their clients of the pro- is imposing increasingly draconian compliance with Dutch Bar rules were tection provided in their national fines on companies that fail to do so.” an express part of such advisory con- laws,” argues Dolman. He adds: “At the same time, the tracts, it said. That trumps company Others have taken a more nuanced Commission severely handicaps a loyalty, it claims. view. Submissions by the IBA, ACC, company’s ability to comply with the There is a system in Dutch law of and CCBE effectively focus on the law by denying legal privilege to the CDR (Commercial Dispute Resolution) 30
  • 88. Competition & EU “The Akzo judgment should not deprive certain lawyers of their national law rights and their clients of protection” Maurits Dolmans, Cleary Gottlieb Steen & Hamilton very lawyer best placed to advise the competition rules. company in the first instance - the in- Referring such questions to outside house lawyer.” lawyers, he argues, will often be less Dolmans agrees, adding that the convenient, less timely, and more ex- practice contradicts the Commission’s pensive than seeking compliance ad- expectation that European companies vice in-house. should self-regulate. Yet the Commission’s track record livered her opinion, repeating the ar- Companies no longer have the op- on recognising such difficulties is guments of the past. tion of asking the Commission for a poor. As the court considers her verdict, ruling on whether business practices So all eyes were on advocate-gen- in-house lawyers will continue to and agreements are compatible with eral Kokott in late April, when she de- watch, and so will we. CDR Faultless product Out now: The International Comparative Legal Guide to Product Liability 2010
  • 89. Competition & EU In-house privilege: Kokott’s Akzo opinion is unwelcome The latest advocate-general’s opinion insults in-house counsel independence, writes Douglas Peden of Osborne Clarke. He also comments on the practical fallout from the case. Advocate-general Kokott O n 29 April 2010, advocate- stronger personal identification with” general Kokott [pictured] “Many in-house their employers than external lawyers. gave her opinion in the long-running litigation of counsel will The appellants and interveners had argued that the position in the EU had Akzo Nobel Chemicals Ltd & Ors v Eu- consider that the changed since the case of AM&S v Com- ropean Commission. She recom- mission, which had laid down the prin- mended that communications by AG’s opinion is an ciple that in-house lawyers were not in-house counsel with their business continue to be disclosable, and not insult to their sufficiently independent. The AG re- jected the argument and considered protected by legal professional privi- professional that there is “no discernible general lege, in competition investigations. If the Court of Justice follows her independence” trend towards treating enrolled in- house lawyers in the same way as opinion and dismisses the appeal this lawyers in private practice”. would be a disappointing result. Many mained protected by LPP in relation to Moreover, there are still a significant in-house counsel will consider that the those investigations. number of EU states that prohibit in- AG’s opinion is an insult to their pro- house lawyers from becoming mem- fessional independence. The advocate-general’s opinion bers of a Bar or Law Society. Advocate-general Kokott’s opinion is The AG also rejected the argument The current position that LPP applies only to communica- that LPP should be a matter for the laws CDR (Commercial Dispute Resolution) The Akzo decision being appealed was tions between a client and an inde- of each member state. In competition in- given in the European Court of First In- pendent, external lawyer in the exercise vestigations, LPP has to apply in a uni- stance in September 2007 and is well of a client’s rights of defence. Despite form manner across the EU. The AG’s known. The court confirmed that advice strong submissions from the appellants view is that to decide to the contrary on competition matters given by in- and from the intervening governments would not be compatible with the princi- house counsel to their business is not and professional bodies, in her opinion ple of the internal market. protected by legal professional privilege salaried in-house counsel are not inde- The general tone of the opinion (LPP) in relation to competition raids pendent. In her view, in-house counsel gives the impression that AG Kokott and investigations by the EU. Competi- are both “economically dependent on” had no doubt whatsoever that the ap- tion advice given by external counsel re- and “usually exhibit a considerably peal should be dismissed. 32
  • 90. Competition & EU “Where there is nothing in writing, nal communications on actual or poten- tial competition law infringements - there is nothing to be disclosed” where there is nothing in writing, there is nothing to be disclosed. The approach of avoiding written, The Court of Justice usually, but not ments which are based on the inconsis- competition-sensitive internal commu- invariably, follows the AG’s opinion. tency of LPP rules across the EU states nications is heavily ingrained into and the need for a consistent applica- major corporates. There are standing Comment tion of EU competition rules. It was procedures, from CEO down, that po- A major thrust of the AG’s opinion is probably inevitable that the machinery tentially damaging competition con- that there is a distinction between the of the EU legal system would come cerns should first be raised verbally. independence of in-house lawyers and down in favour of retaining the current The policy for dealing with any written external lawyers. At least as far as the position. communications is then managed care- UK is concerned, we have to query that fully in conjunction with in-house position. Are external lawyers really Practical points counsel. much less dependent on income from If the Court of Justice follows the AG’s If the appeal succeeds, in-house their clients than lawyers employed in- opinion, the position will obviously re- counsel will have another weapon in house by the client? main as it is. If the Court of Justice takes their armoury if something damaging is Given the commercial imperative for a different view and allows the appeal, sent to them, in writing, for the purpose external lawyers to understand and get what is the likely practical outcome of of obtaining competition advice. They close to the business of their client, there all of this? would be able, legitimately, to protect is an ever increasing tendency for exter- If the appeal ultimately succeeds, their client by withholding that docu- nal lawyers to forge “a stronger personal companies are unlikely to change how ment from the Commission. In-house identification” with the client. Any dif- they communicate, internally, about counsel would welcome that added ference between in-house and external possible breaches of competition law. protection. lawyers can only be a matter of degree. Over the years, in-house counsel best The Court of Justice is expected to It is harder to criticise the AG’s argu- practice has been to avoid written inter- give its judgment later this year. CDR Like what you see? There’s plenty more at Plus: Free weekly newsletter Conference diary Exclusive discounts on dispute resolution events The latest senior litigation and arbitration jobs
  • 91. Turning American? N o rest for the wicked? Months after the Supreme Court issued its emphatic judgment on the long-running bank litigation over UK bank charges, the threat of financial services litigation may be even greater than it was then. Business groups say the Financial Services Bill would encourage lawyers to create costly class action lawsuits, in the first major step to- wards implementing such proceedings in the UK. They also warn that in the current political climate the pace of change could do more harm than good. British business concerns Although the Bill is aimed at the financial services sector, the Confed- eration of British Industry (CBI) has warned of a risk of contagion to other sectors of the economy. Matthew Fell, the CBI’s director for corporate affairs, says: “[The Bill] risks importing a US-style litigation culture to Britain. This would burden the economy, and encourage ill-advised class action lawsuits.” CDR (Commercial Dispute Resolution) He cites evidence from the European Justice Forum, a non-profit group opposed to such claims. The organisation claims tort litigation in the US costs about $825 per citizen per year - about 2% of the country’s GDP. This is much higher than European countries, where it accounts for about 1% of GDP. Maggie Craig, acting director-general of the Association of British Insurers, also foresees a shift to American-style litigation, one she la- bels as “worrying”. For Craig, the Bill threatens to add unacceptable costs for consumers and businesses. 34
  • 92. Collective Redress y finds In the Financial Services Act, Ben Rigb growing fears of a US-style litigation culture - and the business lobby pushing back. What lies beneath Fell and Craig are not the only indus- basis that the perception is accurate. He referred to the blackmail effect “The Financial try commentators to push back against what they see as a compensa- of lawsuits. In cases like class ac- tions, businesses feel pressure to set- Ombudsman tion culture. A 2008 event hosted by tle rather than expend the “huge Service is an Lloyd’s of London saw two peers, costs and emotional resources” re- quired to win. informal service For Falconer - commenting on the heavily stacked in Lord Falconer Northern Rock litigation, defeated in the Court of Appeal in June 2009 - favour of “talk of litigation involved taking the compensation culture to its limits, complainants” and way beyond”. Nathan Willmott, His argument was that businesses treat the risk of litigation as a strategic Berwin Leighton gamble rather than a matter of justice. “It’s the nature of business that if Paisner the risk does not occur you make money, and if it does you lose,” said that litigation and liability risk were Falconer. “There is not some third impacting company operations and course called litigation.” strategy. The consequences, Falconer said, European businesses were increas- were that “regulators become defen- ingly under threat of litigation, sive in what they do, and unwilling whether from US courts extending to allow the financial sector to take their extra-territorial reach or from the very risks on which our coun- within Europe. also likely to take the floor in the try’s commercial success depends”. The Lloyd’s study showed more Lords, speak out on the issue. He underlined the importance of than one in three companies had in- One was Lord Falconer, the for- courts being willing to strike out creased the prices of products in the mer Lord Chancellor. Falconer has cases and for risk to be viewed “in its past three years as a direct result of significant backbench presence in the proper context” by defendants and increased litigation risk and associ- Lords, and is now a consultant to courts alike. ated costs. Gibson Dunn & Crutcher. A third of companies reported they CDR (Commercial Dispute Resolution) Citing the collapse of BCCI, and Surveying risk had become more bureaucratic and the Equitable Life cases, Falconer The other peer to speak in 2008 was more risk-averse, as a direct result of said: “There is a perception that for Lord Levene, the chairman of liability issues. every injury there must be someone Lloyd’s of London. The insurance in- As Levene said then: “Put simply, who will be liable to pay the losers. dustry body had published a study, fear of future litigation appears to put For every business risk which goes commissioned jointly with the Econ- constraints on the ambitions and wrong there is someone to sue.” omist Intelligence Unit, on corporate growth prospects of many businesses He acknowledged the courts’ re- liability risk. around the world.” buttal of this perception, but said it The study showed that global This, he said, could have a devas- doesn’t matter: society acts on the business leaders were worried - and tating economic impact. 35
  • 93. Collective Redress The two-way costs-shifting rule protects defendants against speculative litigation. But Jackson suggests giving courts discretion to limit or discard the rule in collective actions Defendants strike back ner, describes the FOS as “an informal of consumer complaints with common Law firms have been active too in push- service heavily stacked in favour of characteristics, making them appropri- ing back against class actions. Herbert complainants”, a point agreed by Fell. ate for collective actions. Smith, through the firm’s influential dis- Lawyers in the UK have also said putes head Sonya Leydecker, last year The Bill the FOS has struggled to handle commissioned research on class actions Of course, collective redress is not mass complaints. The pressure to in both their EU and UK contexts along- new. The Civil Justice Council (CJC) manage spikes in complaints, say side those on costs. Leydecker felt published a report in 2008 which rec- critics, has damaged the quality of claimants had succeeded in marginal- ommended that the UK should estab- adjudication. ising the legitimate concerns of large lish its own collective action system, The Bill attempts to fix the com- businesses. distinct from the US model. plaints system and proposes a combi- The survey suggested that in-house It said claims should be undertaken nation of opt-in and opt-out counsel felt that there was no “unmet under an opt-out as opposed to opt-in proceedings. It also allows for repre- need” for new procedures. One in- model, and encouraged representative sentative actions, possibly by the Of- house counsel said: “Certain compa- bodies to be given the power to bring fice of Fair Trading or FSA (building nies would be likely to become actions. on the experience of the OFT’s bank perpetual defendants.” The Ministry of Justice’s response, charges litigation), and defines finan- CDR (Commercial Dispute Resolution) They also pointed out that financial over a year later, suggested that indi- cial services tightly. services were already heavily regu- vidual sectors should consider whether Regulators can argue for or against lated, with the Financial Ombudsman collective redress would close any gaps a particular class action. The Bill is Service (FOS) providing a free service on access to justice, or if such gaps ex- modelled more closely on the CJC re- for claims up to £100,000 for consumer isted at all. port than the Treasury’s own white retail banking customers, on the basis Financial services, thanks to the bank paper. of what itsees as fair and reasonable. charges litigation, is the first sector to re- The CJC report suggested class ac- Nathan Willmott, a financial serv- ally put these principles to the test. tions would only be available in excep- ices litigator at Berwin Leighton Pais- The sector receives a large volume tional circumstances, and would remove 36
  • 94. Collective Redress FSA oversight of such actions. As such, it mains cloaked in the detail. May, which effectively gives less than is more liberal. three months. It allows for a new regime on dam- Star-spangled banner? Craig has criticised the hurried nature ages, and retains the English tradition of Willmott points out three reasons why of the legislation. “We are alarmed this is two-way costs-shifting - the loser pays the UK has a more restrained litigation being rushed through without proper rule - in such cases. The rule acts as a dis- environment than the US: the absence consultation with industry,” she said. incentive to group actions, protecting de- of contingency fees, the lack of an opt- Well managed change balances the fendants against speculative litigation. out model, and the loser pays costs needs of business and consumers. But the Jackson Review suggests giv- model. However, the Financial Services Bill ing courts discretion to limit or discard As far as retail banks are concerned, comes in a time of unprecedented the rule in collective actions and replace he says, these restraints will no longer public resentment of banks and it with one-way costs-shifting, meaning apply. “All three of these core princi- bankers. only successful claimants are guaran- ples are to be shelved, or eroded, by the As such there is a danger that legiti- teed the recovery of reasonable costs. Jackson Review proposals and the Fi- mate objections will go unheard amid If courts were granted this power de- nancial Services Bill,” says Willmott. the angry cries for justice. If this hap- fendants, such as banks in collective Like Fell and Craig, his position is in no pens, it will damage the economy. damages claims, would have no such doubt: UK litigation is turning American. Financial institutions and their guarantee. With a general election looming the lawyers are already counting the poten- And there is still a lot of room for Bill will need to be passed before tial cost of collective actions - con- practical interpretation: the devil re- polling day. This is expected to be in sumers might ultimately pay it. CDR Access all areas Sign up for CDR Premium to access all our articles and guarantee your next print edition.
  • 95. 38 CDR (Commercial Dispute Resolution) Region Focus: Spain & Portugal
  • 96. Region Focus: Spain & Portugal Rivals in crisis As the weight of insolvency becomes unbearable, the courts in Spain and Portugal are experiencing a crisis within a crisis. Their responses show the old imperial rivals share plenty of common ground – and not just physically. Ben Lewis reports from Madrid and Lisbon. CDR (Commercial Dispute Resolution) 39
  • 97. Region Focus: Spain & Portugal I beria. It’s not a word to be ut- when the countries in question are so fields Bruckhaus Deringer. tered lightly. Even after 350 defiantly separate? “In places like Barcelona everyone years, the spectre of the “captiv- It is true that Spain and Portugal was planning their insolvencies. In the ity” – a sixty-year period of have very different legal systems, not first days of September everyone was Spanish rule – still lingers over Portu- to mention culture, language and poli- queuing outside the filing office to ask gal. tics. for suspension of payments.” As recently as the First World War, But even the most established Last year the number of insolvency the fear of reintegration was a central lawyers admit that the global age has declarations soared to nearly 6,000, part of Portuguese politics and culture. brought with it some blurring of the and this year has so far been similar. This threat is gone for now at least, borders. After all, the divisions mean The nature of the insolvent companies but the rivalry between Spain and Por- little to foreign clients, as long as they is also changing, as the fallout spreads tugal is undiminished. The two coun- don’t obstruct good business, and this away from property, the once-rigid tries have bitterly competed over the is having a local effect. backbone of Spain’s economy. centuries to assert their dominance, “What I see in the future is the inte- “Last year was the real-estate sec- each amassing a sprawling empire. gration of the two economies. Not the tor,” says Juan Ignacio Fernández, a Nowadays the empire-building is integration of the two jurisdictions, but partner at CMS Albiñana & Suárez de economic: both countries have fiercely the integration of the economies is a Lezo. “This year there are other sectors independent business communities given,” says António Pinto Leite of that have increased in insolvencies, with legal markets to match. Morais Leitão Galvão Teles Soares da such as the automotive sector and re- Nevertheless, through a cautious se- Silva & Associados. tail.” ries of associations, mergers and new The extent of this integration – and As a result the courts are creaking offices, the Spanish law firms have how it affects law firms – will become under the pressure. crept west. evident over time. As it does, the two It’s not a problem of quality. As The integration of Spain’s Cuatre- legal communities must grapple with a David Arias of Pérez-Llorca says: “Al- casas with Portugal’s Gonçalves common crisis: a rising tide of insol- though the Spanish courts aren’t bad, Pereira Castelo Branco is a case in vency, which threatens to engulf their they are terribly, terribly slow.” point. Tabled in 1996, the merger was courts. But according to some, the ineffi- signed four years later and became re- How each country is meeting this ciency undermines the quality of the ality in 2003. Last year the two firms fi- challenge is a window into their funda- judgments. Sierra is among them. nally came to share a name, mental similarities – and differences. “This produces delays and prevents Cuatrecasas Gonçalves Pereira. defendants from having their case This February, Uría Menéndez con- properly explored, and prevents solidated its presence in Lisbon by judges from properly considering the merging with Proença de Carvalho, a prestigious Portuguese firm – a dra- matic vote of local confidence after last Spain Spanish lawyers will tell you their merits of the case,” he says. For him, the creation of specialised commercial courts (juzgados de lo mercan- year’s loss of office head Francisco Sá courts are colapsados. That is not to say til) in 2004 has failed to alleviate the glut Carneiro. they have collapsed – the word of cases in the country’s court system. Garrigues and Gómez-Acebo & roughly translates as “congested” – but “It’s a patchwork,” he says. “It’s try- Pombo are thriving in Portugal too. All the reality isn’t far off. ing to have a quick and fast solution of them are determined to transform In a typical year around 1,000 Span- for a very big problem.” into that most elusive thing: the Iberian ish companies declare themselves Other reform efforts have included law firm. bankrupt. But in 2008 something an update to Spain’s Insolvency Act. For those without such ambitions, snapped. The legislation, in effect since 2003 and of course, this is nonsense. How can “I remember the month of August further amended last year, is quite pro- you have an Iberian law firm, they ask, 2008,” says Vicente Sierra of Fresh- gressive. CDR (Commercial Dispute Resolution) 40
  • 98. Region Focus: Spain & Portugal Its most distinguishing feature is that it combines the previously sepa- Bruckhaus Deringer, Rafael Murillo, has further advice for the committee. “We have to bring rate procedures for suspension of pay- ments (suspensión de pagos) and “Try to reinforce the number of judges and amend the law in a way in solutions that are insolvency (quiebra) into a single that really makes an impact on the way totally away from process (concurso). Nevertheless there is still ample these cases are handled,” says Murillo. He would like to see more innova- the systems and room for improvement. Luis Divar of Diaz-Bastien & Truan tions of the types regularly used in Anglo-Saxon countries, such as the in- traditions that have identifies three problem areas the Law troduction of schemes of arrangement, existed in Spain has failed to properly address in com- mercial insolvency: under which a majority agreement among creditors can force the hand of previously” • high costs arising from receiver and lesser stakeholders and thus limit the lawyer fees; squabbling over assets. • slowness (due to the volume of “We have to bring in solutions that cases, as well as delaying tactics); and are totally away from the systems and • logical inconsistencies (in particular traditions that have existed in Spain the lack of incentive for a creditor to previously,” he adds. reach an agreement where the insol- Spanish lawyers can’t seem to agree vent company has more assets than lia- what’s going to happen next. bilities, but lacks liquidity). “Insolvency filings have peaked,” Divar hopes a further round of re- predicts Daniel Jiménez. “I don’t think forms, under discussion and due early we’re going to see increases of 300% to next year, will take these issues into ac- 400%. I think it’s going to be steady. count. Divar has a far less optimistic out- Sierra’s partner at Freshfields look. Insolvencies will continue to rise, Rafael Murillo BARCELONA I BILBAO I LISBON I MADRID I PORTO I VALENCIA I BRUSSELS I LONDON I WARSAW I NEW YORK I BUENOS AIRES I LIMA I MEXICO CITY I SANTIAGO DE CHILE I SÃO PAULO I BEIJING “Best Spanish Law Firm of the Year” Chambers Europe Awards for Excellence 2010 "European Law Firm of the Year" The British Legal Awards 2009 "Law firm of the year in Spain" IFLR European Awards 2009 MADRID LONDON LISBON Tel.: +34 915 860 400 Tel.: +44 (0)20 7260 1800 Tel: +35 1 21 030 86 00 mail: mail: mail:
  • 99. Region Focus: Spain & Portugal he believes: there is more drama to chip businesses with complex commer- come out of the collapse of property cial disputes. Domestic parties remain giant Martinsa-Fadesa, Spain’s largest- wary. ever corporate default. Even some of the blue-chips are still Now that the ratings company Fitch unconvinced. “We have a client – one has stripped Spain of its AAA credit of Spain’s 35 biggest companies,” says rating, further turbulence is assured. Daniel Jiménez of Ashurst. “They said: More than ever, the country’s courts ‘We are sceptical of arbitration and we need a saviour. Great expectations There is a hint of evangelism in the “If a client loses a way the Spanish talk about arbitration. Bring up the subject and you’ll hear lawsuit, the reading hope and excitement that hasn’t been heard in common-law countries for is: ‘very bad judge’. decades. If a client loses an The Arbitration Act of 2003 was a long-overdue update of legislation dat- arbitration, the ing back to 1988. The Law reinvigo- rated a practice that was in danger of reading is: going stale. ‘something very “Thirty years ago our Supreme Court didn’t apply the New York Con- strange has vention,” says Juan Viaño of Gómez- Acebo & Pombo. happened’” “I can’t remember having spent any Juan Viaño, time in arbitration 20 years ago. Ten years ago, when I joined this firm, we Gómez-Acebo & had an eye on arbitration but it wasn’t Pombo an important part of dispute resolu- tion. “Today I work significantly more in arbitration than in litigation. This ten- dency increases every month and every year. Now the question is: where don’t include arbitration clauses in our are we going to be in another 10 contracts.’” years?” One of the main reasons for the One hint of things to come lies over- scepticism is concern about the inde- seas. Every major Spanish law firm is pendence of practitioners. Whereas heavily targeting Latin American busi- judges are seen by Spanish clients as ness, and a part of this drive is offering separate from the business community, a viable Spanish-speaking arbitration arbitrators frequently mingle with seat in Madrid. businesspeople. This is hard to stom- ness community they are better placed At least one recent arbitration in ach for those who are unused to it. to judge a dispute – particularly as par- Madrid involved no Spanish parties at “If a client loses a lawsuit, the read- ties are able to select them. all. ing is: ‘very bad judge’,” says Viaño. “Judges tend to apply the law, One experience recounted by David “If a client loses an arbitration, the while arbitrators tend to apply the con- Arias of Pérez-Llorca reflects a growing reading isn’t ‘what a bad arbitral tribu- tract,” says Virgós. “If the contract is recognition of Spanish arbitration over- nal’. It’s: ‘something very strange has complex, in the face of difficulty a seas: “Last year I was in Miami attend- happened’.” judge will tend to go to see what the ing an ICC Congress. At a mostly Since arbitrators have a vested inter- codes say, whereas an arbitrator will Spanish-speaking conference I met Ju- est in being independent, the challenge try to see what answers are in the con- CDR (Commercial Dispute Resolution) lian Lew QC, who doesn’t speak Span- is addressing perceptions. tract. So in a way arbitration gives you ish. “It is not only that they are impar- more control over your transaction.” “I asked him: ‘What are you doing tial but that they are seen as impar- The mission of convincing their here?’ He replied: ‘You know, interna- tial,” says Miguel Virgós, a partner at countrymen of arbitration’s merits falls tional arbitration now speaks Spanish. Uría Menéndez. to the Club Español del Arbitraje. The Here is where a lot of the interesting In his view the route to success is club was formed in 2005 as a vehicle cases are taking place.’” not promoting arbitration as cheaper for Spain’s dispute resolution lawyers Nevertheless, arbitration’s popular- or faster, but emphasising the fact that to establish best practice, lobby the ity at home is mainly restricted to blue- since arbitrators are closer to the busi- country’s government, and promote 42
  • 100. SJ Berwin Litigation and Arbitration Setting the strategy for success Berlin Brussels Dubai Frankfurt Hong Kong London Madrid Milan Munich Paris Shanghai Turin SL Berwin LLP is a limited liability partnership registered in England no OC313176 19552
  • 101. Region Focus: Spain & Portugal “We can’t just take the benefits of our home jurisdiction when we want to be a global player” Alvaro Mendiola, Alvaro Mendiola Cuatrecasas Gonçalves Pereira arbitration among the Spanish busi- core of the dispute can be summarised evolutionary step for Spanish arbitra- ness community. with reference to the original agree- tion. The charm offensive appears to be ment and to the contemporary records. “We welcome any modification of bearing fruit. “I’m beginning to see Anyhow, it is a fact that civil-law sys- the law,” he says. “It’s an aspiration.” that smaller companies and businesses tems have successfully dealt with com- are willing to agree to arbitration plex cases for decades without any Mediation: a cultural unknown clauses,” says Carlos de los Santos of need for extensive discovery. Mediation is another aspiration that Garrigues. “As clients increasingly demand flat could clear up the courts even more ef- “Those arbitration clauses are usu- rather than hourly fees, arbitration will fectively, but lies maddeningly out of ally attributed to institutions, particu- naturally become lighter because grasp. The problem is that it isn’t a larly the Corte de Arbitraje de Madrid, lawyers have less interest in prolong- very Spanish thing to do. which I think is doing a very good job. ing a dispute,” he adds. “It’s not embedded in our way of At least they’re beginning to look at Other lawyers seem to welcome the thinking,” says Carlos de los Santos of the possibility of including an arbitra- prospect of wider discovery. Garrigues. “When you have a client tion clause.” “The real issue in discovery is the that doesn’t like you to say ‘good Virgós is even more optimistic. In obligation you have in the US to show morning’ to the other party’s counsel, his view economic recovery should act every single thing in the courts in the how can you mediate?” as a catalyst for arbitration’s develop- presence of the other party, which we The consensus among Spanish ment in Spain, perhaps eventually put- don’t have here. It’s a real substantive lawyers is that Latin clients feel once a ting it on a par with the UK. change in mentality,” says Álvaro third party has been brought into a dis- And herein lies an opportunity. The Mendiola, a partner at Cuatrecasas pute then the time for conciliation is scourge of UK and US arbitration is the Gonçalves Pereira. over. Nothing short of a binding judg- excessive discovery requirements. But But he adds: “I wouldn’t oppose ment will do. in Spain, discovery is very limited – it having it. I think the discovery system There are also problems in legal cul- can’t be used as a fishing expedition. is a very good one. It encourages par- ture. “Trying to persuade less sophisti- A Latinised version of arbitration, ties to come to an agreement.” cated litigators to use what is lighter on discovery and expense, Mendiola recognises full discovery essentially the most sophisticated form CDR (Commercial Dispute Resolution) could become Spain’s trump card. would be unwelcome among Spanish of dispute resolution is very difficult,” For Arias, the ideal situation is a parties, perhaps even more than puni- says De los Santos. compromise between common-law tive damages. The answer? Get with In part, scepticism about mediation and civil-law values. “In medio stat vir- the times. comes from prior experience. For tus: virtue lies in the centre,” he says. “We can’t just take the benefits of many years Spanish court procedure But how do you achieve an effective our home jurisdiction when we want has used a similar process: the acto de judgment in an intricate dispute with- to be a global player,” he says. conciliación. out extensive discovery? “It’s a vicious Gómez-Acebo & Pombo’s Francisco At a case’s first hearing, the judge circle,” says Arias. “But in the end, the Peña also sees heavier discovery as an asks the parties if there is any chance 44
  • 102. Region Focus: Spain & Portugal “When you have a client that doesn’t like you to say ‘good morning’ to the other party’s counsel, how can you mediate?” Carlos de los Santos, Garrigues of reaching an agreement before the world,” says David Arias. done by people who haven’t ever been proceedings begin. To which the an- In general, lawyers praise the confi- to court.” swer is invariably: no. dentiality provisions. But everything But the Bill does have a small core This mechanism has had a spectacu- else seems to miss the point of media- of supporters in the Spanish legal mar- lar lack of success – most lawyers view tion, which is by nature an organic, in- ket. Daniel Jiménez of Ashurst says the it as little more than a formality, or a formal process. Bill’s critics must accept that mediation delaying tactic at best. “No-one takes it So why reinvent the wheel if media- is a fledgling practice in Spain. Only seriously,” says Sierra. tion is so alien to the Latin mentality? once a culture is in place can it start to Nevertheless in 2008 the European Some blame political arrogance. improve, he argues. Commission published a Directive re- Among them is Jose Antonio Caínzos “In my opinion since mediation is quiring member states to put in place a of Clifford Chance. “The ministry of unknown in Spain there is very little to framework for mediation. justice and the government are always criticise. You can’t just impose media- The government dutifully re- saying justice in Spain is slow. For tion: you have to take things step by sponded with a draft Law to imple- politicians – especially with relation to step,” he says. ment the directive: the Civil and elections – it’s very attractive to say to “Cases below €6,000 are not going Commercial Mediation Bill. voters: ‘I am changing justice to make to be the ones that drive forward medi- But the country’s lawmakers also it quicker.’” ation in Spain. There is a huge igno- did something quite unexpected. In- But if that is the government’s mo- rance in Spain of what mediation is stead of adopting an international tive, it could backfire, says Caínzos. and the Law helps to explain what me- standard, as they had done so success- Mediation may alleviate pressure on diation is. fully with the Uncitral Model Law, the courts by removing the need to “For Jiménez, the Bill’s critics may they opted to start from scratch. hear disputes under €6,000 – but the have another agenda: “I understand Thus the Spanish version of media- resulting improvement in access to jus- that some arbitrators can be worried tion will be compulsory and massively tice could limit the effect as more dis- about mediation because they can lose bureaucratised. If the Bill is passed in putes arise. work.” its current form (as seems likely), me- There even seems to be an air of Whatever their motivations, the diators will be required to register with enigma about precisely who is respon- message from Spain’s arbitration the justice ministry, and must take out sible for the notorious Bill. Many Span- lawyers is clear: if the government professional insurance policies. ish lawyers are annoyed that they were wishes to regulate mediation it should There will be no right to waive not consulted. not interfere with the runaway success agreements, which will have an en- “My personal thought,” says Juan of Spanish arbitration. forceable status akin to res judicata. Ignacio Fernández of CMS Albiñana & Arias believes the Bill will be passed “There’s nothing else like this in the Suárez de Lezo, “is that it is being unchanged into law – and ignored. “I
  • 103. Region Focus: Spain & Portugal will be happy,” he says, “if at least it Everything is encrypted, and the Rescue and restructure doesn’t interfere with arbitration.” Portuguese Bar association regulates If only this celebration of efficiency ex- access. It is possible to liaise with the tended to court procedure. Like its courts almost exclusively online in the easterly neighbour, Portugal suffers Portugal run-up to litigation. Judges can even rule via Citius. Practitioners are delighted. “There from a cripplingly slow judicial sys- tem, particularly when it comes to liq- uidating a company, which can take It’s Saturday afternoon. Down a side- are some critics that say this is just a up to four years. street on the fringes of Lisbon’s trendy façade that the government is making. Some respite came in the form of a Bairro Alto, scores of middle-class Por- But as lawyers this has been a great new Insolvency Law in 2004. The legis- tuguese are taking shelter in one of the help,” says João Maria Pimentel of lation consolidated the processes of re- city’s coffee shops. Uría Menéndez. structuring and insolvency, and gave There’s something quintessentially He adds: “Normal mail is disap- rise to new opportunities to effect a Portuguese about the scene. And it’s pearing. Nowadays we receive it all by corporate rescue, even during the liq- not the egg custard pastries. email – paper is disappearing from our uidation process. The room is littered with gadgets: desks. Not only are the lawyers using Meanwhile the company enjoys Apple laptops, BlackBerries, Bluetooth the internet but also the judges and court protection similar to that of headsets and other hi-tech gizmos bailiffs.” Chapter 11 proceedings in the US. punctuate the view. It’s a stark contrast Portugal’s digital revolution is also But it wasn’t until 2006 that any with the ancient cobbled streets out- finding a foothold in the law firms’ change was seen in practice. “Now side. own systems. One firm has taken this there is clearly a different movement,” Technology is central to the country’s further than any other. says Nuno Líbano Monteiro of PLMJ. mission to disprove its sunny, laid- Abreu Advogados has a separate di- “The banks are clearly interested in back Mediterranean stereotype. And vision which only practises mass debt rescuing the company.” one of the most fervent fronts is the recovery. The service depends on vol- And what a difference it makes. legal sector. ume, so efficient, modern technology is “The probable speed of the insol- Unlike in Spain, where the experi- essential for it to be profitable. vency process has a lot to do with the ence of technology differ wildly (one Although the service pre-dates ability of the courts to deliver,” says lawyer describes local attitudes as Citius, the system’s introduction has Frederico Gonçalves Pereira of Vieira being “at the end of the nineteenth been a massive boost, says the partner de Almeida. century”), the Portuguese legal market in charge of the project, Natália Garcia “When there’s a will to restructure – is unanimous in praising the uptake of Alves. Clients are able to follow the when there’s an attractive project – the CDR (Commercial Dispute Resolution) digita methods. progress of every case, even down to courts are not a problem. The prob- The jewel in the crown is Citius, a tracking the relevant phone calls made lems come with the liquidation of the case management system run by the by Abreu’s lawyers. company. government. “It is great because we can know “The legislative change of 2004 is Lawyers and their clients log in what is going on at any time,” she clearly helpful because it gives the each morning and check if any docu- says. “Before Citius even existed we creditors the opportunity to intervene ments have been served by the court, already did this kind of practice but more. My experience is that this inter- without the need for paper or cross- we had to go to courts with docu- vention by the creditors has been more country travel. ments.” effective in the past two-and-a-half 46
  • 104. Region Focus: Spain & Portugal years because the importance of the (BPN) collapsed in late 2008, swiftly of insolvency. credit is a lot bigger and with higher followed by accusations of fraud. “It was like a house of cards,” re- credit we have the will to find a recov- The government had little choice calls Líbano Monteiro. ery solution.” but to bail out the bank, but the real Small industrial producers of tex- This epiphany has come at the right damage was collateral: a host of com- tiles, cork and sunflower seeds are also time. Stricken by losses totalling €700 panies connected with BPN, most of under pressure. million, Banco Português de Negócios them in real estate, now face the threat Many will be saved; some will not. IFLR Law Firm of the Year PORTUGAL 2009
  • 105. Region Focus: Spain & Portugal Attempts to save the Portuguese arm sues that you have to deal with first in Despite having legislation in place of German shoemaker Rohde went the morning, because if you wait two since 1986, providing for ad hoc arbi- awry as creditors lost faith in the com- days or three days they become huge tration, companies remain uncon- pany’s management, which was hugely issues,” he says. vinced about the merits of the process. dependent on the company’s German In Pinto Leite’s view the courts have Manuel Cavaleiro Brandão of PLMJ parent. much to learn from law firms. (After says the lack of belief is particularly Where recovery fails, companies all, he says, “we were all colleagues pronounced among smaller compa- drop into the tortuous process of insol- back in university”.) nies. vency. The best judges should focus on the “They like to see things in court,” he António Pinto Leite of Morais complex cases; those with manage- says. “It’s a kind of private vice of Leitão Galvão Teles Soares da Silva & ment skills should manage; and the many of our clients!” Associados, is succinct: “In Portugal rest should concentrate on clearing the Addressing suspicion about arbitra- it’s difficult for a company to die.” litigation backlog, hearing cases on tion is difficult, particularly as the Por- As the firm’s managing partner he which they are actually suited to rule. tuguese Arbitration Association lacks believes the issue is entirely down to the impact of its Spanish equivalent poor management – of personnel, of Suspicious minds (which launched a Portuguese chapter cases and of bureaucracy. If arbitration is characterised by evan- in 2006). “When you have a high pressure of gelism in Spain, in Portugal it is stuck Cavaleiro Brandão blames a lack of bureaucratic issues, those are the is- in a crisis of faith. international networking by the associ- PLMJ, Advising with Va J, dvising Value Portugal Brazil Angola M Portugal Brazil al Mozambique Cape Verde Macao Verde As a pioneering country in globalization, Portugal can provide creative thinking for different problems and dilemmas. Portugal provide creative When the matter involves the law, you should strive for the best solution. involves law, you strive That’s why at PLMJ we offer internationally recognised legal services in several areas of the law. That’s why several law. So, if you have a dispute in a Portuguese-speaking country, PLMJ is your answer. you have Portuguese-speaking country, your answer. “Portuguese Law Firm of the Ye ear” ea Chambers Europe Excellence 2009, IFLR Awards 2006 & Who’s Who legal Awards 2006, 2008, 2009
  • 106. Region Focus: Spain & Portugal ation. And on the domestic front, the government has offered little support. Says Cavaleiro Brandão: “In the past, the government was accepting arbitration If arbitration is characterised by evangelism in Spain, in Portugal it is stuck in a crisis of faith but not pushing it. We are now promot- ing arbitration, but I must admit in not as strong and systematic a way as the Span- ish are doing it. We are trying to do it but much more from the universities and law firms, not the government.” Things are at last starting to move, however. The government has passed legislation that allows the country’s may only be a matter of time. the Spanish, Brazil for the Portuguese. labour ministry to impose compulsory “I think it will happen. Even arbitra- Arbitrators like José María Alonso of arbitration in some cases. tion wasn’t regarded as a first option Garrigues and Jesús Rémon of Cuatre- Recognising its potential to alleviate in this kind of dispute and now it is be- casas are among the region’s most ac- the courts, the government is also in- coming more and more [prevalent],” tive disputes lawyers. centivising the transfer of pending liti- Cavaleiro Brandão says. It doesn’t stop there. Offices in Lon- gation into arbitration. “You have to pass on the message. don, New York and Brussels are de Meanwhile the Portuguese Arbitra- What’s important to the market agent rigueur for large Spanish firms. Some tion Association is weighing in with a is to have a fast and safe way to re- have offices in Beijing, Shanghai, War- proposal for a legislative update which solve issues. This is clearly the way to saw or Bucharest. would allow for interim measures and do it.” Diaz-Bastien & Truan has the un- other provisions aimed at making arbi- usual goal of winning over India. It tral awards more robust. Change is abroad may seem a strange decision for a firm As for the caseload, much of the de- As the neighbours inch towards a sort of in a civil-law country with no obvious velopment has been hidden from pub- integration, the real challenge may have cultural ties, but the demand for Iber- lic view - internal shareholder disputes less to do with what happens within the ian expertise in real estate and green going to arbitration, for example – but peninsula than what happens beyond it. energy is strong. there is movement. Every leading firm in Spain and Portugal For the Portuguese firms, mean- Other areas of ADR are decidedly has one eye overseas. while, there is a litter of ex-colonies CDR (Commercial Dispute Resolution) stationary, however. For dispute resolution lawyers this brimming with opportunity: Angola, “It is easy to talk about mediation, means selling their arbitration expertise Mozambique, Cape Verde and because there isn’t much to talk abroad, a tricky feat considering some Macau. about,” says Cavaleiro Brandão. parties at home are yet to be convinced. Some day soon the tide of insol- “Companies and their managers really But as we have learned from the vency will subside, the collapsing aren’t used to it and it’s hard to sell it.” days of empire, the Iberian ambition is courts will find their feet again, and Given the relatively rapid adoption quixotic by nature. Iberian arbitration will come of age. of arbitration and legal technology, the Latin America is an obvious desti- When that happens, we may again emergence of Portuguese mediation nation: the hispanophone countries for glimpse the rival empires of old. CDR. 49
  • 107. Expert Views BSkyB v EDS: how to avoid a liability cap The epic court battle between BSkyB and EDS, a technology supplier, has exposed the risk of making overly optimistic statements in order to secure a contract. Philip Clifford and Alex Hamilton examine when pre-contractual puffery goes too far. B SkyB, the UK satellite TV Not your usual case tion from a college in the US Virgin company, has succeeded in The case has been closely watched, if Islands. Despite the witness describ- the English High Court in nothing else for its sheer size. It lasted ing in detail the college and how he claiming that it should re- over six years, with 109 days in court. had attended it, BSkyB showed that cover losses far in excess of the £30 The much anticipated judgment took the college sold degrees through its million cap on liability under its con- 15 months to be delivered and came website, as memorably illustrated by tract with EDS (the information tech- in at more than 460 pages. With few a BSkyB lawyer’s dog being granted nology supplier since acquired by information technology industry one! HP). The amount of damages cases actually going to trial, the case The judge said that “[h]aving ob- awarded in February was £200 mil- has inevitably been described by served him over the period he gave lion, with a further £75 million pay- commentators as a milestone judge- his evidence and heard his answers to ment awarded in March. ment. questions put in cross-examination BSkyB’s claim arose out of a £46 mil- The case is, however, unlikely to and by me, which have been shown to CDR (Commercial Dispute Resolution) lion project for EDS to provide a new be repeated soon as so much de- be dishonest, I also consider that this customer relationship management pended on the behaviour of one of reflects upon his propensity to be dis- (CRM) system for BSkyB’s call centres. the main witnesses for EDS who was honest whenever he sees it in his inter- The project overran massively and found by the judge to have “demon- est, in his business dealings. Whilst, of BSkyB sued EDS, claiming over £700 strated an astounding ability to be course, this does not prove that Joe million in damages. The judge held that dishonest”. The witness, Joe Gal- Galloway made dishonest representa- EDS was liable for fraudulent misrepre- loway, who had been the head of tions, it is a significant factor which I sentations and that these claims were EDS’s regional CRM group at the have to take into account in assessing not subject to the contractual caps on lia- time of the bid, was challenged on his whether he was dishonest in his deal- bility. claim that he had an MBA qualifica- ings with Sky.” 50
  • 108. Expert Views The judgment In his judgment of 26 January 2010, commented that there was “surpris- ingly little documentation relating to Suppliers need to Justice Ramsey found that: EDS the process by which EDS prepared its review how their breached the main contract with Response”. He considered the two BSkyB. project plans setting out sequence and sales teams During the competitive bid and prior to BSkyB and EDS entering into a time for the deal, the work that had gone into the production of the plans, operate and think letter of intent and then the main con- variations between the two plans, vari- whether hyperbole tract, EDS fraudulently misrepresented that it had carried out a proper analy- ations between the plans and other evi- dence, and the level and nature of the that may have been sis of the amount of elapsed time needed to complete the initial delivery consideration of the plans. • Witness evidence - key participants considered and go-live of the customer contact in the projects, on both sides, were ‘puffery’ can be centre and that they held the opinion that, and had reasonable grounds for subject to detailed cross-examination. • EDS internal report - the judge con- safely included holding the opinion that, they could and would deliver the project within sidered and quoted a report which was the result of a review to monitor the in bids this timescale. development of the project (prior even Prior to an amendment to the con- to the main contract being signed). safely included in bids. The teams will tract being agreed by the parties, EDS • Internal EDS e-mails. need guidance on not only what can be made a negligent misrepresentation • Planning meetings and oral state- said, but also how key assertions that it had developed an achievable ments made in those meetings. should be backed up with internal doc- plan to get the project back on track, Significantly, the evidence high- umentation. We are not convinced that which had been the product of proper lights that potential liabilities arose this ruling will reduce suppliers’ ap- analysis and re-planning. early on in the project; the judge went petites for taking on riskier projects, Justice Ramsey held that EDS in- as far as to rely on EDS’s response to but we do believe that suppliers will tended BSkyB to rely on the represen- the ITT, possibly one of the earliest be more cautious in how they describe tations, which BSkyB did, to select EDS documents between the parties, when their capabilities and the timelines they for the CRM project instead of Price- deciding if misrepresentations had can meet. waterhouseCoopers, to enter into the been made. Customers on the other hand, will letter of intent and the main contract Finally, the judge was able to find want to ensure that they have docu- and to continue with EDS rather than that the misrepresentations were made mented the key representations made select an alternative systems integrator fraudulently based on the evidence of by the supplier that they are relying on following difficulties with implemen- just one of EDS’s witnesses. and preferably include these in the tation of the project. To reach this con- contract. clusion, he considered many of the The consequences Hopefully, greater effort being put documents and meetings that typically However unusual this case may have into clarifying what can be achieved arise during the competitive process, been with the drama surrounding will lead to more projects being deliv- including: EDS’s witness and the judge’s reliance ered on time and on budget, or at least CDR (Commercial Dispute Resolution) • EDS’s Response to Sky’s invitation on this to find fraudulent misrepresen- more realistic timelines and budgets to tender (ITT) - the judge said that the tation, we do expect this case to lead to being agreed at the beginning. CDR use of phrases such as “on time” and significant changes to pre-contract dis- “within the required timescales” could cussions in the information technology The authors would like to express their be taken as confirmation of the industry. thanks to the co-authors of this article, timescales being represented. The Suppliers are going need to review Brian Meenagh and Jane Rahman. judge also referenced diagrams within how their sales teams operate and this Response in support of his find- think again whether hyperbole that Philip Clifford and Alex Hamilton are both ings. may have been considered to date as partners in Latham & Watkins’ dispute • Planning documentation - the judge mere “puffery” can any longer be resolution practice. 51
  • 109. Expert Views The Jackson Review A commercial lawyer’s perspective Lord Justice Jackson’s final report aims to bring down the mountainous cost of litigation in the UK. Sarah Garvey shares her take on the proposals. F or a man who admits “in the port does contain many interesting client loses) are notable. past I have not been hugely proposals which, if adopted, would Such arrangements are not cur- interested in the subject of have an impact on users of the Com- rently permitted in contentious busi- costs”, Lord Justice Jackson mercial Court and commercial practi- ness in England; Jackson LJ appears to have had a Damascene tioners. Highlighted below are three recommends they should be. He rec- conversion. such proposals. ommends adopting what he describes In his much anticipated final report as the “Ontario Model”, where costs on civil litigation costs, Jackson LJ sets shifting is effected on a conventional out, in meticulous detail, an impressive Practitioners will basis (i.e. loser pays) and not by refer- and comprehensive survey of the cur- ence to the contingency fee. He sug- rent approach to costs in civil litigation now scrutinise gests contingency fee arrangements in England. Perhaps Jackson LJ’s most radical other jurisdictions should be properly regulated and should not be valid unless the client proposals are to be found in the per- where has received independent legal advice. sonal injury/defamation spheres. These proposals, taken in the round, do ap- contingency fees Given this signal, it is anticipated that practitioners will now begin to pear to be helpful for defendants with meritorious defences. What about com- are permitted. The scrutinise with increased urgency the practices in other jurisdictions where mercial disputes? Jackson LJ appears to change in culture such arrangements are permitted, such be content to leave the Commercial Court relatively untouched. He notes this could herald as the US. The change in culture that this could herald should not be under- this court has recently undergone a re- should not be estimated. CDR (Commercial Dispute Resolution) view of its procedure, conducted a pilot scheme of new measures and, only underestimated Settlement months ago, introduced consequential Secondly, on Part 36 offers (settlement reforms into its guide. offers) Jackson LJ recommends an up- Although he warns against compla- Contingency fees lift of 10% on damages for a successful cency, Jackson LJ acknowledges the First, Jackson LJ’s recommendations in claimant who beats its Part 36 offer. overwhelmingly positive feedback relation to contingency fee arrange- For claims over £500,000 he suggests from Commercial Court users, as well ments (where a lawyer’s fee is calcu- “there may be a case for scaling down as the court’s continuing attraction to lated as a percentage of monies the uplift”. foreign litigants. Nevertheless, the re- recovered, with no fee payable if the In high-value claims even a reduced 52
  • 110. Expert Views percentage uplift may well influence the ment and more by having the same it more difficult to advise on costs at conduct of parties in litigation. It may documents sifted initially in various the outset if there is uncertainty about encourage greater realism and precision low-cost centres outside the EU. whether extensive or more limited dis- in the formulation of settlement offers in Jackson LJ recommends that stan- closure will be ordered. the first place by claimants keen to get dard disclosure should no longer be If pricing litigation becomes still the benefit of the uplift, as well as in- the default position in large com- more difficult, this may create interest- creasing pressure on defendants to con- mercial claims. Rather, there should ing tensions for contingency fee and sider such offers seriously, and at the be a “menu” of options, containing litigation funding assessments. There earliest opportunity. different breadths of disclosure from is no recommendation for the engage- This proposal will no doubt be wel- which the court and the parties ment of disclosure assessors (the comed by claimants, as it should serve would choose at the first CMC. This prospect of appointing an experienced to promote early settlement. On a re- proposal is interesting and throws lawyer to assist the Court with disclo- lated point, Jackson LJ suggests the up many possibilities. sure had been mooted in Jackson LJ’s abolition of the Carver principle. This It may, for example, be attractive to preliminary report). would mean that when the court was certain foreign litigants who might Further, on e-disclosure specifically, assessing whether or not a party has wish to agree with the other side to a Jackson LJ supports the draft practice “beaten” a Part 36 offer, it only has to more limited, civil law approach to direction on e-disclosure and recom- look at monetary figures to work that disclosure (assuming the court agrees - mends training for lawyers and judges out. This proposal is welcome, as it one intriguing issue will be how the in this area. will promote greater certainty. court reacts to such requests). The UK’s then Justice Secretary, However, the proposal may also in- Jack Straw, described the report as a The disclosure ‘menu’ troduce a new element of uncertainty, “remarkable piece of work”. At 557 Thirdly, disclosure is recognised in the making it more difficult for solicitors pages long, there was certainly a lot for report as a major source of costs in to advise on the prospects of their him to digest in the months leading up commercial litigation, with e-disclo- client’s claim succeeding (if there is un- to the general election. CDR sure increasing this burden in recent certainty as to whether a “smoking years. To date, that cost has often been gun” document will have to be pro- Sarah Garvey is a lawyer at Allen & addressed less by active case manage- duced, for example). It will also make Overy. Undisputed leader Out now: The International Comparative Legal Guide to Litigation & Dispute Resolution 2010
  • 111. Expert Views Russia: Sevmash case shows growing acceptance of foreign awards Russia’s treatment of a recent cross-border contract dispute holds clues about the country’s changing attitudes towards foreign arbitral awards, write Irina Maisak and Alexander Vaneev. T he Arbitration Institute of contract in February 2008. may follow the practice which has re- the Stockholm Chamber of According to Sevmash, the con- cently been established by the Commerce has recently ren- struction period needed to be extended Supreme Arbitrazh Court in the Stena dered the award in the Sev- due to the lack of funding. This was RoRo case. For the first time, Russia’s mash case in favour of the Norwegian because of prices in the contract fixed highest court in its ruling invoked Ar- company Odfjell. The winning party at the 2004 level. According to Odfjell, ticle VI of the New York Convention considered the amount of damages the increase of the original price by and Article 144(5) of the Russian Arbi- awarded to be small. However, even nearly 10% was considered by the par- trazh Procedural Code, which provide this amount can be difficult to obtain ties. However, when subsequently that the process of enforcement of an through the process of enforcement Sevmash refused to speed up produc- award may be stayed until an applica- and recognition of arbitral awards in tion, asking instead for even more tion to set the award aside is resolved Russia. money, the deal fell apart. Odfjell’s by the courts at the seat of arbitration. CEO Terje Storeng then said that the The other issue that may be of con- Facts of the dispute Russian shipyard had “acted with dis- cern for the Swedish company is the The Russian shipyard Sevmash is cur- respect as well as a lack of will to meet approach to the concept of public pol- rently in financial hardship that has al- the contract conditions”. icy which Russian courts take when ready caused a number of delayed Initially, the Norwegian company they consider enforcement of foreign projects. As the result of one such delay, sought compensation in the amount of awards. However inconsistent the one of its customers, namely Odfjell, $300 million. However, the tribunal practice on this matter is, the arbitrazh filed a complaint before the SCC arbitra- granted the relief only in part. Sev- courts most frequently find violations tion. The tribunal held Sevmash liable mash’s counterclaim was rejected. In of public policy when an award is ren- for $43.8 million to Odfjell for the dam- addition, the cost of the arbitration was dered against major ‘strategic’ Russian ages caused by a failure to deliver 12 allocated as 75% against Sevmash. enterprises. Sevmash - being Russia’s chemical tankers. (The total amount of largest shipyard, specialising in build- the contract was $540 million.) Likely actions of the parties ing nuclear-powered submarines, oil Of note is the fact that the contract The Sevmash case in many aspects re- and gas platforms and tankers, and for construction of chemical tankers, sembles a number of recent disputes, whose golden share is held by the state entered into in 2004, was touted as a such as the one concerning Swedish - can scarcely make an exception. CDR (Commercial Dispute Resolution) historical deal in Norwegian-Russian company Stena RoRo, and therefore we industrial cooperation. However, the can anticipate how the parties are likely How the courts have acted relationship between the parties soon to act. The losing party will most likely It is often believed that Russian courts began to sour. The first vessel, sched- try to challenge the award at the place of construe the concept of public policy in uled to be delivered in September arbitration, that is, in the Swedish a very broad manner. In this respect, 2007, was postponed for an additional courts. In contrast, the lawyers for Odf- going back to the Stena RoRo case, it 14 months. The same happened with jell will apply to the Russian courts for would be worth observing how the po- other projected deliveries. Fed up with recognition and enforcement. sition of arbitrazh courts at different this, Odfjell unilaterally terminated the In this situation the Russian courts levels evolved in this case. 54
  • 112. Expert Views The shipyard Baltiysky Zavod was policy the findings concerning failure Thus, Russia’s highest court found the respondent and the losing party in to conclude a contract. The court elab- the application of public policy irrele- this case. orated that it was improper to make vant to this case and settled that the The court of first instance ruled that the party liable for non-performance issue of whether the contract covered by the award had been rendered pursuant of a contractual obligation that did the arbitration agreement is binding to the contract that the parties had not not exist. Such liability was declared shall be subject to the tribunal’s consid- entered into and, consequently, on the a violation of the fundamental princi- eration, rather than that of the national basis of an arbitration agreement that ples of Russian civil law, in particular courts. had never been made by them. As the the principles of freedom of contract A final issue which is expected to be text of the contract reads, the transac- and equality of parties, as well as the decided in the Stena RoRo case and tion shall be approved by the boards of principle of liability. may have influence on the Sevmash directors of each party and, in the ab- case is the applicability of arbitration- sence of such approval, the contract Changing outlook of the courts related provisions contained in the bi- shall be deemed null and void. The aforementioned judgments seem to lateral Agreement on the Trade in Stena RoRo failed to provide the min- be evidence of the hostility of Russian Goods and Payments between the utes of the board meeting for transaction courts to foreign arbitration awards af- USSR and Sweden, concluded on 7 approval. The court of first instance er- fecting the most important local enter- September 1940 (confirmed by the roneously considered the minutes as prises. This practice has been changed. countries in 1976 and later by a special forming the part of the contract and It is therefore no surprise that the protocol in 1993). therefore did not permit the submission Supreme Arbitrazh Court dissented These provisions include the rules of witness statements as evidence of the with the lower courts and held that on arbitration, as well as the rules on approval. This was considered by the the issue of entry into force of a con- enforcement and recognition of tribu- court of first instance falling under Arti- tract refers to the merits of the case nal awards, which differ from those cle V(1)(c) of the New York Convention. and therefore lies within the scope specified in the New York Convention (The award deals with the difference not of the tribunal’s competence. Since and therefore can be used by the Russ- contemplated by the terms of the sub- the tribunal of the Stockholm Cham- ian debtor as additional grounds for mission to arbitration.) ber of Commerce had already con- challenging the award. In addition, the court found that the sidered this issue, it was improper The case is pending proceedings re- CDR (Commercial Dispute Resolution) debtor was a “strategic” enterprise to revisit it through Russia’s na- lating to a challenge initiated by the re- (and therefore a Russian enterprise) tional courts. spondent in the Swedish courts. The and the enforcement would run it Furthermore, the Supreme Arbi- Supreme Arbitrazh Court is expected bankrupt, which would be distressing trazh Court held that the requirements to return to the case after those pro- “for the state in general and for the in- concerning the order and recording of ceedings are finished. CDR terest of its nationals”. the approval of major transactions by The court of second instance re- legal entities shall be governed by the Irina Maisak and Alexander Vaneev are jected the latter argument but law of the country of a legal entity’s in- associates of the dispute resolution practice brought under the heading of public corporation. at Magisters (Moscow). 55
  • 113. Expert Views Three cases reshaping patent licensing practice Several recent disputes over technology patents show the emergence of a smarter approach to calculating royalty damages, write Elizabeth M Bailey, Gregory K Leonard and Alan Cox. O n 11 September 2009, the tion reorderbuffer (IRB). The jury or large is not the right question. In- US Court of Appeals for awarded damages in the amount of stead, the reasonable royalty analysis the Federal Circuit $184 million to Cornell. In response to should seek to determine the economic (CAFC) issued its opinion a post-trial motion by Hewlett- value generated by the patented fea- in Microsoft’s appeal of the $358 mil- Packard, Judge Rader reduced the ture relative to the next-best (non-in- lion damage award in Lucent. In a damage award to $53 million, less than fringing) alternative. In principle, a jury trial, Microsoft was found to one-third of the amount awarded by small feature might generate substan- have infringed a patent that describes the jury. tial value. Indeed, the product may not a method to enter information on a While the details differ, several com- be commercially feasible without the computer screen without using a key- mon themes emerge from the CAFC feature. Conversely, a large feature board (for instance, by using a stylus). judges’ consideration of the methodolo- might have a very similar next-best al- Microsoft appealed the damages gies on damages in these three matters. ternative, making its economic value award to the CAFC. Finding that the These common considerations have small. “damages calculation lacked suffi- general applicability in matters involv- The economic value of the patented cient evidentiary support”, the CAFC ing patent damages. First, the economic technology derives from the licensee remanded the matter for a new trial approach to calculating reasonable roy- being able to earn higher profits (i.e. on damages. alty damages, because it focuses on the through charging a higher price for or Less than two weeks later, on 23 Sep- incremental value provided by the making greater sales of the product) tember 2009, the CAFC heard oral argu- patented technology, does not depend with the patented component than ments in Microsoft’s appeal of the on whether the patented technology is a without it. If the patented component court’s decision in i4i. The patent that large or small component of the overall is unimportant (to customers and the Microsoft was found to have infringed product. licensee), it will not have a substantial describes a method to edit Extensible Second, it is not economically sensi- impact on demand for the product, Markup Language (XML) files. The jury ble to determine the royalty base and and thus it will not have a substantial found that Microsoft incorporated the royalty rate independently of one an- effect on the licensee’s price, sales and technology described in the patent and other because a mismatched rate and profits (unless it is a cost-saving tech- awarded damages in the amount of base can lead to an unreasonable dollar nology). $200 million to i4i. Microsoft appealed amount of royalties. Finally, non-eco- The reasonable royalty analysis the damages award and, in its question- nomic approaches to calculating rea- should focus on the link between the CDR (Commercial Dispute Resolution) ing at the hearing, the CAFC took up sonable royalties, such as the use of patent and the licensee’s profits (in several issues related to the appropriate non-comparable benchmarks and the dollars). There are many accepted and standard for estimating damages. so-called 25% rule, are unreliable be- rigorous economic approaches that can In March 2009, the judge in the case cause they are not based on factual be used to determine how the demand made a ruling related to damages in support for the patent’s use in the spe- for the product would change, if at all, the Cornell matter. A jury had found cific cases at hand. when an additional feature is added to, that Hewlett-Packard infringed a or removed from, the product. These patent that describes a method to read Size doesn’t matter economic approaches do not depend a component of a processor’s instruc- Whether the patented feature is small on whether the patented technology is 56
  • 114. Expert Views a large or a small part of the overall the patents that underlie them vary in these negotiation-specific economic cir- product - they measure the economic their attributes. Unless the important cumstances into account can lead to er- value in either case. attributes are the same across two li- rors in the resulting royalty. censes, they will generally not be com- Royalty and rate intertwined parable. Conclusion In the past, whether the patented Similarly, the economic circum- A reasonable royalty is one which component is a small or large part of stances surrounding the typical or in- makes the patentee whole with respect the overall product has been debated dustry average licensing negotiation to the infringement. In contrast to the in the context of whether the so-called that led to the typical or industry av- use of non-comparable benchmark li- entire market value rule can be erage royalty rate are unlikely to cor- cences and the 25% rule, the economic invoked to argue that the royalty base respond to the economic approach to calculating a reasonable should be the entire product as circumstances surrounding the hypo- royalty is reliable because it is opposed to something smaller. thetical negotiation at issue. Before an grounded in the specific economic con- However, the focus on the royalty base existing licence can be used as a ditions and facts of the case and fo- misses the point as a matter of benchmark, one must carefully cuses on the value of the patented economics. Litigants and parties analyse whether it is truly compara- technology. The economic approach engaged in licensing negotiations care ble in terms of factors such as the takes into account the alternatives about the total dollar amount of technology covered, the product of available to both parties to determine royalties. The royalty rate and the the licensee, the degree of competi- the range of royalty payments over royalty base must be chosen in tion between the licensor and li- which the parties would have bar- conjunction so that the product of censee, and cross-licensing gained. As these three cases illustrate, multiplying them will yield a dollar arrangements. using a damages expert who utilises amount that reflects the economic In some situations, damages experts approaches that do not account for value of the patented technology. apply the so-called 25% rule - i.e. the economic and business realities, such roy technology because it is based on as non-comparable benchmark licences Inside expert testimony operating profits of the product rather or the 25% rule, can result in damage Non-economic approaches suffer from than the incremental value provided calculations that risk being overturned a number of problems. First, as dis- by the patented technology. on appeal. CDR cussed above, it makes no economic Furthermore, it imposes a one-size- CDR (Commercial Dispute Resolution) sense to determine a royalty rate inde- fits-all approach to determining the This article was originally published in pendently of the royalty base because royalty rate. In the real world, each Managing Intellectual Property. the product of the two independently patent has a different economic value. determined numbers may yield a dol- Moreover, the economic circumstances Elizabeth Bailey is a Vice President in lar royalty that has no relationship to that influence the negotiated royalty NERA Economic Consulting’s Boston of- the incremental value of the patented typically differ substantially from ne- fice and Alan Cox and Gregory Leonard technology. Second, purportedly com- gotiation to negotiation, even if the are Senior Vice Presidents in NERA’s San parable licenses may not, in fact, be same patent is involved. As with non- Francisco office. comparable. Licensing agreements and comparable licences, failure to take 57
  • 115. Country Report Country report Dispute resolution in Belgium The fallout from the sale of Fortis Bank, Belgium’s prized lender, has been a showcase for the country’s streamlined court system. But the uptake of ADR is dismal. T he Belgian legal system rivals facts that are relevant to the dispute. rival of class actions,” says Jean-Pierre that of neighbouring Ger- The absence of discovery saves both Fierens, head of litigation at Stibbe, many in its reputation for ef- time and costs, even though legal costs “except for the Employers’ Federation, ficiency and reliability. generally fare well when compared which is very concerned about poten- Commercial cases take, on average, six with other jurisdictions. tial attacks on Belgium’s corporations.” to 12 months to process in the courts. Since 2007 the losing party pays op- But at appeal level disputes can last posing counsel’s costs; the amount de- Litigation between two and three years before pends on the level of compensation Belgian law is modelled on the French they are concluded. awarded in the judgment. But even legal system. The speed with which your case is these are capped at €30,000 and court The judiciary is an independent decided depends on which of the five fees are nominal. governmental body with equal stand- regional courts your matter is heard in. The appearance of witnesses in pro- ing to the legislative and the executive Brussels and Liège have a significant ceedings is also rare. You must demon- branches. Civil lawsuits are brought backlog of cases, while Flanders and strate that the witness is essential to before district courts of first instance. Mons are less burdened. your case and specify the topics upon Other district courts include the “There have been various efforts to which the witness will be questioned. commerce and labour tribunals. Ver- reduce the backlog of the judicial sys- “In 30 years of litigating, I have only dicts handed down by these courts tem,” says Christophe Ronse, litigation seen a designated witness in a com- may be appealed before five regional CDR (Commercial Dispute Resolution) head at Belgian law firm Altius, “but mercial case three or four times,” says courts of appeal or the five regional with varying results.” Brussels-based Françoise Lefèvre, labour courts. A key feature of Belgium’s judicial global head of litigation at Linklaters. However, if your case is urgent, you system is the non-existence of docu- Belgium’s experience of class ac- can request summary proceedings be- ment discovery. tions is also limited. But it is antici- fore the commercial court, court of first Production of a document will only pated that class actions will eventually instance, or court of appeal, depending be granted when it can be shown that become a reality, as Belgium falls in on the nature of your case. it is reasonably likely to be in the op- line with the rest of Europe. The highest court is the Supreme ponent’s possession and to contain “Everybody is prepared for the ar- Court of Cassation, whose function is 58
  • 116. Country Report only to deal with questions of law, not Bandt van Hecke & Lagae. pendent local talent. Hanotiau & van fact. Of the domestic practices, Stibbe den Berg and Stibbe yield strong arbi- and Hanotiau & van den Berg are trators such as Bernard Hanotiau and The case: In 2008 Fortis Bank found it- major players in dispute resolution. Vera van Houtte, respectively. self in need of an €11.2 billion govern- Some of the country’s best-known ment bailout. Then, to the fury of its Arbitration practitioners are based in cities other shareholders, the Belgo-Dutch lender Belgium is keen to be recognised as an than Brussels. These include Hans was sold to French bank BNP Paribas. attractive venue for international arbi- van Houtte in Leuven; Didier Matray Reversing a first-instance decision, tration. But for many international in Liège; and Herman Verbist in the Brussels Court of Appeal froze the clients looking for an arbitration seat, Ghent. deal with BNP Paribas. Belgium is not an obvious jurisdiction. The court ordered that the Belgian Many believe the country lacks large Mediation government should not have agreed numbers of arbitration cases because its “I’ve been hearing for the last 10 years the deal without the shareholders vot- state court system works so well. that mediation is taking off,” says ing on the transaction. Says Fierens: “I am surprised to see Françoise Lefèvre of Linklaters. She And when a Supreme Court report how many low-value cases go to arbi- has been involved in four mediations concluded in December 2008 that Bel- tration in Belgium even though the over the last two years and her firm’s gium’s prime minister Yves Leterme state courts are virtually free.” Belgian litigation group has been man- had attempted to steer the first in- Yet when arbitration is the pre- dated on between eight and 10 in the stance court ruling, the government ferred route, clients can benefit from same period. collapsed. more reasonable costs. But for many litigators, it’s all talk - “The speed with which the Fortis some have only experienced mediation case was carried out is a perfect exam- The case: The Brussels Court of Ap- first-hand in relation to family law ple of how efficient Belgium’s legal peals recently delivered a landmark matters. system can be when you convince the judgment in the longrunning Cytec v A lot of lawyers believe that the Bel- court of the real urgency of the situa- SNF saga. gian court system is efficient enough to tion,” says Lefèvre. SNF had terminated a long-term negate the need to seek recourse in me- Fortis and other co-defendants supply agreement because of alleged diation. sought recourse before the Supreme anti-competitive effects. Says Christophe Ronse of Altius: Court, which quashed the appeal deci- The contract provided for ICC arbi- “Despite the efforts of representative sion in February 2010. tration in Brussels. Two awards were associations such as the Brussels Busi- But a new deal with BNP Paribas rendered in Brussels in 2002 and 2004 ness Mediation Center and some had already been approved by the ma- in Cytec’s favour. SNF claimed the de- judges to recommend mediation the jority of shareholders in April 2009. cisions breached Articles 81 and 82 of offer is very rarely taken up in com- The Fortis case is of added impor- the EC Treaty. mercial disputes.” tance to Belgium because it was con- In 2007 the Brussels first instance It’s not only a matter of costs. ducted similarly to a class action. tribunal set aside the awards, holding Fierens, an accredited mediator, re- “Fortis was the largest financial in- that the decisions were in breach of Eu- ports a cultural resistance to the idea. stitution in a very small country,” says ropean competition law and violated Clients in Belgium are not psycho- Fierens. “Almost every Belgian citizen public policy. Meanwhile the French logically ready for mediation at the was effectively a shareholder.” Court of Appeal granted orders to en- start of a case, but only after a few Linklaters acted for Fortis and Mis- force the awards in France. years when they are exhausted and chael Modrikamen, an independent Eventually a 2009 Brussels Court of have explored all options, he says. lawyer, represented about 2,400 angry Appeal decision reversed the first in- “In Belgium there is the view that if shareholders. stance judgment, refusing to set aside the lawyers cannot sort it out between the arbitral awards and concluding themselves then a mediator will not The market: Either Dutch or French is that there was no breach of public pol- have much more luck,” Fierens says. required to be spoken in court, de- icy. It also found that Article 82 had pending on the region where the court not been violated. The market: Just as elsewhere, the is established. Linklaters acted for Cytec. The market for mediation centres on indi- CDR (Commercial Dispute Resolution) Consequently there are very few in- counsel for SNF were Bernard Han- viduals rather than law firms. ternational law firms that can offer a otiau and Olivier Caprasse of Hanotiau Avi Schneebalg, an independent credible local litigation offering, and & van den Berg. practitioner, and Patrick Van Leynseele they tend to focus more on interna- of Dal & Veldekens are among Bel- tional arbitration. The market: High-profile international gium’s active mediators. Other notable Allen & Overy and Linklaters over- firms such as Allen & Overy and Lin- mediators include Jean-Pierre Fierens of came this hurdle by merging with local klaters are among the market leaders for Stibbe, Didier Matray of Matray Matray firms. The former joined up with Loeff international arbitration in Belgium. & Hallet and Pascal Hollander of Han- Claeys Verbeke and the latter with De There is, however, a core of inde- otiau & van den Berg. CDR 59
  • 117. Country Report Country report Dispute resolution in Austria Thousands of cases linked to the Meinl European Land (MEL) and Immofinanz financial scandals are offering Austria the opportunity to parade the merits of its court system. But Austria’s true star is arbitration. T he length taken to conduct a Yet the initial costs of processing a head at Cerha Hempel Spiegelfeld commercial case in Austria claim can be steep. Before commencing Hlawati (CHSH), “because the actual compares reasonably well to the case, Austria’s Court Tariff Act facts of each case are different.” other European jurisdic- compels claimants to pay 1.2% of the tions. On average, first-instance cases claim value into court. Litigation can last up to two years, with appeals If at any point the case is settled Like neighbouring Germany, Austria taking a further six to nine months. then these court fees are lost. But if you has a civil-law system. Cases in the Supreme Court may take win the case, the loser pays your costs The Austrian judiciary is independ- another six to nine months. in accordance with the Lawyers’ Tariff ent and Austrian judges are considered Key features of Austria’s judicial Act (Rechtsanwaltstarifgesetz). trustworthy as well as effective. system include the summarising of Contingency fees do not exist in At first instance, the case will be hearings. Literal transcripts are not Austria but a number of external fi- heard before a district court (Bezirks- produced. nancing companies have begun financ- gericht) or a regional court. CDR (Commercial Dispute Resolution) Nonetheless the results are ab- ing disputes, offering to pay the legal At second instance appeals are made solutely reliable, believes Bettina costs in exchange for a percentage of to a regional court if the case was ini- Knoetzl, dispute resolution head at the final award. tially brought before a district court. Wolf Theiss. Meanwhile the arrival of US-style And if a regional court decided the Like in Germany, disclosure is ab- class actions in Austria remains hotly first instance decision, the appeal will sent in Austria. The upside is obvious. debated. But judges can use their dis- be heard before a province court (Ober- “Conducting litigation in Austria is cretion to bundle claims together. landesgericht). generally much cheaper than in the “Yet they are reluctant to do this,” The Supreme Court (Oberster Gericht- UK,” says Knoetzl. says Irene Welser, dispute resolution shof) is the highest court and limits itself 60
  • 118. Country Report to issues of legal importance. Plus Austria has an excellent pool of the arbitral award for phase one is cur- No oral hearings take place before arbitrators whose knowledge of the rently awaited. the Supreme Court. CEE region is second to none. Many of The market: Several of Austria’s leading them have CEE roots themselves. domestic and international law firms The cases: Allegations over fraud New-generation arbitrators are es- house strong arbitrators, such as Gün- erupted over investment funds at pecially impressive. “They produce ther Horvath of Freshfields Bruckhaus Meinl European Land (MEL), a quoted quality decisions that are difficult to Deringer; Christoph Liebscher of Wolf property group closely held by the challenge,” says CHSH’s Welser. “Plus Theiss; Benedikt Spiegelfeld of CHSH; Meinl dynasty. they can work in foreign, even CEE and Gerold Zeiler of Schoenherr. Julius Meinl, chairman of Meinl languages. This is rarely the case in Bank, was charged with breach of London.” Mediation trust, overcharging fees and fraud in Mandates are also arriving from be- Austrian law firms witnessed a great connection to his role at MEL. yond CEE’s borders. Russians tradi- deal of hype over mediation around MEL had completed a huge buyback tionally go to Stockholm or London six or seven years ago. of shares to support its share price. But but recently Liebscher has noticed an But although it is common in envi- in breach of domestic stock exchange influx of Russia claims. “Russians in- ronmental and family matters, media- rules the buybacks were not publicised creasingly see Austria as a good place tion is not yet a popular option for in Austria. MEL has since been sold and to conduct business,” he says. resolving commercial disputes. renamed Atrium Real Estate. Indeed Austrians are sceptical of me- Wolf Theiss is active on the The cases: Freshfields Bruckhaus De- diation, especially when many media- claimants’ side of the Meinl matter. ringer is instructed on a widely publi- tors are not lawyers but come from Similarly Immofinanz’s Karl cised Icsid arbitration concerning other professions, such as psychologists. Petrikovics has faced breach of trust Austria’s utility company EVN and its Plus becoming registered as a medi- and fraud allegations. investment acquisition of 90% of the ator is a tedious process. Because of Meinl and Immofinanz, shares of EVN Macedonia, the coun- Freshfields Bruckhaus Deringer’s around 12,000 cases have been lodged try’s only electricity distribution and Willibald Plesser is a certified mediator in the Commercial Court. supply company. but has rarely conducted formal busi- The arbitration is in response to pro- ness mediations. The market: Local firms dominate the ceedings initiated by the Republic of Since Austria’s legal system works Austrian dispute resolution market. Macedonia against EVN Macedonia. so well there is little incentive for par- Big names include CHSH, Wolf Theiss, Macedonia has demanded €93 mil- ties to resort to mediation in business Schoenherr, Dorda Brugger Jordis and lion plus interest for unpaid electricity matters. Andreas Reiner & Partner. dating back to pre-privatisation days. But because of Austria’s recent fi- International powerhouses such as Such proceedings breached Mace- nancial scandals, this could change if Freshfields Bruckhaus Deringer and donia’s share purchase agreement with the workload and backlog at the Com- CMS Reich-Rohrwig Hainz Rechtsan- EVN and its obligations under bilateral mercial Court continues to build up. wälte are also among the jurisdiction’s investment treaties. Otherwise mediation tends to be most active firms. Lead partner Willibald Plesser, used where disputes between parties But litigation before ordinary courts CEE/CIS regional co-head at Fresh- cannot be resolved in court. For exam- remains very much in the hands of fields Bruckhaus Deringer, is working ple, mediations are often sought in re- outstanding individuals. closely with his Paris, London and US lation to internal conflicts within an colleagues on the arbitration. organisation. Arbitration The case is significant, not just be- But although few people knew of For many CEE clients, Austria is the cause of the size and complexity of the mediation’s existence until a couple of perfect setting in which to conduct an case, but also because of the impact it years ago, Knoetzl believes that people arbitration hearing. could have on other investments in the now have a good understanding of Clients know what to expect from sector and region. how it works. CDR (Commercial Dispute Resolution) Vienna’s neutral, arbitration-friendly Meanwhile Wolf Theiss has repre- Recently large mediation proceed- seat. There are no surprises, particu- sented Danish Polish Telecommunica- ings concerning Vienna’s International larly because the arbitration system is tion Group I/S in Uncitral arbitration Airport took place to study the current modelled on the Uncitral Model Law. proceedings. impact of the airport and development “For legal, emotional and geograph- The case concerns a joint venture plans. ical reasons, Vienna is the perfect place revenue dispute over Poland’s Individual lawyers involved in me- for CEE clients to have their arbitration telecommunications infrastructure. diation include Alexander Petsche of heard,” explains Christoph Liebscher, The €1 billion arbitration has been Baker & McKenzie and Nikolaus arbitration head at Wolf Theiss. divided into three different phases and Pitkowitz of Graf Pitkowitz. CDR 61
  • 119. Conference Diary June Monday 28 - Friday 2 July European Competition Law Location: Brussels, Belgium Organiser: Academy of European Law Tuesday 29 Friday 4 Crisis Management Workshop The Uncitral Model Law on International Commercial Arbi- Location: Oxford, UK tration: 25 Years Organiser: Manches LLP Location: Brussels, Belgium Organiser: AIA Wednesday 30 ICC Arbitration Today: Arbitrator Independence Crisis Management Workshop Location: Paris, France Location: London, UK Organiser: International Chamber of Commerce Organiser: CIArb CDR discount: CDR Premium subscribers can email for a code to claim discounted member rates on this event. Sunday 6 - Tuesday 8 International Litigation Summit 2010 Location: Las Vegas (NV), US Organiser: Marcus Evans July Thursday 1 - Friday 2 Wednesday 9 - Thursday 10 State Aid Litigation in the EU Commercial Arbitration in Russia, Sweden and England Location: Brussels, Belgium Location: Moscow, Russia Organiser: Academy of European Law Organiser: Arbitration Institute of Stockholm Friday 2 - Sunday 4 Monday 14 - Thursday 17 Workshop on International Commercial Arbitration International Commercial Arbitration Location: Hong Kong, China Location: Paris, France Organiser: International Chamber of Commerce Organiser: International Chamber of Commerce CDR discount: CDR Premium subscribers can email CDR discount: CDR Premium subscribers can email for a code to claim discounted for a code to claim discounted member rates on this event. member rates on this event. Wednesday 16 - Thursday 17 Thursday 8 Professional Negligence and Liability Forum Tax Dispute Resolution & Litigation Summit Location: London, UK Location: Sofitel, St James, London, UK Organiser: IBC Legal Organiser: IBC CDR discount: CDR Premium subscribers can email for a code to claim 10% off the Monday 21 - Tuesday 22 price of this conference. 8th European Forum on Anti-Corruption Location: Hilton London Tower Bridge Hotel, London, UK Sunday 18 - Tuesday 20 Organiser: American Conference Institute CDR discount: CDR Premium subscribers can email Corporate Litigation Exchange for a code to claim £150 off the Location: Colorado, US price of this conference. Organiser: IQPC Exchange CDR discount: CDR Premium subscribers can email to benefit from complimentary Tuesday 22 - Thursday 24 hotel stay and accommodation. Internal and Regulatory Investigations in Oil & Gas CDR (Commercial Dispute Resolution) Location: CCT Venues, Canary Wharf London, UK Organiser: International Quality & Productivity Center (IQPC) Tuesday 20 - Wednesday 21 CDR discount: CDR Premium subscribers can email Antitrust and Enforcement Compliance for a code to claim 10% off the Location: Washington (DC), US price of this conference. Organiser: American Conference Institute CDR discount: CDR Premium subscribers can email for a code to claim $200 off the Wednesday 23 - Friday 25 price of this conference. Resolving International Energy and Infrastructure Disputes Location: Lagos, Nigeria x Organiser: IBA 62
  • 120. Conference Diary September October Thursday 9 Wednesday 13 - Thursday 14 Joint Seminar with LCIA Intelligent Competition Compliance Location: London, UK Location: London, UK Organiser: CIArb Organiser: American Conference Institute CDR discount: CDR Premium subscribers can email Friday 10 - Sunday 12 for a code to claim £150 off the European Users’ Council Symposium price of this conference. Location: London, UK Organiser: LCIA Tuesday 19 - Wednesday 20 CIArb Congress Sunday 12 - Tuesday 14 Location: Heidelberg, Germany IP Law Summit Organiser: CIArb Location: Las Vegas (NV), US Organiser: Marcus Evans Tuesday 19 - Wednesday 20 Arbitral Awards Chief Litigation Officer Summit Location: Dubai, UAE Location: Las Vegas (NV), US Organiser: International Chamber of Commerce Organiser: Marcus Evans CDR discount: CDR Premium subscribers can email for a code to claim discounted Tuesday 14 - Wednesday 15 member rates on this event. Corporate Counsel Forum Europe Location: Hampshire, UK Sunday 24 - Tuesday 26 Organiser: Legal Week Corporate Counsel Exchange™ Location: The Netherlands Thursday 16 Organiser: IQPC Exchange Litigation Forum CDR discount: This event is by invitation only and CDR Pre- Location: London, UK mium subscribers can email for Organiser: Legal Week details on a CDR invitation. Wednesday 22 - Thursday 23 Sunday 18 - Tuesday 20 Investment Treaty Arbitration Corporate Litigation Exchange Location: London, UK Location: Colorado, US Organiser: C5 Organiser: IQPC Exchange CDR discount: CDR Premium subscribers can email CDR discount: CDR Premium subscribers can email for a code to claim 10% off the to benefit from complimentary price of this conference. hotel stay and accommodation. Thursday 23rd Tuesday 20 - Wednesday 21 Arbitration and Sport Antitrust and Enforcement Compliance Location: Paris, France Location: Washington (DC), US Organiser: International Chamber of Commerce Organiser: American Conference Institute CDR discount: CDR Premium subscribers can email CDR discount: CDR Premium subscribers can email for a code to claim discounted for a code to claim £150 off the member rates on this event. price of this conference. Sunday 26 - Tuesday 28 CDR (Commercial Dispute Resolution) For more upcoming conferences, visit European Corporate Counsel Summit Location: Montreux, Switzerland Organiser: Marcus Evans Featured partner event 63
  • 121. Profile Full disclosure Gary Wickham G ary Wickham is the head more than European legal systems. lawyer, it is extremely important to me of legal at CLS Holdings, The US system is too plaintiff-friendly that people at all levels of the organisa- a property investment and the consequences of losing a case tion feel able to come and discuss is- company. In the first of can be so damaging that there is huge sues with me at an early stage, our in-house profiles, Gary shares his pressure to settle even if the claim is confident that I will help them achieve thoughts on strategy, costs... and mys- without serious merit. European legal a solution to any potential problem. terious disappearances. systems have a more balanced ap- proach and the excesses of the US sys- When I’m stressed I tend to revert in- We collect evidence early and review tem hopefully will limit the risks of wards and focus solely on what I am our case with a sceptical mind. This European legal systems moving too far dealing with. I then become less able to means taking out the emotional ele- towards the US model. delegate matters which make the situa- ment of feeling wronged, and ration- tion worse. ally deciding what the risk/benefit Globalisation is a positive thing, but situation is. When your client strongly it causes rapid changes in local indus- My most useful tool? My contacts at feels that they are in the right you tries as they are forced to become more our external law firms. I call them to sometimes have to point out that in efficient to compete with foreign com- get a free second opinion. It’s a great practice there is nothing to be gained petition. For globalisation to have a net help. by pursuing the matter - no matter positive effect, local, national and how wrong that seems morally. transnational bodies need to ensure The worst experience was sitting in local expertise, skills and resources are my office past midnight for the Our last major dispute was resolved used more efficiently in new areas. umpteenth day in a row, having through expert determination. We known with 99.9% certainty since early deal with minor, straightforward Cost control is critical. I have to en- afternoon that completion would not claims in-house - otherwise we use sure compliance with the ever occur that day, but needing to Ashurst, Taylor Wessing and Maples changing legal and regula- be available in case I was Teesdale. tory environment, and wrong. I wasn’t. justify the in-house de- A good legal adviser makes clear partment’s existence in- I was on the way to from the start what the strengths and ternally. We need to work one day, reading weaknesses of your case are and can seen as a positive asset in the newspapers that see the overall picture rather than get- to the organisation someone we had an ting bogged down in details. rather than a cost outstanding arrange- Arbitration is the lesser of two evils. centre or an obstruc- ment with had disap- It has its faults but tends to be a tion to doing deals. peared. The only trace cheaper and quicker way of bringing a of him was his car, dispute to resolution. It has a better Approachability is which had been aban- chance of leaving the parties able to my most helpful per- doned at the side of a continue a commercial relationship. sonality trait. This re- motorway. We won- duces the chances of dered how on earth we UK lawyers have become much more matters festering and were going to sort out the willing to discuss fee options. But then becoming con- consequences. It worked CDR (Commercial Dispute Resolution) commercial dispute resolution is still tentious. As an in- out in the end. CDR one of those areas where it’s almost house impossible in advance to know what level of legal fees will be involved. My feeling is that in the rest of Europe such flexibility on fees is less preva- lent. The US legal system is politicised and driven by interest groups, much 64
  • 122. The International Comparative Legal Guide Series Written for global corporate counsel by the world’s leading lawyers The ICLG series provides current and practical comparative legal information on a range of practice areas Examples of current titles in the ICLG series include: Business Crime Cartels & Leniency Class & Group Actions Competition Litigation Corporate Recovery & Insolvency Corporate Tax Dominance Enforcement of Competition Law Environment Law International Arbitration Litigation & Dispute Resolution Merger Control Mergers & Acquisitions Patents Product Liability Real Estate “A great format and an excellent handy reference” Legal Operations Europe, GlaxoSmithKline PLC, UK “The layout, volume and accessibility of the material is very good” Director of Legal Services, Camelot, UK FREE ACCESS to all ICLG guides is available on our website