US firm makes strong statement of intent in London with high-profile Simmons hire

With even the notoriously conservative Cleary Gottlieb Steen & Hamilton making a senior disputes appointment in the Square Mile, it appears that the much-touted banking litigation market really does have legs.

The US firm made a big splash last week with the news that it was making a rare lateral hire in the shape of Jonathan Kelly (pictured) from Simmons & Simmons, one of the best-known banking litigators in the City.

Kelly's mandate is to launch a City litigation practice for Cleary, which, despite launching in the UK in 1971 and having a very well-regarded City arm, has so far confined its contentious practice to US litigators working out of London.

In many ways it is surprising that it has taken the firm so long to enter the City disputes market. Cleary already has a very respectable European arbitration group led out of Paris and Brussels, but a UK litigation practice has been on the agenda for years with little drive until vague aspiration turned to serious intent last year. Even then the firm at one point flirted with hiring a senior barrister to oversee its litigation effort before securing Kelly's services.

Most would say they found the right man, hiring a lawyer who oversaw an excellent practice at Simmons and who has worked on some of the most closely watched financial disputes of recent years, including acting on HSH Nordbank's claim against UBS for more than $275m (£175m).

Cleary, given its strong securities pedigree, also feels understandably confident that a client base that includes UBS, Goldman Sachs, Deutsche Bank, Credit Suisse and Bank of America will need contentious advice in the City, in what is set to be an increasingly risky market.

The consensus among litigators is – with some of the wilder predictions that there would be floods of credit crunch-related litigation dismissed – that there has been a steady increase in contentious work in the banking sector over the last 12 months.

A number of cases have been bubbling over, including Deutsche Bank suing investment firm Sebastian Holdings for approximately £170m in relation to losses on a foreign exchange trade, while Royal Bank of Scotland and Ambac are locked in a dispute involving collateralised debt obligations.

In this context the much-touted launch in the City of Quinn Emanuel is still being watched with much interest. While opinions among hardened litigators remain divided over the prospects of Quinn, which is explicitly targeting banking disputes work, the firm has won some admirers and is generally regarded as having put in a promising first year of operation.

Plenty of other US law firms are known to be hunting for quality UK litigators, though Cleary's Wall Street rivals such as Sullivan & Cromwell and Simpson Thacher & Bartlett have said that they still have no plans to launch local litigation teams.

In the meantime, Cleary will be watched as a firm with serious prospects, though leading finance litigators warn the firm will need a substantive investment to back up Kelly in order to have much impact. But given its reputation for leanly staffing its European practices, Cleary seems in a relatively expansive mood, with the firm currently aiming to bring in another partner in the short term with a longer term goal to build a broader litigation practice. If it is a case of better late than never, there is some evidence that Cleary is aiming to make up for lost time.