madrid annual e-report 2011

May / June 2011 • IBERIAN LAWYER • www.iberianlawyer.com

IBERIAN LAWYER

MADRID ANNUAL REPORT 2011Unlocking the practice puzzle

An abstract from Iberian LawyerMay / June 2011

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Madrid annual report

1

The Madrid legal market is a barometer of the Spanish economy. If the country does well so do the capital’s law firms. Spain may be in many senses federal but the Capital remains the focus of much of the country’s corporate, finance and commercial activity. The city’s law firms are therefore acutely aware of the prevailing economic challenges and looking to adjust their operations accordingly.

“Spain has clear economic challenges but we are nowhere near the situations faced by Greece, Ireland or Portugal. The country does not need rescuing. Our firm, like others, has been affected by the downturn and we continue to face short-term challenges. But we are still moving forward,” says Fernando Vives, co-Managing Partner of Spain and Continental Europe’s largest law firm, Garrigues.

Lawyers agree that the nature of day-to-day legal work has changed with the downturn. There is more housekeeping work alongside a boom in litigation, refinancing and restructuring, and labour mandates, with significantly less transactional and M&A work. The result has been firms having to adjust both their practice focus and revenue expectations.

According to MergerMarket, during 2010 there were 356 announced Iberian M&A deals with a total value of €33billion, a long way off the 482 deals seen in 2007 worth a total €121bn.

Spain may not be suffering direct contagion from the troubles affecting other members of the eurozone but uncertainties remain, says Carlos Pazos, Managing Partner of SJ Berwin in Madrid. “The downturn is evident in the streets, with protests and falling consumer demand, and the Government still faces a significant deficit. So in relation to countries such as France or Germany our position is not good.”

El mercado legal de Madrid es un barómetro

de la economía española. España tiene muchos

elementos de un Estado federal, pero su capital

concentra gran parte de la actividad comercial y financiera del país. Los

despachos en Madrid son plenamente conscientes

de los desafíos económicos actuales y ya se están adaptando a los

cambios.

The Government has embarked on reforms and more are needed, say lawyers. A major challenge remains in bringing more flexibility to the labour market although with official unemployment figures at 21 percent there is less political will to do so.

But there have been relative successes. The Government has dramatically cut public spending, albeit by cancelling a large number of planned construction projects, and the consolidation of the country’s regional savings banks (cajas) is under way. A process encouraged by The Bank of Spain which has imposed increased capital ratio thresholds, and facilitated mergers among cajas with heavy exposure to the collapsed real estate market.

This summer will likely see the first IPOs of the year, of Telefónica’s call centre division Atento, and most significantly of three new merger driven banks: Bankia, Banca Cívica and Banca Mare Nostrum, and the restructuring of La Caixa as CaixaBank (see News page 4).

Lawyers continue to highlight the potential negative impact of events in neighbouring Portugal, and elsewhere in Europe, but many in the market remain stubbornly optimistic over the prospects for the economy and Madrid’s legal market through 2011.

“The risk issues impacting on Spain affect all of Europe and we are clearly better off in the EU than out of it,” says

Unlocking the practice puzzle


Ignacio Ojanguren, Managing Partner of Clifford Chance in Spain. “France and Germany are on different trajectories, but we do see Spanish companies doing increasingly well and this will ultimately be reflected in a rise in their legal needs and spending.” His firm is among those to feature prominently among the proposed IPOs, alongside Uría Menéndez and Linklaters.

Others also sense a tentative return of international investors. “Recent months have seen an increase in the national and international interest for specific sectors and targets, with clear movement in the financial sector. In this context, Madrid is gaining a position as the business and legal capital of Spain and it is a trend that is unlikely to reverse,” says Luis Briones, Managing Partner of Baker & McKenzie in the capital.

Management focusThe economic and productivity challenges facing Spanish businesses are though also applicable to its law firms, which are learning to better manage themselves.

“The effective utilisation of lawyers and the realisation of work is crucial. This is not a new issue and nothing that does not also apply to companies in other sectors that need to increase competitive,” says Manuel Martín, Managing Partner of Gómez-Acebo & Pombo.

A recurring issue nonetheless is pricing. As clients have sought to reduce their cost base they have placed enormous pressure on their suppliers, including law firms. But for some in the market, it is unsustainable for firms to keep reducing fees.

“As regards fees, I think there is a structural component, which goes beyond the current economic circumstances and which is linked to the idea that the knowledge cycle gets shorter over time. To successfully adjust to this, we need to offer truly innovative law services, which add real value to the client,” says Vives at Garrigues.

Some suggest however that clients are less concerned about fee levels and more about the value created by any advice given. Clients see through artificially low proposals. One of the 14 bids for the recent privatisation mandate of Spain’s airports operator AENA – won by Cuatrecasas Gonçalves Pereira – was disqualified as being below the accepted “professional standard”.

“In the current environment I understand that we cannot be paid as we were a few years ago, but if we

reduce our fees below a certain threshold we will not return, at least for a long time, to the levels we had prior to the onset of the crisis,” says Julio Veloso, Partner with Broseta in Madrid.

Some may highlight the “ridiculous offers” in the market but others emphasise that the downturn has merely heightened pre-existing tensions. Nonetheless, firms need to be efficient but it is profitability that draws top professionals to leading firms. “If the challenge consists of offering high quality services but at a lower price the solution lies in reducing the cost of providing this service or in reducing margins,” says Martín at Gómez-Acebo & Pombo.

But the client demand is not always to pay “less for more” but rather to pay the appropriate amount in each case, says Andrés Monereo Velasco, Partner with at midsized firm Monereo Meyer Marinel-lo Abogados. While an inevitable additional issue is ensuring payment. “Law firms have been compelled to devote more administrative staff for collection and recovery and to reduce as much as possible their fix costs – excluding salaries and social commitments,” says Francisco Pala Laguna at Madrid-based Ramon & Cajal.

Spain may not be in the best of shape economically, but there is a more consistent optimism among law firms with a more evident practice or business sector niche, not least because the “traditional” law firm model relies on growth. “Our clients in IT and IP related businesses continue to do reasonably well, as they remain sectors which have been less affected by the economic crisis,” says Pedro Alemán Laín, Founding Partner at Madrid’s Pedro Alemán Abogados.

For most firms however the economic situation continues to present very real challenges. There is a degree of cost and lawyer manoeuvrability but there is less room for new growth in terms of lawyer and partner numbers. This means recurring issues on how to incentivise the best young lawyers and present credible career paths.

“I am at least relatively positive in this respect,” says Rafael Sebastián, Director of the Madrid office of Uría Menéndez. “We have proved to be flexible in the way our staff work and in keeping our lawyers busy. We have a natural practice balance and the rise in disputes has, for example, shown that litigation can be as profitable as many M&A or corporate deals.”

The downturn will nonetheless continue to present varying levels of demand, which will impact on how firms plan ahead, say others. “The main challenge will continue to be how to deal with such an adverse environment. Business generation and entrepreneurial spirit are an increasingly valuable asset among young lawyers,” says José Luis Huerta, Managing Partner of Hogan Lovells in Madrid.

Firms have to be able to adapt, but the lack of a consistent recovery across all sectors of the economy means that firms will continue to experience variable practice demand. Flexibility and focus is


Our firm, like others, has been affected by the downturn and we continue to face short term challenges. But we are still moving forward.Fernando Vives,

co-Managing Partner, Garrigues

“”

May / June 2011 • IBERIAN LAWYER • www.iberianlawyer.com 3

clients as they grow internationally. But we also accept that we have jurisdiction-specific expertise. We have therefore to sell the expertise of the ‘network’ we have already invested in,” says Inaki Gabilondo, Managing Partner of Freshfields in Madrid.

Others suggest nonetheless that Spanish firms can compete around the world. “For many international transactions our clients are not necessarily looking to capitalise only on our legal skills. They want to understand the local commercial

perspective and to increasingly rely on our project management expertise,” says Torrente at Cuatrecasas.

Legal capitalDomestically at least, the Madrid offices of Spanish law firms are already at an advantage believe many managing partners. It is increasingly viewed as the corporate capital of the country, as well as already being the seat of the major policymakers and regulatory agencies, and the centre of the banking, finance and insurance sectors.

Some national firms admit that well over three-quarters of their revenues are now derived from the Madrid offices albeit the legal market is more competitive than ever. “Practically all major transactions with an international component are negotiated and closed in Madrid,” says Diego Lozano, Partner with Ramón & Cajal.

But in a country with a large degree of regional autonomy a geographic reach outside the Capital remains important for many firms. However with a foot in both Barcelona and Madrid, many feel sufficiently content. “We opened in Barcelona in 1994 and we have never felt the need to open offices other than here and Madrid,” says Pedro Pérez-Llorca.

For some, Madrid is also established as the “Iberian” legal capital reflecting the desire of many multinationals to adopt a single regional headquarters and commercial strategy for the Peninsula. Although in the prevailing difficult environment the willingness of some companies to maintain the unity of their Spanish and Portuguese operations may be challenged.

“The concept of ‘Iberia’ functions well in good economic times but we see a rapid disaggregation of business structures in these more difficult times.

the key. With some beginning to question the viability of established law firm models.

“It is a challenge to balance the different practice demands and we do not yet know what the new growth model will be. What specific areas of expertise will be sustainable in the new economy and what will not, and ultimately what our law firm structures must look like,” says Fernando Torrente, co-Head of Corporate at Cuatrecasas Gonçalves Pereira in Madrid.

Outside investmentThe impetus for renewed economic growth is ultimately down to market confidence, say the Capital’s lawyers. The summer IPOs will present a dramatic test of both the outside perception of the country and specifically the success of the restructuring of Spain’s financial institutions.

“Since 2009 we have seen the country face two specific challenges as regards new inward investment. The first being the general uncertainty over the direction of the economy, and for those that were prepared to still do deals, the significant challenges they faced in raising the necessary finance,” says Pedro Pérez-Llorca, Senior Partner of Pérez-Llorca.

There are now two economic realities, say some: that affecting peoples’ everyday lives, and the other where companies are beginning to return to profit – having restructured their operations and debt obligations – but which are less connected, or at least less reliant, on the domestic Spanish market. Many businesses are looking for new growth opportunities across Latin America, as well as now the Middle East and Asia.

Such a development inevitably presents Madrid’s firms with a challenge: how to continue to demonstrate that they can add value to clients’ international operations.

“Spanish law is not utilised globally in the same way as English or US law so we have to accept certain limitations, but for us it is important to be in the major legal centres and to develop strong connections in markets such as London and New York,” says Martin at Gómez-Acebo & Pombo.

Latin America is naturally attractive for Spanish firms, but even the UK firms in the market are increasingly looking towards it. “A firm such as ours is seeing more demand to open in new markets, albeit currently the Middle East and Asia, to help


If the challenge consists of offering high quality services but at a lower price the solution lies in reducing the cost of providing this service or in reducing margins.Manuel Martín, Managing Partner,

Gómez-Acebo & Pombo

“”

In the current environment, I understand that we cannot be paid as we were a few years ago, but if we reduce our fees below a certain threshold we will not return, at least for a long time, to the levels we had prior to the onset of the crisis.Julio Veloso, Partner, Broseta

“”



Businesses can be structured to benefit from logistic and administrative synergies but the Spanish and Portuguese markets are still very different, and legal issues remain jurisdiction specific,” says Serena Argente Escartín, who leads the Madrid office of Lisbon-based Raposo Bernardo & Asociados.

An attractive destinationEven in the face of the economic downturn there is however no doubt the attraction of Spain continues, and Madrid remains the focus of many foreign firms’ wishing to cover the market.

The legal market has continued to experience change over the past year, including the arrival of new firms, among them London-based Olswang which launched with the hire of a team from Bird & Bird led by corporate Partner Javier Vasserot, shortly after the launch of Watson Farley & Williams, while Squire Sanders has now returned to the market through a merger.

More recently, there have also been significant team moves as firms look to capitalise on those areas where there is the continuing potential for growth. Typical was the relocation of almost the entire Madrid restructuring and insolvency team of Roca Junyent, led by Partners Javier Díaz-Galvez and Luis Martín, to DLA Piper’s Madrid office.

“One of the key implications of the current fee pressure we see is that teams tend to be smaller and more senior. Clients demand more partner time, which as a matter of fact, even if more expensive per hour may prove cheaper in terms of efficiency,” says Juan Picón, Managing Partner of DLA Piper in Spain.

Competition boutique Martínez Lage has regained its independence, rebranded as Martínez Lage Allendesalazar Brokelmann, following the collapse of Howrey, while Eversheds is another firm experiencing change, with an imminent new local affiliate. Madrid-based Nicea Abogados is to replace Lupicinio, which has decided to leave the network citing strategic differences. Other firms have also however seen management changes, among the most notable being the elevation of Mercedes Fernández as Managing Partner of Jones Day, following the relocation of Luis Riesgo to lead the firm’s Brazilian venture.

For some firms, the downturn has clearly proved an opportunity to attract talent, among them Herbert Smith. “We are now focusing our efforts on consolidating

our market exposure but at the same time believe we have a quite balanced practice. In general terms we perceive law firms in Madrid focusing on maintaining work levels and managing fixed costs,” says Partner Ignacio Díez-Picazo.

Some may question whether there will be more new international arrivals in the short term, but for those managing partners already with them the benefits of an established cross-border network

is obvious. “The approach of clients is changing. Major Spanish companies look to Madrid for international firms able to deal with their legal business. The one stop shop concept really sells well,” says Rafael Alonso, Managing Partner of what is now Squire Sanders Hammonds.

Some suggest that the downturn and evident practice pressures may also prompt a continuance of the merger trend among mid-tier firms, the most notable in recent years of Dutilh with Barcelona’s Vialegis, and the emergence of new smaller and niche practices – such as Gold, Hernández-Echevarría and Laffer. Large firms continue to quietly downsize, either not replacing those who leave or “assisting” others to leave. Some are also seeing the departure of partners and senior assistants in the face of fewer promotion prospects or practice rationalisation.

“Deeper changes, although hidden in most cases, are taking place. But we may all have to review the way we structure our law firms,” says Veloso at Broseta. “In a growth environment, the model works. In a decreasing environment, we have to see what we must do to attract and retain talent if we cannot offer partnership or we have to extend the period to become a partner.”

Natural selectionA number of firms have already begun, in private, to question their trajectories and with limited prospects for new growth begun looking for a new direction or niche. “Arguably some players may in the short term either have to shut down operations or keep costs to a minimum to make it through the downturn,” believes Picón at DLA Piper.

For others such developments are merely the inevitable reaction of firms confronting the continuing economic uncertainty. Large law firms let people go as activity has reduced just as they increased numbers in the boom years. This time round there is merely more transparency, but clearly firms need not only to have a strategy but be willing to implement it.

“It is difficult to speculate when the long-awaited economic recovery will appear. But we do see companies across various sectors reacting boldly, participating in transactions and entering new markets. There is also no doubt that Madrid is Spain’s nerve centre for business decision-making, its investment centre, and the leading legal sector,” says Julián García Rubí, Madrid Partner of

A firm such as ours is seeing more demand to open in new markets. But we accept that we have jurisdiction-specific expertise. We have therefore to sell the expertise of the ‘network’ we have already invested in.Iñaki Gabilondo,

Managing Partner Madrid, Freshfields

“”



Cuatrecasas Gonçalves Pereira. “But a presence in the capital is not enough to guarantee future success. Firms need to think ahead.”

For some smaller firms their ability to offer very niche services will remain a market differentiator. But others see a continuing need to innovate. “Even if we consider the sector in which we operate, the entertainment and media industries, the two words that best describe our present legal market are ‘change and innovation’. There is no ‘business as usual’,” says José Antonio Suárez Lozano, Managing Partner of boutique Suárez de la Dehesa.

For other firms their differentiation is their international structure, geographic or practice spread. There is no “one-size-fits-all approach” and many firms are wrestling with how to adapt to the new “normal” with structures built in economically better times.

All agree however that there is no easy solution to the practice challenges they face, at home or abroad. Economic recovery is a slow process, and for many, Spain is only now beginning to show the first tentative results of the ongoing restructuring the country requires. This summer will present a clear test of investor confidence, which may yet however lead to more rapid change.

Statistics show that the Madrid economy is doing better than elsewhere in Spain but the Capital’s law firms have to live with the national market as they find it. The focus for many therefore is on retaining cohesion, developing new service lines, and managing the expectations of their own lawyers.

“We are still growing but do not want to become fixated by profits,” says Vives at Garrigues. His firm has seen five percent revenue growth and a continuing rise in demand for specific areas of expertise.

Firms have however to continue to reduce costs, to react to market and economic changes, and pressures, and ultimately to decide how their lawyers can develop their careers, be that in Madrid, Spain or elsewhere.

Solving the insolvency issuesAlejandro Fernández de Araoz believes that the outlook for Spain’s economy is bleak.

The Araoz & Rueda founder points to IMF and OECD prediction of five to 15 years of tough times ahead. Likewise, Prime Minister José Luís Rodriguez Zapatero’s recent decision not to stand for re-election in 2012 means political changes are also likely next year.

The general outlook is forcing not only large companies to find new business opportunities abroad but also small and medium-sized enterprises (SMEs); for many it is now a matter of survival, he says. Large numbers of SMEs have also stopped trading in recent years and it is a section of the economy that will take years to rebuild.

Even so, the boom of insolvencies is tailing off, believes Fernández de Araoz. This provides mixed blessings for creditors; while many of the large insolvencies have been finalised lenders are more aware that getting remedies from troubled companies is a hard task.

“About 96 percent of companies that enter into administration end up being liquidated,” he says. “Creditors are realising that it can sometimes be better to agree a poor deal in terms of money owed than go through the costs and resources needed to claw back money once a company is in liquidation.”

Matters are compounded by the restructurings of the cajas from non-accountable organisation to de facto public listed companies. The change has generated a huge amount of legislation and is therefore providing many law firms, including his, with some optimism.

“I do expect M&A to pick up on the back of these restructurings,” Fernández de Araoz says. “We are now advising investors on various opportunities related to the Cajas which are at a unique junction, as they strive to find and create a fresh capital base and consolidate to gain size and create synergies.”

La crisis económica ha pasado factura a los bancos

y empresas españolas por igual. La situación no parece que vaya a

cambiar en los próximos años; sin embargo, la

reestructuración de las cajas presenta nuevas

oportunidades de inversión, según Alejandro Fernández

de Araoz, de Araoz & Rueda en Madrid.

Alejandro Fernández de Araoz

Arguably some players may in the short term either have to shut down operations or keep costs to a minimum to make it through the downturn. Juan Picón, Managing Partner

Madrid, DLA Piper

“”



Madrid is the epicentre for Spain’s top corporate and financial institutions. After a difficult few years following the slowdown in the economy, the latest aspect of corporate life to come under the spotlight are the internal structures and operations of the country’s top businesses.

The last six months has seen an uptake in companies’ requirements for corporate governance advice. The driver behind much of this is the need to comply with Spain’s new Criminal Code. The most significant aspect of the Code, which was passed into law in December 2010, is the dismissal of the old rule that companies cannot commit crimes. Now, for the first time, businesses can be held criminally liable.

“The new law has provided an interesting source of work for the Spanish law firms,” says Juan Alberto Urrengoechea, a Partner at Roca Junyent in Madrid. “More and more companies are now requiring legal advisers to draft protocols to adhere to the regulations.”

The rules brought Spain into line with other major EU countries, including France, Germany and the UK, and effectively mean that the directors of a company can be held liable for any criminal wrongdoings that occur within the business. Companies can also face severe action if found to breach the Code. These sanctions range from being banned from public tenders, being closed down or even court action.

The main safeguard for companies is to prove they have a control system, such as internal reporting and transparency structures. This will be a businesses’ main defence against any liability cases, says Urrengoechea.

“Companies are keen on drawing up stringent due diligence and corporate governance models that would show to the authorities that all possible actions had been taken.”

Taking it to the banks Beyond corporations’ enhanced

En los últimos seis meses han crecido las necesidades de las empresas en cuanto a asesoramiento sobre gobierno corporativo. Ello se debe en gran medida a la reciente reforma del Código Penal, afirma Juan Alberto Urrengoechea de Roca Junyent en Madrid. El aspecto más significativo de la reforma es la introducción de la responsabilidad penal de las personas jurídicas.

Adjusting to a changing regulatory world Companies and banks in Spain’s financial capital are getting accustomed to new regulatory regimes, both to avoid criminal sanctions as well as attract future investment

responsibilities, the local banking market is also requesting further advice on their operations. Unlike criminal liability, however, this advice concentrates on internal business structures.

The push has been prompted by the mass consolidation amongst the local savings banks (cajas). A portfolio of major deals closed in 2010, which saw the number of cajas slashed from 43 to 17. Notable deals included the €4.2bn merger between Caixa Catalunya, Caixa Tarragona and Caixa Manresa and the €1.1bn tie-up merger between Caixa Sabadell, Caixa Terrassa and Caixa Manlleu.

“There has been a lot of consolidation and now these banks are looking at the next stage, which will require new regulation from the Bank of Spain,” says Urrengoechea.

Earlier in the year the Bank of Spain warned that the cajas could be exposed to up to €100bn of bad debt principally

because of poor real estate investments.

Indeed, the likes of Alicante-based Caja Mediterráneo (CAM) are already facing nationalisation over their spiralling debts. As such, cajas are requiring advice to change from the historic

locally-run, not for profit model into a more commercial venture and all the regulatory issues that this entails.

On one level, this will make cajas more robust in terms of future stability. Urrengoechea points out also that the sector is now primed for external investment and that shifting their business models is vital if the cajas are to attract outside interest.

“Firstly, cajas have to go from a public entity to a publicly-traded entity, which requires a change in structure. This paves the way for private equity funds and foreign investors to purchase or take a stake in them.”

It is clear that many of Spain’s largest companies and banks need to get to grips with new sets of rules if they are to reshape and flourish in a new economic and regulatory environment.

Juan Alberto Urrengoechea

The new law has provided an interesting source of work for the Spanish law firms. More and more companies are now requiring legal advisers to draft protocols to adhere to the regulations.

“”



Managing disputes across bordersInvestment arbitration – both representative and advisory work – is a growing area of international disputes, say lawyers The international expansion of Spanish businesses since the 2007 crash has been considerable. Organisations, such as Iberdrola, Santander and Ferrovial, have acquired valuable assets and contracts across the world. While such activity initially kept corporate lawyers busy, Spanish litigation teams are now winning international client mandates.

“We have seen a considerable uptake in cross-border litigation,” explains Herbert Smith Madrid Partner Ignacio Díez-Picazo. “We are receiving instructions from all over the world from Spanish companies who have become involved in local disputes.”

Díez-Picazo says that one specific area of interest is investment arbitration, particularly in Latin America. This is where a company benefits from a bilateral investment treaty (BIT) that Spain has entered into with the host investment country. A cause of action might arise when a State adopts a measure or course of action, for example nationalisation, that causes loss to the company.

Cada vez se recurre más al arbitraje internacional

en materia de inversiones, y las empresas deben estar preparadas para

ello, afirman Ignacio Díez-Picazo y Christian

Leathley, de Herbert Smith en Madrid.

Ignacio Díez-Picazo

Litigating to accumulate Companies in regulated sectors, such as energy or telecoms, are finding that the threat of litigation and problematic regulations are keeping them busy.

Energy is one of the most competitive and tightly-regulated markets in Europe. It is little surprise then that companies within the sector are becoming more active in bringing cases against rivals for a host of issues.

“We are finding that commercial disputes involving energy companies are increasing,” says Raúl Da Veiga, name Partner at Madrid-based Gómez Olmo & Da Veiga (GOLD) Abogados. “There have been a number of cases prompted by the impact of new regulation, for instance the rules that electricity distribution companies must give some of their supply output to competitors.”

A recurring issue in energy disputes is however that in most cases: “commercial tribunals lack information about how the sector works,” according to Da Veiga. The situation also requires law firms to adapt their litigation teams to

the specialist needs of the client. “Any commercial dispute involving these sectors has a special complexity and demands an in-depth knowledge of specific regulation, which in turn makes the successful resolution of disputes more sophisticated.”

Market behaviour has also changed during the crisis, he adds, with companies now trying to obtain long-term advantage by securing capacity and prices. “With energy prices falling, we see that a lot of companies prefer to face litigation with their current suppliers and try to find a new agreement with better conditions for the future,” he says.

Da Veiga believes however that the energy market in Spain is still hindered by over-regulation. “The Spanish Government has drawn criticism in the past for neglecting ‘free-market’ principles, notably with attempts to prevent the takeover of strategically important companies by foreign competitors.”

Las empresas de los sectores regulados

como la energía o las telecomunicaciones

dedican mucho tiempo a evitar litigios y a lidiar con

normativa complicada, afirma Raúl da Veiga, de Gómez Olmo & Da Veiga

(GOLD) Abogados.

Raúl Da Veiga

“Spanish clients are considering their right to pursue investment arbitration, especially in Latin America,” explains Christian Leathley, Herbert Smith of Counsel. “The Republic of Argentina, for instance, currently has over 50 cases brought against it deriving from the abandonment of the peso’s fixed exchange rate with the US dollar in 2001-02, leading to substantial financial loss for investors.”

Leathley adds that Venezuela, Peru and Bolivia have likewise recently experienced an increase in investment arbitrations. Disputes relating to fast-moving sectors such as renewable energy, specifically the constant changing of tariffs, are on the rise too. Likewise, the advisory work ancillary to and in anticipation of investment arbitration, is also becoming an important aspect of the practice.

“Many companies are increasingly aware that before investing, they need to be informed how to structure their investment to gain the protection of BITs. It is as important as tax planning,” he concludes.

• IBERIAN LAWYER • May / June 2011 www.iberianlawyer.com8 • IBERIAN LAWYER • January / February 2011 www.iberianlawyer.com


The sky’s the limitThe ongoing claims and litigation against the Spanish airport operator AENA is no barrier to its planned privatisation

Ongoing tensions between the Spanish airport operator AENA and Air Traffic Controllers have prompted walkouts, strikes and chaotic scenes at many airports over the past year. The result has been litigation involving, the state, airlines and the air traffic controllers, says Jesús Avezuela, Director of the Madrid office of Broseta.

“The Controllers, through their Union USCA, rejected various attempts to change their working practices prompting the Government ultimately to force the changes on them through legislation. The most dramatic outcome to which was a mass walkout on one of the busiest bank holiday weekends of the year.”

On December 3rd Controllers massively abandoned their posts which led to the Government to close Spanish air space, which led to hundreds of flight cancellations.

“Airlines are claiming for the cancellation of flights, the need to compensate passengers for the cost of their tickets and expenses, having to

move empty aircraft and the cost of having to reconcile schedules affected by the cancellations, as well as their own costs of handling complaints,” says Avezuela, who is advising a number of airlines.

AENA, overseen by the Ministerio de Fomento, has immediate responsibility for air traffic control thus companies are entitled to make claims against it. It in turn, can seek compensation from the controllers, already subject to claims by passenger groups.

Such actions come as the Government has now however begun the process of the privatisation of AENA, and separately of the country’s two largest airports, Madrid Barajas and Barcelona El Prat. But such actions are unlikely to affect the private entities that will ultimately gain an interest in them, believes Avezuela.

“Privatisation should not affect the actions or the liability of those involved. The ongoing claims relate to prior events and it is ultimately the public administration that currently has responsibility for airport management.”

Las tensiones entre AENA y los controladores aéreos han provocado renuncias, huelgas y juicios que involucran a aerolíneas y colectivos de pasajeros, explica Jesús Avezuela, de Broseta.

Assessing chances in dispute resolutionLaunching a lawsuit can be a costly affair, which is why more companies are looking to external experts to assess the financial viability of undertaking legal proceedings.

Early case assessment (ECA) is not a term that all European companies may be familiar with but it has flourished in the US, the world’s largest litigation market, where over 90 percent of disputes are settled prior to reaching the courts. ECA involves a review of the nature and amount of the economic items to be included in the quantum phase of a claim. The idea is to undertake a thorough economic and financial analysis to give a proper estimate of what a claimant can or should expect to lose or gain, explains Marisa Yepes, a Director with the forensic advisory team at KPMG in Madrid.

“Pre-assessing the amount in dispute and the relative strengths and weaknesses from a financial standpoint can be essential when the in-house lawyer is assessing the full viability of a claim,” she says. “What can seem a strong case on paper often has below stated expenses and, crucially, overly-generous payout predictions.”

Yepes suggests that part of the problem is that many companies make decisions based on their own damages estimates. “In some cases, with a company’s own calculations, the consequential losses may overlap, strengths or weaknesses may not be considered in terms of the documentary evidence required, or inappropriate discount rates may have been used to calculate the loss of profit.”

Spanish companies’ increasingly complicated business structures are contributing to the uptake in forensic analysis. But the demand for General Counsel to get greater value for money and the rise in the use of third-party funding for claims, is also driving demand for a cold financial benefit-risk analysis of claims.

“Six years ago, there was very little discussion about ECA,” says Yepes. “Now there is a clear trend for businesses to call in experts very early in the assessment process. The strongest legal claims may not always be the best use of a company’s financial resources.”

Emprender un proceso judicial puede ser muy costoso, por lo que cada vez más empresas recurren a expertos externos que evalúen la viabilidad financiera de las demandas, explica Marisa Yepes de KPMG Forensic en Madrid.

Marisa Yepes

Jesús Avezuela



Sponsored section: A selection of law firms recommended within the internationally recognised directories and / or by clients.

GUIDE TO LAW FIRMS

Allen & Overy, Pedro de Valdivia 10, 28006 Madrid

Contact: Iñigo Gómez-JordanaTel: +34 91 782 98 00 Fax: +34 91 782 98 99Email: [email protected] Web: www.allenovery.com Main practice areas: Corporate, M&A, Banking & Finance, Capital Markets, Tax, Employment, Public Law & Regulatory, Litigation & Arbitration, Insolvency & Restructuring, Regulated Sectors, Antitrust & EU Law

Araoz & Rueda, Paseo de la Castellana 164, 28046 Madrid

Contact: Alejandro Fernández de AraozTel: +34 91 319 02 33 Fax: +34 91 319 13 50Email: [email protected] Web: www.araozyrueda.com Main practice areas: Corporate Law, M&A & Private Equity, Banking & Finance, EU & Competition, Energy, Insolvency & Restructuring, Litigation & Arbitration, Labour and Tax

Baker & McKenzie, Paseo de la Castellana 92, 28046 Madrid

Contact: Luis Briones Tel: +34 91 230 46 16 Fax: +34 91 230 51 45Email: [email protected] Web: www.bakermckenzie.com Main practice areas: Corporate & M&A, Banking & Finance, Tax, Employment, Public Law, IP, Competition & Antitrust, Insolvency & Restructuring, Energy, Infrastructure & Project Finance, Pharmaceuticals & Healthcare, IT and Real Estate

Broseta Abogados, Fernando el Santo 15, 2º, 28010 Madrid

Contact: Julio Veloso CaroTel: +34 91 432 31 44 Fax: +34 91 432 32 55Email: [email protected] Web: www.broseta.com Main practice areas: M&A, Corporate & Commercial, Private Investment Funds, Banking & Finance, Tax (International & Domestic), Insolvency & Restructuring, Real Estate, Public Law & Urban Planning, Wealth Management, Litigation & Arbitration and Labour & Employment

Deloitte Abogados y Asesores Tributarios, Plaza de Pablo Ruiz Picasso s/n, Torre Picasso, 28020 Madrid

Contact: Luis Fernando GuerraTel: +34 91 514 50 00 Fax: +34 91 524 51 80Email: [email protected] Web: www.deloittelegal.com Main practice areas: Tax, Arbitration & Litigation, Corporate & M&A, Labour, Banking & Finance, Real Estate, Restructuring & Insolvency, Capital Markets, TMT, Planning and Public Law

DLA Piper, Paseo de la Castellana 35, 28046 Madrid

Contact: Juan PicónTel: +34 91 319 12 12 Fax: +34 91 319 16 40Email: [email protected] Web: www.dlapiper.com Main practice areas: M&A & PE, Banking & Finance, Projects, Energy, Real Estate, EU & Competition, IP & IT, Employment, Litigation & Arbitration, Tax, Public Law, Capital Markets and Restructuring

Cuatrecasas Gonçalves Pereira, Velázquez 63, 28001 Madrid Contact: Francisco Pérez-Crespo PayáTel: +34 91 524 71 03 Fax: +34 91 524 71 22Email: [email protected] Web: www.cuatrecasas.com Main practice areas: M&A, Restructuring & Insolvency, Banckruptcy, Debts Renegotiation, Corporate Disputes & Public-Private Collaboration


GUIDE TO LAW FIRMS



Gómez, Olmo & Da Veiga Abogados, Almagro 31, 3 izquierda, 28010 Madrid

Contact: Israel Gómez-CaroTel: +34 91 702 08 68 Fax: +34 91 391 53 21Email: [email protected] Web: www.goldabogados.com Main practice areas: Banking & Finance, Energy & Infrastructure, Competition, Regulatory, Litigation and Arbitration

Gómez-Acebo & Pombo, Paseo de la Castellana 216, 28046 MadridContact: Manuel MartínTel: +34 91 582 91 00 Fax: +34 91 582 91 14Email: [email protected] Web: www.gomezacebo-pombo.comMain practice areas: Administrative, Communications & Audiovisual, Company Commercial, Competition, Criminal, Employment, Environmental, EU, Financial Services, IP & TMT, Litigation & Arbitration, Real Estate, Sports and Tax

Herbert Smith, Paseo de la Castellana 66, 28046 Madrid

Contact: Ignacio Díez-PicazoTel: +34 91 423 40 00 Fax: +34 91 423 40 01Email: [email protected] Web: www.herbertsmith.com Main practice areas: Dispute Resolution, International Arbitration, Commercial Litigation, Restructuring and Insolvency

Hogan Lovells, Paseo de la Castellana 51, 28046 Madrid

Contact: José Luis HuertaTel: +34 91 349 82 66 Fax: +34 91 349 82 01Email: [email protected] Web: www.hoganlovells.com Main practice areas: Dispute Resolution, Arbitration, Business Restructuring & Insolvency, Product Liability, White Collar and Fraud

Monereo Meyer Marinel-lo Abogados, Alfonso XII 30, 5ª planta, 28014 MadridContact: Andrés Monereo VelascoTel: +34 91 319 96 86 Fax: +34 91 308 53 68Email: [email protected] Web: www.mmmm.es Main practice areas: M&A, Corporate, Insolvency & Restructuring, International Dispute Resolution, Tax Law, Employment Law, Real Estate, Administrative Law, Regulatories Affairs, Technology and International Property

Pedro Alemán Abogados, Lagasca 10, 1º, 28001 Madrid

Contact: Pedro Alemán LaínTel: +34 91 435 32 01 Fax: +34 91 435 61 01Email: [email protected] Web: www.pedroaleman.com Main practice areas: Intellectual Property (Copyright), TMT and Corporate Law

Jones Day, Paseo de Recoletos 37-41, 5ª planta, 28004 Madrid

Contact: Mercedes FernándezTel: +34 91 520 39 39 Fax: +34 91 520 39 38Email: [email protected] Web: www.jonesday.com Main practice areas: M&A & Private Equity, Banking & Finance, Arbitration & Litigation, Real Estate, EU & Competition Law, IP, TMT, Energy, Labour and Tax

Garrigues, Hermosilla 3, 28001 MadridContact: Fernando Vives/ Ricardo GómezTel: +34 91 514 52 00 Fax: +34 91 399 24 08Email: [email protected]/ [email protected] Web: www.garrigues.com Main practice areas: M&A, Banking & Finance, Capital Markets, EU & Competition, Tax; Restructuring & Insolvency, Litigation & Arbitration, Public Law & Urban Planning, Labour, IP & IT, Environmental Law, Criminal Law, Pharma & Biotech, Human Capital Services, Real Estate, Maritime & Transport, Sports and Entertainment


GUIDE TO LAW FIRMS



Prol y Asociados, Ebro 3, 28002 Madrid

Contact: Francisco Prol PérezTel: +34 91 563 06 01 Fax: +91 563 00 20Email: [email protected] Web: www.prol-asociados.com Main practice areas: Banking & Finance, Corporate, Capital Markets, Litigation & Arbitration and Employment

Ramón y Cajal Abogados, Almagro 16, 28010 Madrid

Contact: Francisco Palá LagunaTel: +34 91 576 19 00 Fax: +34 91 575 86 78Email: [email protected] Web: www.ramoncajal.com Main practice areas: Finance, Capital Markets, Commercial, Competition, Procedural, Administrative, Real Estate, Tax and Labour

Raposo Bernardo & Asociados, Paseo de la Castellana 126, 8º Izq, 28046 Madrid

Contact: Serena Argente EscartínTel: +34 91 745 08 74 Fax: +34 91 561 18 50Email: [email protected] Web: www.raposobernardo.com Main practice areas: Full Service Law Firm

Roca Junyent, José Abascal 56, 28003 Madrid

Contact: Juan Alberto UrrengoecheaTel: +34 91 781 97 60 Fax: +34 91 781 97 64Email: [email protected] Web: www.rocajunyent.com Main practice areas: Tax

Suárez de la Dehesa Abogados, Paseo Pintor Rosales 40, 28008 Madrid

Contact: José Antonio Suárez LozanoTel: +34 91 559 59 99 Fax: +34 91 541 03 43Email: [email protected] Web: www.sdanet.com Main practice areas: Copyrights, Audiovisual Law, Information and Communications Technologies and Entertainment Law in General

Uría Menéndez, Príncipe de Vergara 187, Plaza Rodrigo Uría, 28002 MadridContact: Rafael SebastiánTel: +34 91 586 04 30 Fax: +34 91 586 04 71Email: [email protected] Web: www.uria.com Main practice areas: Corporate & Commercial, Financial, Tax, Competition, Intellectual Property, Telecommunications, Media & Entertainment, Litigation & Arbitration, Public, Real Estate, Environmental, Urban Planning, Employment & Pensions, Maritime and Transport

Squire Sanders Hammonds, Plaza Marqués de Salamanca 3 y 4, 28006 Madrid

Contact: Rafael AlonsoTel: +34 91 426 48 40 Fax: +34 91 435 98 15Email: [email protected] Web: www.ssd.com Main practice areas: Corporate, M&A, International Tax, Project Finance, Real Estate, Dispute Resolution, IP and Employment

Pérez-Llorca, Alcalá 61, 28014 Madrid

Contact: Iván DelgadoTel: +34 91 436 04 22 Fax: +34 91 436 04 30Email: [email protected] Web: www.perezllorca.com Main practice areas: Corporate & M&A and Private Equity


IBERIAN LAWYER

An abstract from Iberian LawyerMay / June 2011

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