City law and the economy

What impact do market events and trends have on the work of City lawyers? Hannah Langworth finds out from Clifford Chance partner Emma Matebalavu
Commercial awareness

For those working at international law firms, the movements of the financial markets, economic conditions, and political events across the globe have an impact every day on their clients' businesses and the work they do for them. And if you choose to enter the legal profession over the next few years you'll do so at a time of great flux - economic prospects continue to be uncertain and politicians disagree significantly over how best to tackle the issues. So there are certainly many challenges ahead for commercial lawyers, but the current climate presents significant opportunities too.

As a finance partner at a leading global law firm Clifford Chance, Emma Matebalavu is well-placed to give some insight into how financial and economic events can affect the work of commercial lawyers at her own and similar firms. Here she discusses three very significant themes: the eurozone crisis, new regulation, and the rise of markets outside Europe and the US.

The eurozone crisis

As it's hitting the headlines at the time The Gateway goes to press, we speak first about the eurozone crisis. What kind of legal issues does this kind of economic and political uncertainty throw up for the large corporates and financial institutions Clifford Chance acts for? One of their key areas of concern, Emma explains, is the potential impact on their existing commercial contracts with parties based in the eurozone. �What happens," says Emma �to contracts with financial obligations in euros if the unthinkable happens and a member state in which a party to the contract is based exits the euro? We've been considering the issue in relation to particular types of contract, like loan agreements and derivatives, which means looking carefully at their clauses concerning place of payment and at which national law governs the contract." Other related issues lawyers like Emma are considering with their clients include the reintroduction of one or more national currencies and currency controls.

Clifford Chance lawyers have also been working closely with EU institutions on tackling the crisis. A team of lawyers from the firm, mainly in the Paris office, is representing the European Commission and EU governments on the setting up of the European Financial Stability Fund, a vehicle established to preserve financial stability in the EU by providing funds to eurozone states in financial difficulties, which has assisted Greece, Ireland and Portugal so far. �Clifford Chance has been at the heart of the bail-out and stability measures," says Emma, and the expertise provided by the firm included working on establishing the fund and on raising debt in the capital markets �using a combination of techniques that we use in our regular deals, but on a much bigger scale".

New regulation

The eurozone crisis is to a certain extent part of a wider pattern of economic convulsion triggered by the 2008/9 financial crisis, which governments and regulators have sought to tackle over the past few years with a significant amount of new financial regulation. This includes UK-specific legislation on the activities of the banking industry such as that outlined in the Vickers report, European directives regulating various market participants across the EU, the US Dodd-Frank Act applicable to much of the US financial services industry, and international agreements such as the Basel III accord on how much capital banks worldwide should hold in reserve. More regulation means clients need more advice from lawyers, as Emma explains: �There is so much new regulation that we refer to it as the Sea of Change. Our clients expect us to have digested the new rules and to be able to explain their impact on their businesses. We have a big financial regulatory team, but it's important for all our lawyers to have a good grasp of regulation in the areas in which they work."

Clifford Chance's lawyers are also assisting clients who've seen opportunities in the new regulatory climate: �Because new regulation requires banks to hold more funds in reserve," says Emma, �many banks are selling portfolios of loans and other assets to free up capital. Therefore insurance companies, hedge funds and sovereign wealth funds are showing an interest in these assets as they're able to bring welcome liquidity to the market." And these parties come to lawyers at firms like Clifford Chance for advice on the feasibility, structure and legal terms of these deals.

Emerging opportunities

With the eurozone in turmoil and regulatory uncertainty in Europe and the US, the eyes of many in the business world are turning towards markets elsewhere across the globe. Emma pinpoints Asia Pacific and Africa as areas with particularly strong economic prospects. The need for increased access to natural resources is driving a great deal of activity, including the development of new infrastructure, such as power plants, roads and communications infrastructure, both to assist the resources industry and for general purposes. This kind of economic growth means plenty of opportunities for lawyers, as Emma explains: �Our energy and infrastructure teams are very busy in Africa in particular, and mergers and acquisitions deals often come out of this kind of activity - for example, two mining companies joining together - which means opportunities for our corporate lawyers." Clifford Chance opened an office in Morocco last year to act as a hub for the firm's Africa-related work, and has also recently set up a base in Turkey and made strides towards opening in South Korea, all of which are seen as countries with enormous economic potential.

Emma is in no doubt that now is a good time to enter the legal profession, despite the current difficult economic climate. There's always work for lawyers as, whatever the state of the economy, clients need legal advice: �Lawyers keep reasonably busy in good times and bad," says Emma � - my team has been pretty active since the beginning of the credit crunch." The type of work available, however, may differ to a certain extent - for example, during a downturn lawyers are likely to work on fewer new deals, but may find their restructuring and dispute resolution skills more in demand. Emma mentions that some of her colleagues have been working on the $16 billion (�10.2 billion) restructuring of state-owned Dubai property developer Nakheel and, in her view, involvement in these kinds of matters can be a great experience for junior lawyers: �The best time to learn is when markets are difficult because that's when the legal contracts written in the good times are tested and you really see how things work." She adds that hard times in the City can also offer junior lawyers a chance to spread their wings: �Often there are more opportunities to work abroad during a recession, which is always good experience."

Her exhortation to be prepared to go abroad reflects Emma's key piece of advice for junior lawyers during a downturn: be flexible. If you're adaptable rather than fixed on working on a particular area of law, she explains, you'll be able to head towards the most interesting prospects that the market presents at any time - and might just find yourself prospering in an area of work you would never have otherwise considered. �If you keep an open mind, and have initiative and drive," says Emma, �you're sure to find something where there's plenty of opportunities available that you're good at and that you enjoy."