Continental Breakfast: your daily update on what’s happening in Europe.
The head of the U.K.’s central bank is working on a secret deal that would see British businesses retain access to the European single market for at least two years after the country leaves the EU, according to The Sunday Times.
Bank of England governor Mark Carney has repeatedly called on the government to secure transitional arrangements with the EU in order to minimize disruption to business and the economy. Speaking to politicians earlier this month, he said that such transitional periods normally range between four and seven years.
The Sunday Times also reports that Brexit may be delayed until late 2019 due to staff shortages in key government departments.
The special Brexit and international trade ministries, which were established as a result of the EU referendum result, have only recruited around 200 of the 1,250 trade policy experts and other staff needed to negotiate a Brexit deal, the newspaper claims.
U.K. prime minister Theresa May had previously reiterated her intention to invoke Article 50, which starts a two-year deadline for an EU member to complete its exit from the political bloc, by the end of March.
But this was thrown into doubt after a recent High Court ruling that May does not have the power to start the Brexit process. A group of claimants successfully argued that parliament should be allowed to vote on the triggering of Article 50. It means that U.K. politicians, the majority of whom wanted the country to remain within the EU, could delay or even block Brexit.
The U.K. government has appealed the High Court ruling, with the case set to be heard by the Supreme Court over four days from December 8. The Supreme Court recently ruled that the Scottish and Welsh governments can join the historic legal battle.
The Supreme Court’s decision is expected in early January.
Goodwin Makes Another Raid On Struggling KWM
Goodwin Procter has made yet another raid on struggling King & Wood Mallesons, picking up a four-partner private equity team in London.
The U.S. firm’s recruitment of Shawn D’Aguiar, Patrick Deasy, Ed Hall and Ajay Pathak, reported by The American Lawyer’s U.K. sister title Legal Week, comes just days after its capture of KWM’s investment funds head Michael Halford. Goodwin confirmed after Halford’s hire that it had “extended offers to certain other London-based KWM partners.”
KWM sued Goodwin earlier this year over its hiring of a highly-profitable six-partner private equity team from the Sino-global giant’s Paris office.
Halford was one of four senior KWM partners whose resignation led to a collapse of the firm’s planned $18.4 million recapitalization.
KWM’s European partners recently rejected a financial bailout from the firm’s Asian arm, despite having being told that they may have to repay two years’ worth of profits if the deal was not approved. (A leading expert in partnership law says it would be practically impossible for the firm to claw back the profits.)
KWM said in a statement that its European management board is now “considering a range of strategic options, including mergers, in conjunction with the firm’s bankers and financial advisers.” The firm recently held recently held unsuccessful talks with Morgan, Lewis & Bockius.
British Utilities Giant To “Reshape” Novel Law Firm Deal
British utilities company Thames Water is to “reshape” its novel arrangement with London-based law firm Berwin Leighton Paisner.
The company, which is responsible for the water supply for much of London and the surrounding areas, currently has a deal with BLP that sees it outsource the majority of its legal function to the firm.
Thames previously worked with a range of law firms, including Allen & Overy; Ashurst; Denton Wilde Sapte (now Dentons); DLA Piper; Freshfields Bruckhaus Deringer; and Linklaters.
But in 2010, Thames agreed a groundbreaking five-year contract that saw its 19 inhouse lawyers transfer to BLP, which received around 5 million pounds ($6.2 million) per year to provide the company with an outsourced inhouse legal function.
BLP, which already received around 15 percent of Thames’ legal work by value, now handles all of the company’s day-to-day legal requirements. It also receives first refusal on any work that isn’t covered by the deal, such as major transactions, projects, and disputes. These “out of scope” matters account for about 30 percent of the work BLP does for Thames, with the firm currently acting on the 4.2 billion pounds ($5.2 billion) Thames Tideway Tunnel project to replace London’s ageing Victorian sewer system.
In return, BLP has to deliver annual cost savings to Thames of at least 20 percent. It sends Thames’ lower-value work to Manchester-based Pannone and Ashfords, a southwest England firm that has a longstanding relationship with the company. The two firms also step in if BLP is ruled out of a particular Thames matter due to a conflict.
BLP has said that the combination of being freed from inhouse administrative burdens—such as managing outside law firms, negotiating fees, and paying bills—and gaining access to the firm’s technology and expertise has increased the productivity of Thames’s 19 lawyers by 40 percent following the deal, which moved into profit midway through its second year and was renewed in 2014.
But the firm has struggled to sign up other clients to similar managed legal services contracts. BLP came close to securing deals with Buckinghamshire County Council and IT company Colt Technology Services in 2010, but both ultimately fell through, with Colt instead retaining Greenberg Traurig. More recently, negotiations with utilities company Yorkshire Water broke down after a new head of legal was appointed at the company, while infrastructure group Balfour Beatty opted against BLP’s managed legal services offering in favor of a conventional law firm-client arrangement with Pinsent Masons, which was last week named Law firm of the Year at the British Legal Awards.