Big-name partner exits turn spotlight on leading litigation practice's next move, as Anna Reynolds reports

Herbert Smith Freehills' (HSF) prized litigation practice has been the subject of much attention in recent months, with a steady stream of senior departures providing an unwelcome narrative in the wake of last year's transformative Anglo-Australian merger.

The departures – which have seen senior names such as Ted Greeno, Martyn Hopper and Kevin Lloyd head to magic circle rivals and ambitious US competitors in the City – come amid falling partner profits and much talk of post-merger tension following last October's Freehills tie-up.

But as global dispute resolution head Sonya Leydecker draws up a new three-year strategy, she believes the practice remains at the top of its game, with the merger providing an opportunity to build the practice globally.  

Following the departures, the firm has no plans to recruit at partner level in London, preferring to grow organically through associates coming up the ranks. But internationally, the firm is looking to add litigation capability to its nascent German practice in Berlin and Frankfurt, launched this year with corporate duo Ralf Thaeter and Nico Abel and real estate partner Hans Thomas Kessler. The German launch came after legacy Herbert Smith's three-way alliance with Germany's Gleiss Lutz and Benelux firm Stibbe came to an end at the close of 2011.

Meanwhile, Leydecker cites Moscow as one of the firm's most successful disputes practices, while in China the firm's five partner-strong arbitration practice is seen internally as having real potential for growth.

UK disputes head Mark Shillito adds: "We feel we are where we want to be, apart from in Germany where we are looking to build. We are also recruiting white collar crime specialists, particularly in New York." 

However, the perception from outside the firm remains sceptical, with former partners and rivals criticising a perceived short-sightedness in the firm's international strategy, in particular the firm's struggle to gain a foothold in the US. The firm made its long-awaited US launch in 2012 through the hire of a high-billing product liability team from US firm Chadbourne & Parke. 

One former partner said: "The loss of big names is the result of strategy decisions: the fact that the firm didn't have a US practice and the lack of an EU merger with Gleiss Lutz. HSF's international strategy is a difficult one to understand and I don't believe they have steadied the ship now."

The Freehills merger is also set to see the legacy UK arm of the firm move away from its rigid eight-year lockstep, with moves to shore up the firm's capital structure also provoking strong opinions both in and out the firm.

As one former litigation partner comments: "If you ask people why they are leaving it's because of the merger. The biggest objection is the loss of the lockstep culture – I left because I wanted a pure lockstep and this was in jeopardy."

Much has been made of ongoing tensions between the corporate and litigation practices in relation to partner profits, which this year have fallen by about £100,000, down from £840,000 to £744,000. 

But despite the departures, the firm's disputes department remains one of the largest in London, boasting 57 partners as part of a team of 132 around the world. The firm continues to act on some of the most high-profile litigation cases, including taking a role for Virgin Trains on its lawsuit against the Government over the West Coast Main Line franchise, as well as advising UBS on last year's Kweku Adoboli rogue trader scandal. 

"Herbert Smith is still a powerhouse in the UK litigation market and I doubt that the departures will make any material difference other than in the very short term," comments one City litigation head.

Leydecker adds: "Of course, we would have preferred not to lose partners and yes, we have lost a small number of good names. But we have really high-quality associates and have worked to reassure them about the departures. We are confident, so we need to ensure they feel the same way. 

"There's always going to be fall-out from mergers and an initial period in which some people feel unsettled. This was after all one of the biggest fully integrated mergers the legal sector has seen. However, the departures have also led to opportunities for others to step into the limelight, and they are doing this with gusto."  

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Key ongoing cases

  • Bharti Airtel in defence of a claim in excess of $1bn (£653m) relating to its business in Nigeria
  • SP AusNet on major class action arising from the 2009 Kilmore Bushfires in Australia
  • Apple against Samsung in the Federal Court of Australia regarding infringement and validity of patents
  • Nikolai Maximov in seeking recognition and enforcement of a $280m (£182m) Russian arbitral award against Novolipetsk Metallurgical Plant
  • The Kingdom of Spain on the claim of international arbitration of 25 investment funds based on the Energy Charter Treaty

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Herbert Smith Freehills disputes resolution practice – key figures

132 partners around the world: EMEA 60, Asia 18, Australia 46, US 8

10 new partners hired in 2012-13: seven in New York, one in Moscow, one in Shanghai and one in London

6 partners promoted to the practice in 2013 – in London, Hong Kong, Sydney, Paris, New York and Madrid