Legal 500 have given Sedgwick London an excellent write-up in their latest edition, under the Insurance and Reinsurance Litigation section:

Sedgwick Detert Moran & Arnold LLP has an excellent practice, with clients appreciating, among other things, its international reach. Sarah Hills is ‘very detail orientated’ while new addition to the team Jolyon Patten offers ‘sensible and commercial solutions’. It represented a large Bermuda insurer in respect of its insured’s involvement in the Buncefield oil depot explosion.

And, at the risk of own-trumpet-blowing, I am also happy to see my name again on the Legal 500 list of Leading Individuals for Insurance and Reinsurance Litigation.

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It’s been a long time coming, but someone has finally seen the sense in outsourcing not just support functions but more routine legal work. Rio Tinto are parceling up their more everyday lawyering to an outfit called CPA Global in India:

It works like this: Rio Tinto is building a team of CPA lawyers in India who will operate, effectively, as an extension to its in-house legal department. That will free Rio Tinto lawyers to focus on more complex tasks. More ambitiously, on all assignments involving external law firms, Rio Tinto will ask these firms to pass tasks that can be done by lower cost lawyers to CPA people in India and elsewhere. [Source: The Times]

As Prof. Susskind (specialist subject: “the Future of Law”, or at least the future of legal practice) notes, the system already demonstrably works: “A team of 50 CPA lawyers was assembled in under 48 hours to work with a US law firm on a document review for the Federal Trade Commission. This yielded savings of $1 million (£600,000).” Ouch. Scale that up and you are looking at a lot of lost revenue for the big firms.

Now as I have never had the pleasure of working for one of the huge shops, I’ve only looked at their business model from the outside, so take what I say with a pinch of the proverbial. While I can see the financial sense of it (to them), it’s long struck me as a bit odd that clients didn’t see that there were cheaper and better ways of getting much of the work done, though I put it down to a combination of the old boy network (albeit in its modernised form) and the ‘never get shot for using IBM’ mentality. The sort of work I do is fairly ‘partner-intensive’ and therefore there is limited scope for having armies of assistants ploughing through vast amounts of paperwork (which is in any event pretty easy to deal with now with the help of electronic tools). It is also more intellectually stimulating, which is, of course, part of the reason why some of us get into the job in the first place. But I’ve little doubt that an awful lot of transactional work and even some aspects of contentious work could be handled relatively easily by less specialist, less expensive people elsewhere.

Susskind is correct, of course, to point out the step-change here: the impetus comes from the clients, not the law firms. While there has been a certain amount of tinkering from the firms in sending back-office functions offshore, that has really been aimed at saving money for the firms, money which then goes straight to the equity partners, for pensions or Bentleys as the case may be. Here, the clients are demanding–and getting–an overall reduction in costs and requiring that their law firm ‘partners’ accept that they are going to be bearing the cost of that themselves.

Novel? Not really in the wider global economy, but perhaps new in the legal world.

Generally, the puritan in me thinks this is a Good Thing for lawyers and for the profession generally. I like things done efficiently–doing them inefficiently, and thereby making more money, has always struck me as Not a Good Thing.

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We won the second phase of our case for RMP against Brent LBC, Harrow LBC and LAML today.

Here is the Press Release. As before, I hope to put up a more comprehensive guide to what the judgment means shortly.

Another resounding victory for Risk Management Partners in second part of landmark case against Brent LBC and others

In the second Judgment in a landmark case, the High Court has today found that Brent LBC acted unlawfully in side-stepping EU-regulated procurement procedures and awarding its insurance services direct to the London Authorities Mutual Limited (LAML), a mutual insurer for London borough councils. The effects of this Judgment will be felt throughout the local government arena as it confirms that all councils must adhere strictly to the tender framework.

Risk Management Partners (RMP), a company providing insurance services to local authorities, pursued the test case against Brent after Brent abandoned the EU-regulated public procurement process and awarded the contract for its insurance services to LAML, outside the tender framework.

Today’s decision follows an earlier ruling in the case which found, in principle, that no local authority can participate in such a mutual if it does so to save money on its insurance.

Jolyon Patten, partner at national law firm Halliwells LLP, who acted for RMP, comments:

“The Judgment is a tremendous success for RMP and will be a relief to all those providing insurance services to the local government sector. LAML has never explained how its operating as a monopoly could benefit authorities. These Regulations are there precisely to ensure transparency, fairness and competition in public procurement, and this decision underlines the fundamental importance of those principles to the local government sector.”

RMP’s Kaz Janowicz said:

“We are delighted at the Court’s findings. Our sole aim in this action has been to get back to a level playing-field. We are happy to compete with LAML, or indeed, anyone—all we ask is an equal opportunity to do so, and the Court has now given us just that.”

EU Regulations stipulate that public contracts above a certain value must be put out to open competitive tender. An authority may be able to side-step this process in limited circumstances under the so-called Teckal exemption (after an Italian case of that name). To do so, it must exercise over the contracting party a control similar to that which it exercises over its own departments. In the case of LAML, Lord Justice Burnton found that the authorities participating in LAML did not have the necessary control, pointing to the independence of LAML from any of its member authorities.

The second stage of the Teckal test is that the other contracting party must carry out the essential part of its activities with the controlling local authority or authorities. Given his conclusion on control, the judge did not consider it necessary to find on this point.

The judge also commented that these same issues are “likely to arise whenever a London borough is considering placing or renewing an insurance contract of sufficient size with LAML”.

RMP understands that as a result of these decisions, Brent has now obtained insurance outside LAML.

This decision follows the earlier decision of Lord Justice Burnton on the vires part of the case, in which he found that Brent had acted without authority in participating in LAML and that there was a “fundamental difference between…participation in LAML and normal commercial insurance”. Brent were not only buying insurance; they were providing insurance to others, taking on potentially unlimited liabilities to LAML in the event of future shortfalls. The judge found that the provision of insurance to others was “not incidental to the discharge of any function of a local authority” and thus fell outside the scope of s.111 of the Local Government Act 1972.

Brent further failed in their case on s.2 of the Local Government Act 2000, the so-called “well-being” power. The mere fact that Brent expected to save money on its insurance premiums did not justify participating in LAML since it did not promote the well-being of the area of Brent. This applies to all councils participating in LAML; an expectation that money might be saved is not enough to make participation lawful.

There is no question of these decisions putting the shared services agenda at risk. As the judge said at paragraph 84 of the vires decision, “if a local authority has power to do something, it may do so in association with other authorities. But this does not assist if what is being done is outwith the powers of that authority.”

Additional information:

• LAML and Harrow, who were in a similar position to Brent, originally joined the action as Interested Parties to the Judicial Review claim. Since no relief was sought against them in either claim, no finding was made specifically against them.
• Brent, Harrow and LAML obtained leave to appeal this judgment, and have already commenced appeal proceedings in the vires action.
• RMP were awarded costs.
• The full text of Judgment can be found here: http://www.bailii.org/ew/cases/EWHC/Admin/2008/1094.html

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