GLOBALISATION is one of the most significant driving forces changing business. Yet it can produce unique challenges for many companies particularly...
In the past financial year the recruitment market for construction and infrastructure partners has remained reasonably static, making up 8% of all lateral partner moves in Australia during that period compared to 10% the previous financial year. The migration of construction partners from large international firms to either domestic mid-tier or boutique firms continues with the added option of an increasing number of infrastructure focused global firms.
Linked to this, construction clients continue to demand greater efficiencies from their legal providers in the face of in-house departments that are increasingly blurring the lines between the functions of internal and external legal teams.
Perhaps the greatest impact in the past 12 months on construction and infrastructure lawyers both in terms of future revenue and overall strategy, and where this overview begins, is last year’s change in the Australian Federal Government.
Tony Abbott‘s desire to be the ‘Infrastructure Prime Minister’ has seen renewed focus on infrastructure projects as a central theme of the Federal Government’s first term in office. Added to which, announcements concerning the sell-off of public assets by State Governments has left infrastructure lawyers sensing a political environment which should result in renewed project activity in the coming years. A recent example which may be a sign of things to come was the NSW Government’s sale of Port Botany. Minter Ellison was engaged by the NSW Government to provide legal advice on the transaction.
A key focus of the Federal Government’s policy in this area is road infrastructure. West Connex in Sydney, partly funded by NSW through the sale of Port Botany, and East-West Link in Victoria being just two examples where lawyers engaged by Government or engaged by the successful consortia will be well placed in terms of both workflow and fee income for a sustained period of time. With respect to West Connex, Allens Linklaters have been the major winner with an overarching role on the project.
The renewable energy sector is widely regarded as the major infrastructure casualty of last year’s Federal election. Previously firms had enjoyed an increasing flow of new renewable projects relating to solar, wind and water, supported in part by financing initiatives introduced by the previous Government. Unfortunately for the sector Tony Abbott has proved a staunch critic of the cost efficiencies offered by renewables and their broader role in the climate change debate. Not surprisingly renewable energy lawyers have seen their off shore energy clients seek out other jurisdictions where they perceive investment dollars are better spent.
As with the major Australian banks, infrastructure businesses have been at the forefront of moves to rationalise external legal spend. In recent years all of the major contractors and developers have established quasi-law firms internally staffed with construction lawyers of good pedigree that can transact much of the day to day contractual matters, conduct dispute work and in some instances more complex project documentation. As a consequence, law firms remain under pressure to offer competitive pricing structures to maintain existing workflows. The need to be viewed as a ‘trusted advisor’ in the eyes of the client, whilst a cliché, is particularly important in such conditions. Further, secondments remain a popular strategy to infiltrate in-house teams and help identify areas where value can be added from outside the business.
The situation for litigators is equally challenging. Lengthy construction litigation has dropped off considerably. Reasons for this can be attributed to the emergence of the fast tracked processes under the Security for Payment legislation and the increased push for the resolution of disputes before they become costly and time consuming exercises. Add uncertain economic conditions for the construction industry generally and you typically find risk aversion when it comes to embarking upon significant litigation.
The migration of all but the specialist PPP and project finance partners away from high costs top tier firms is a phenomenon that began 10 years ago. These days you will find the vast majority of construction partners servicing the major contractors and principals in domestic mid-tier law firms and smaller specialist boutiques whose origin is often a breakaway from the major firms.
In addition, the recent globalisation of the legal market has not solely focused on those firms in corporate and banking. Holman Fenwick & Willan arrived several years ago with a strong offering in the infrastructure, disputes and resources space. Clyde & Co landed in Australia in 2012, initially off the back of insurance but is now looking to replicate its international reputation in infrastructure with David McElveny now back on home soil after a successful period in the firm’s Abu Dhabi office. Pinsent Masons, arguably the UK’s leading construction firm, is in the process of assessing its Australian launch which will further internationalise the market. David Rennick, previously of Maddocks is consulting to Pinsents on the launch. US firm Jones Day, having hired John Cooper in Sydney in 2013 has launched a construction disputes practice in Perth with Simon Bellas joining from Norton Rose Fulbright.
Locally, CBP Lawyers have succeeded in their efforts to establish a national construction practice by adding Nathan Abbott (Vic) and Paul Muscat (QLD) to their existing team. HDY achieved the headline raising acquisition of Kevin Arkwright and Graham Read from Ashurst, possibly off the back of HDY’s strong links into State Government infrastructure agencies.
New entrants to the space are Addisons who were joined by Mal Fielding previously of Maddocks and M+K Lawyers who acquired Alex McKellar in Victoria to lead its practice. Swaab Attorneys have returned the construction space with the hire of Paul Brennan who was previously in-house with Parsons Brinckerhoff.