“Impossible” is one exasperated partner’s opinion of the world’s largest financial group. And he is from a firm that is getting on with Citibank.
But the bank, which spends a large slice of Citigroup’s £150m legal budget, can afford to be demanding.
With Citibank putting the final touches to its long-running overhaul of European legal advisers, no firm has felt the bank’s wrath more than Freshfields Bruckhaus Deringer, which dared to litigate against it on behalf of Prince Jeffri of Brunei two years ago.
When Legal Week this month revealed the early results of this shake-up, it was clear that Freshfields, which several years ago was reckoned to receive £10m in annual fees from Citibank, will remain on the sidelines.
Although “no-one has technically been dropped from the panel”, according to one senior Citibank insider, the source adds: “Freshfields is not in favour. I would not imagine we would retain them for anything of substance.”
His reasons are clear: “The legal panel needs to ensure quality and loyalty to us.”
It was this “lack of loyalty” that Freshfields failed to demonstrate the day it decided to act against
the bank.
But ousting Freshfields altogether has been impossible. The firm’s market-leading position in securitisation, along with Allen & Overy and Clifford Chance, has ensured that it continues to see a steady flow of work.
With only a handful of law firms offering suitable experience, Citibank’s options in this area were severely limited.
The source concedes the hold the magic circle firms have in some practice areas is “extraordinary”. But it is making small steps towards rectifying this.
The two main beneficiaries of the bank’s desire to widen its panel were Skadden Arps Slate Meagher & Flom and Weil Gotshal & Manges, which have been appointed for UK banking work for the first time, despite the scarcity of their resources in London.
However, Skaddens and Weils have excellent relations with Citigroup in the US – particularly Skaddens, whose New York-based partner, Kenny Bialkin, sits on the Citigroup board of directors.
The appointment of Weils and Skaddens, neither of which have UK banking practices that come anywhere near the top 10 City firms in terms of resources, has raised eyebrows in City. But in many ways, it reflects Freshfields’ position.
US investment banks are notoriously intolerant of law firms acting against them, a fact that Clifford Chance is facing, having conflicted itself with leading banking client CSFB.
The flipside is that US banks, while more open to using local talent than 10 years ago, still have a habit of bringing in their favoured US firms.
But insiders concede that with US clients, relationships – and their maintenance – are everything. Being named as an approved adviser is just the first step to gaining work.
This contrasts with the rigidity of most UK panels, a system Citibank is known to be unhappy with. It is clear that the bank is setting up a loose list of approved advisers for future use, not an inner circle of trusted firms.
All of Citibank’s panel firms will be expected to provide discounts, secondments and other value-based legal service requirements – the main reason UK general counsel Brad Gans is keeping the panel system in the first place.
However, the Citibank insider warns that an understanding of the business remains crucial if firms want to be favoured.
He says: “Firms are more interested in the panel for the purposes of their CV, rather than understanding this business. More people ask us about the panel and approved list than anything else.”
Selected advisers
Cross panel: Clifford Chance, Allen & Overy, Shearman & Sterling, Linklaters & Alliance
M&A: Slaughter and May, Linklaters
Banking: Weil Gotshal & Manges, Skadden Arps Slate Meagher & Flom
Projects: Norton Rose and Denton Wilde Sapte (telecoms financing only)
