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Osborne Clarke sets up shop in Amsterdam

Osborne Clarke is to launch an office in Amsterdam in the New Year, marking the firm’s fourth international opening with a year.

The new base will open focus on the digital business sector initially, with plans to expand into real estate and renewables over the next financial year. No head has been decided as yet but the firm is looking at hiring in Amsterdam and will model the office on its recent international openings.

It is the Osborne Clarke’s second recent assault on the digital business sector. In October the firm opened in Manhattan to enhance its relationships with tech companies and intermediaries in the US (25 October 2013). It has been trying to establish relationships in the venture capital and investor communities, aiming to provide UK legal advice to European clients who have moved to the US, or US clients looking to gain a European stronghold.

Osborne Clarke has been on an expansion binge in recent years. The firm pulled out of its Europe alliance last year before entering into mergers with former Spanish and Italian allies SLA Studio Legale Associato and Osborne Clarke Spain in March 2012. It has also set up shop in Brussels (3 June 2013), Paris (22 July 2013) and New York in 2013.

It has been adding to those offices ever since, appointing IP partner Claire Bouchenard in Paris in September and former Linklaters managing associate David Haex to its Brussels office the same month (4 September 2013).

Bulking out in Europe is central to new senior partner Andrew Saul ‘s strategy. The former corporate chief and current City head will take over from incumbent Tom Birt on January 2014 (26 November 2013).

He has set his sights on growing the firm’s footprint further in its European stronghold, telling The Lawyer earlier this month: “I want to get stuck into international expansion. I have a lot of experience in that having set up our office in Silicon Valley and helping set up our office in New York.”

Europe has proved profitable for the firm, which revealed a 12 per cent turnover rise for the first half of the 2013-14 financial year, with turnover for the firm’s Spanish offices rocketing by 25 per cent (22 November 2013).

The firm’s total revenue increased to €71.6m (£59.8m).

1,000 crime solicitors to descend on Law Society in bid to oust leadership

Beleaguered Law Society officials are braced for up to 1,000 angry criminal legal aid solicitors to swamp a special meeting in less than a fortnight’s time as the row over Chancery Lane’s leadership peaks.

Proponents of a motion of no confidence in the society’s president and chief executive have organised coach convoys from at least four provincial centres to deliver a stark message to the leadership at a special general meeting (SGM) later this month: oppose more robustly Government proposals to slash criminal legal aid rates, or resign.

Against the backdrop of the SGM, the profession’s regulator announced that next year it will research the impact of legal aid rate cuts on the financial viability of crime specialist solicitors’ firms.

The society has confirmed it is preparing to accommodate slightly more than 1,000 solicitors at the SGM. It has asked lawyers to notify Chancery Lane of their attendance by 12 December. By Friday afternoon (6 December) 350 lawyers had said they would attend.

Emotions are running high as the vote looms, with James Parry, the solicitor behind the no confidence motion, claiming the Law Society hierarchy is pressing him directly and indirectly – through representatives from criminal legal aid specialist lawyer groups – to drop the challenge.

But he says he has no intention of bowing to the pressure.

“I’ve received significant support from grassroots solicitors since calling for the vote of no confidence,” he told The Lawyer, “and the only way I would consider dropping the motion is if the society acknowledged that it had entered into discussions with the Ministry of Justice without a mandate from the profession and it agreed to change its policy regarding the proposed reforms.”

Parry – a partner at Liverpool-based Parry Welch Lacey – said he anticipates strong support for the motion at the special general meeting on 17 December at the Law Society’s London headquarters. In addition to coachloads of solicitors travelling to the capital, Parry anticipates many London solicitors will also attend to back the no confidence motion.

He claimed that, ironically, an e-mail sent by society president Nick Fluck to criminal law specialist firm senior partners has actually motivated many to give their associate staff a day of paid leave to attend the meeting and back the motion.

Society chief executive Des Hudson has declined to release details of how the vote will be conducted. Concerns have been raised that qualified Law Society staff might feel pressured to back the leadership if the vote is not held through a secret ballot.

Meanwhile, the Solicitors Regulation Authority said it will conduct a research project on how law firms are managing the risks of the legal aid cuts. Mike Haley, the authority’s director of supervision, explained that “in our financial information gathering, as part of the financial stability programme, we asked 500 firms with over 50 per cent reliance on legal aid about their current financial health.”

He pointed out that as “the exact nature of the changes to be made by the MoJ are not yet settled it is too early to say what the impact will be”.

In a statement last week the Law Society reiterated its opposition to the Government’s proposed cuts, pointing out that criminal law practitioners were not unanimous in their approach. Chancery Lane officials also denied they were in cahoots with the larger crime firms to agree a programme of consolidation with ministers.

“The Government made it clear with price competitive tendering that they wanted to deal with the smallest number of firms in big contracts at the minimum price,” said the society. “There are among the leaders of big firms some who would prefer that too. The society secured a concession from Government, which means that the maximum number of firms, subject to economic viability, should be able to compete. That’s against the interests of big firms, but in the interest in the majority of criminal practitioners.”

Chinese investment picking up speed

UK prime minister David Cameron’s current visit to China could potentially see China investing in the hotly-debated $50bn High Speed 2 rail line project, and Chinese investment into the UK picking up speed in general.

But even before Cameron’s trip, Chinese money has been pouring into Great Britain and has been keeping City firms’ corporate departments busy. For example, two Chinese nuclear groups are investing in EDF’s Hinkley Point C nuclear plant in Somerset, and China Investment Corporation has acquired a stake in each of Heathrow airport and Thames Water.

Inside China, the government’s tougher stance on corruption and law enforcement has triggered investigations into multinationals’ practices and spurred a market for compliance advice. This week’s China special report takes a closer look at this fast-growing practice area among international and local law firms.

During his official visit, the prime minister is also calling for an EU-China trade deal. For the UK and European legal industry, a free trade agreement could potentially solve some of the perennial problems in China such as low profitability and a lack of critical mass.

DAC Beachcroft merges with Colombian alliance firm

DAC Beachcroft has merged with Colombian insurance firm De La Torre & Monroy Abogados Asociados and started trading as DAC Beachcroft Colombia yesterday (1 December).

Having entered into a formal association with De La Torre & Monroy earlier this year (20 March 2013), DAC Beachcroft partners agreed the merger with a vote that closed on Friday 22 November.

The Bogota office consists of the legacy firm’s two founding partners Camila de la Torre and Gabriela Monroy, and six lawyers.

DAC Beachcroft senior partner Simon Hodson said: “We will run the ambassador relationship through the Madrid office but no additional headcount is being sent there. We will cover all Colombian law and insurance matters arising in Colombia, including reinsurance which often comes back to the London market.”

Legacy DAC had a longstanding relationship with De La Torre & Monroy, as well as a successful Latin American practice with bases in Madrid and Mexico and alliances with JBO Advocacia in Brazil and Seguros Lex in Chile.

The two firms already share relationships with a number of clients locally in Colombia and in the international reinsurance market, particularly in London, New York and Spain.

The move builds on the tie-up between DAC Beachcroft and Chilean firms Seguros Lex and Amunategui y Cia at the end of last year (1 November 2012).

Ashurst advises on first German public takeover by Chinese state-owned company

Ashurst was among a raft of firms that have secured advisory roles in Chinese state-owned group Aviation Industry Corporation of China (AVIC)’s €320m acquisition of German listed company KHD Humboldt Wedag International AG (KHD).

The Chinese group, which already indirectly owns a stake in German industrial-plant builder KHD, has submitted a voluntary public takeover offer together with three further bidders from Singapore. The transaction is the first public takeover of a German listed company by a Chinese state-owned enterprise.

The Ashurst team acting for the Chinese group and the Singaporean bidders is led by Frankfurt-based partner Reinhard Eyring and counsel Martina Rothe. Senior associate Fabian von Samson-Himmelstjerna and associate Joanna Wilczynska-Gluch, both from the corporate team in Frankfurt, are also part of the core team. The firm’s finance partners Tom Beckerhoff in Frankfurt and Dominic Gregory in Hong Kong have provided support with respect to the financing aspect of the transaction.

Chinese firm Zhong Lun and Jun He have advised the Chinese group on PRC law. Jones Day has been advising AVIC on antitrust and competition law, led by Frankfurt competition partner Carsten Gromotke.

The financing bank to the bidders, ICBC Asia, instructed Mayer Brown, fielding Hong Kong partner Francis Chen and Frankfurt partners Ulrike Binder and Dirk-Peter Flor.

“This is particularly remarkable due to the fact that public takeovers in Gemany have up to now posed problems which have been almost impossible for state-owned companies from China to solve, and we have broken new ground with this transaction,” said Eyring.

According to Eyring, Chinese state-owned enterprises have to meet numerous regulatory requirements which have also in this case greatly complicated the transaction. For example, pursuant to the Securities Acquisition and Takeover Act (WpÜG) a Chinese bidder, being part of a group whose parent company’s shares are owned by the Chinese state, has to disclose all Chinese state-owned enterprises in the offer document. The relevant annex can therefore comprise several thousand pages – in this case approximately 5,800 pages.

AVIC is a longstanding client of Ashurst. In 2011, the firm advised the Chinese group on the acquisition of a 20 per cent stake in KHD by its subsidiary Max Glory Industries. In 2012, Ashurst’s Hong Kong office acted for AVIC on its investment in the Finnish ship design and engineering company, Deltamarin.

AVIC is an aerospace and defense company owned by the Chinese state, ranked 212 in the Fortune Global 500. In the financial year 2012, AVIC generated a consolidated turnover of approximately RMB300.6 billion (€36.6bn).

Deloitte the winner in UK 200 audit race

Deloitte has emerged as the dominant player in the UK law firm audit market, new research by The Lawyer has revealed.

Two-thirds of this year’s UK 200 top 30 firms are clients of Deloitte. The firm’s closest competitor in this group is Nexia Smith & Williamson, which in contrast to Deloitte’s 20 has just two clients (Clyde & Co and Macfarlanes).

Deloitte also has a stranglehold on the UK magic circle, auditing Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters. Allen & Overy is the sole PricewaterhouseCoopers (PwC) client in this group.

“It’s a sector we invest heavily in, and have done for many years,” said Jeremy Black, a partner in Deloitte’s professional services practice. “As a result, we’ve been able to build a breadth and depth of expertise that allows us to better serve firms both here in the UK and globally. Our experience in the sector means we have tax and audit professionals in all the key international locations who have experience of serving law firms.”

The Lawyer examined the accounts for all of the 162 firms in this year’s UK 200 that have converted to LLP status and are therefore statutorily required to file year-end accounts and have their accounts audited.

While the largest firm in the UK 200 – DLA Piper – is audited by PwC, 20 of the UK top 30 are clients of Deloitte. In total Deloitte has 40 clients in this year’s UK 200, 26 ahead of BDO in second place.

Once outside the top 30 Deloitte’s dominance is significantly reduced, with a total of 47 accountancy firms auditing this year’s top 200.

Of those, 32 had just a single client. They include Ernst & Young and its sole audit client, Newcastle’s Watson Burton.

There is no place for either KPMG or Ernst & Young in the upper reaches of this year’s table, with the former’s highest-ranked client (Parabis) coming in at 34 and the latter having no clients in the top 100 at all, with only Watson Burton in 168th place turning to it for auditing services.

Today’s feature examines the issues audit firms are facing in the context of an increasing number of law firms going into administration, such as Manches last month (4 November 2013).

“Auditors look at businesses as going concerns,” said Nexia Smith & Williamson’s head of professional practices Giles Murphy. “They assess the ability of a business to function for the following 12 months. And what the last year or two has shown in spades is that the partnership model is fragile.”

Wragges and Lawrence Graham prepare for £170m merger vote

Lawrence Graham (LG) and Wragge & Co are in merger talks to create a £170m firm, partners were told today.

Wragge & Co senior partner Quentin Poole confirmed the talks, stating: “We have been open about our strategy and the fact that we are looking at opportunities to strengthen our ability to serve clients in strategic practice areas, sectors or locations, particularly in London.”

He cited LG’s real estate, equity capital markets, investment funds and private capital practices as the main attractions for the firm, and added: “We are exploring how clients might benefit from our two firms forming closer ties.”

Wragge & Co began drawing up a list of London merger targets in 2009 and said at the time that financial services, private equity, property finance and property funds were top of the wish list (7 February 2009).

LG announced a sizeable drop in profitability this summer, with average profit per equity partner (PEP) sliding by 14 per cent between 2011/12 and 2012/13 to £260,000 (26 July 2013), while the firm’s latest LLP results reveal an annual property bill is costing the firm £5.1m a year (4 February 2013).

The firm had been in talks about a tie-up with Field Fisher Waterhouse (FFW) but were called off last summer (28 June 2012). Sources at the time suggested that issues with LG’s London-headquarters costs were problematic for FFW.

Managing partner Hugh Maule told The Lawyer in July that the firm was hoping for a significant boost to profitability at the end of the next financial year, after the firm sublet surplus office space to Bond Dickinson and an international property developer.

Wragges has long had an eye on the development its London base with Poole telling The Lawyer in 2009 that it was drawing up a list of London merger targets to boost its presence in the city (2 February 2009).

At the latest year-end the firm pushed turnover up 1.9 per cent to £120.5m, compared with a 7.5 per cent fall at LG from £56m to £51.8m. Wragges’ average profit per equity partner (PEP) figures also outweighs LG, at £329,000 compared with £260,000 for LG.

Both firms have seen departures in recent months.

In April LG property litigation head Jane Fox-Edwards quit the firm to join Allen & Overy (12 April 2013), she was followed by pensions partner Ron Burgess who left for Olswang and white collar crime partner Eoin O’Shea who quit for Reed Smith.

Wragges was hit by DWF in Birmingham in August for real estate partner Toby Askin who joined the firm as practice head (28 August 2013).

In October, the firm moved to transfer a cohort of its support staff to third-party provider Intelligent Office, resulting in 26 full-time equivalent (FTE) staff members opting to take voluntary redundancy (14 October 2013).

A vote is yet to be scheduled on the tie-up.

Dentons vote on McKenna Long tie-up expected next week

Dentons partners have until 14 November to vote on whether to merge with US firm McKenna Long & Aldridge.

Board members at both firms have approved plans for the tie-up and have now asked partners to decide whether to complete the deal.

Dentons could add 575 lawyers to its global presence, six months after the tripartite combination between SNR Denton, Salans and Fraser Milner Casgrain (8 November 2012).

Today the firms said: “The boards of Dentons and McKenna Long & Aldridge have recommended to their partners that the firms combine, subject to the approval by their respective partnerships.

”The voting procedures will follow the protocols of each firm and will be completed no later than November 14, 2013.”

The new-look Dentons went live on 28 March after being approved in a partner vote last November. Today’s news marks the one year anniversary of its tripartite announcement.

Its new relationship with McKenna Long sees it tie up with McKenna Long’s 15 offices, mainly based in the US and Brussels.

The China paradox

The actual number of foreign firms and their footprints in mainland China has gradually grown. According to China’s Ministry of Justice, the number of foreign firms’ representative offices by the end of 2012 stood at 228, double the 114 in 2003.

“China’s legal market has grown substantially, and so has the demand for international legal services,” says a Chinese partner in King & Wood Mallesons. “It is in a position to support the success of many international firms, but certainly not everyone. Most unsuccessful ventures are a result of a lack of strategic vision and differentiated products.”

He also points out that many small- to mid-sized firms rushed into China mainly driven by peer pressure and marketing needs, and their China offices are headed by opportunistic partner lateral hires because of the limited talent pool.

“More often than not, these local partners’ practice focuses and skill-sets don’t match the firms’ home offices,” he says. “They are run like a separate shop and have no synergy with the home market. These firms are having a tough time in China.”

Every global-minded firm knows the importance of having a China presence and, equally, no one is underestimating the challenges of succeeding there. However, when firms have invested in the market for some years but have yet to see satisfactory returns, their patience must eventually run out.

Many market observers expect a number of other firms to close one of their China offices following Vinson & Elkins’ move. But given the difficulty in obtaining regulatory approval to launch an office coupled with peer pressure, most will hold on with a leaner presence and wait for the tide to rise again.

Jones Day is one of the firms that has recently rejigged its Greater China teams to improve business efficiency. The reconfiguration in May saw almost half of its eight Beijing partners, along with several associates, relocate to Shanghai and Hong Kong. Jones Day’s Beijing office was opened in 2003 and was a 20-lawyer outpost prior to the moves. At its height, at the end of 2007, the firm had nearly 50 fee-earners in Beijing.

O’Melveny & Myers is another US firm that has been widely tipped to be the next one to scale back in China. Sources close to the firm suggest it plans to downsize in China, a decision said to have been taken by the firm’s new management led by chairman Bradley Butwin, elected in 2011.

“The firm’s previous management was keen on China and has invested heavily in the country, but the new management is understood to take a different view,” says a source close to O’Melveny & Myers. “There was also significant disgruntlement among US partners over all the investment in China. Its China practice is making money, but the figures are nowhere near the level of its home market, so the firm has decided to concentrate on the most profitable part of its practice.”

O’Melveny & Myers, however, forcefully rejects any local speculation that it might downsize and a spokesperson says: ”China remains a key focus area for our firm”.

In June the firm’s long-serving Asia practice chair Howard Chao, previously based in Hong Kong, stepped down from the post and the partnership to become an of counsel. He was not replaced; instead, the firm shifted governance responsibilities to its Asia committee. The leadership restructuring perhaps is a sign of things to come as well as a changing focus in Asia.

Rerun of events

US firms have a reputation of being sensitive to overheads and unproductive investment. Office closures and downsizing exercises are not new in China. In the early 2000s a number of US firms withdrew from Hong Kong or mainland China – legacy Dewey Ballantine, Paul Weiss and Gibson Dunn to name but a few. Several UK firms also departed China and later re-entered, such as legacy Denton Wilde Sapte and CMS Cameron McKenna.

Although magic circle firms generally take a longer term view on investment and are more established in China, they are under unprecedented pressure.

“Most China offices are dilutive to their firms’ global partnership’s profit distribution,” says a former magic circle China partner. “In the good years partners didn’t really care about reducing their profit shares to subsidise China, but no one can afford to leave one part of the business bleeding, particularly when the home market is tough.”

Although Freshfields’ commitment to China is unchanged and it remains a top international player there, it is believed that the only time its China offices were accretive to the global offering was in the boom time of 2006/07. The number of partners based in the mainland has decreased from eight in 2009 to five in 2013. The reduction in foreign firms’ China headcount is not obvious, as there is no public information available and ‘stealth layoffs’ are common practice.

A&O’s Greater China team has also shrunk noticeably over the past few years. In 2008 the firm had 34 partners in Beijing, Shanghai and Hong Kong. Now, the number has reduced to 26, with seven residing on the mainland.

“Five years ago, when Latham & Watkins took away a team of seven partners in Hong Kong, it really had a big impact on the China practice,” says a former magic circle partner based in China. “The firm still hasn’t quite got it back. The exit of the six senior partners in Hong Kong last year further affected certain practice areas. Overall, the China team is leaner now than five years ago.”

China’s legal landscape is vastly different from what it was 10 years ago and is still evolving. Both international firms and local firms are constantly responding and adjusting. The issues firms are facing are many and characteristic of an important developing market. Whatever steps firms take to address these issues it will be a fine balancing act.

For now, those that have reshaped their China strategy and chosen to have a leaner team but a sharper focus and a specialist offering are more likely to thrive than the ones that are yet to figure out what their raison d’être is in China.

Dhir partner Jay Cheema joins Clasis for int’l reach, to start energy-infra practice

Clasis Law has added an energy and infrastructure practice with former Dhir & Dhir Associates energy and infrastructure partner Jay Cheema, who joined the firm as partner in Delhi effective today.

“I am both for oil and gold,” said Cheema, adding, “I only feel that this [practice area] is bound to grow both nationally as well as internationally as India’s energy needs become more demanding. There is a great emphasis by Indian companies making acquisitions overseas – essentially I see my role there in terms of advisory.

“A fair bit of my practice is in international energy law. I have advised clients in South America, Africa and China and intend to strengthen my international energy law expertise.” Clasis has a ‘best-friend’ preferential referral relationship with international firm Clyde & Co.

Cheema said he established the energy and infrastructure vertical at Dhir & Dhir, which had been primarily known for reconstruction and telecom work. He left the firm on 30 October.

He graduated as a lawyer from Panjab University in 1991 and obtained an LLM from the University of Ottawa in 1994, after which he pursued a Bachelor of Laws at the University of Toronto in Canada to become a Canadian-qualified lawyer. He graduated in 1995 and worked at Fasken Martineau Walker for a year before returning to India to join MNC Legal. Cheema left MNC Legal as a partner in September 2011 and joined Dhir.

Vineet Aneja, Partner and head of Clasis’ Delhi office said: “Energy and infrastructure are core sectors in the context of Clasis Law’s strategic plan; Jay’s arrival adds a complementary depth of capability to our current offering and in an area where we are witnessing increasing client demand and potential.”

The firm also started its indirect tax practice in September after recruiting Grant Thornton indirect tax director Manoj Mishra as head of the practice in Delhi.

Dhir & Dhir CEO Manju Mohotra commented: “It was nice to have Jay and we wish him all the best.” She added that associate partner Santosh Pandey, who had been handling some of the firm’s infrastructure work after joining the firm in August 2012 when the infrastructure practice of the firm “really picked up”, would take charge of Cheema’s specific oil and gas vertical alongside his existing projects in road, power and ports. The firm would not hire someone immediately to replace Cheema, she said, as the firm’s associates also shared an excellent rapport with projects clients.