Who’s Who Legal brings together Paul Davies of Latham & Watkins, Jeff Civins of Haynes and Boone and Jochem Spaans of Allen & Overy to discuss increasing sub-specialisation in this sector, regulatory developments, and changes in the legal market in their jurisdiction.
Latham & Watkins
Haynes and Boone
Texas Jochem Spaans
Allen & Overy
WWL: Environmental practices appear to be increasingly sub-specialised. Have you noticed this trend in your jurisdiction? And if so how has the environmental practice area at your firm changed over the years?
Paul Davies: As part of a global environment, land and resources practice, we have a number of colleagues who focus on particular areas (eg, air quality issues or product regulatory issues). We see this particularly in the US, where regulators and enforcement are more proactive. In our European team, we continue to handle all environmental issues, but also ask different members of the team to concentrate on different areas. This allows us to develop the breadth of knowledge required, but also encourage our team to educate each other, so that we are able to spot issues across the board. This more rounded knowledge is particularly important for transactional work, where the client won’t thank you for only focusing on one part of environmental law at the expense of other issues.
Jeff Civins: I started practising environmental law in 1975.
At that time, although there was a breadth of environmental programmes, ranging from pollution control, to protection of sensitive aspects of the environment, to chemical handling, it was possible to be generally knowledgeable about each. But succeeding statutory amendments of those programmes, as well as the creation of new ones, resulted in lengthier and more complex statutes, which resulted in more complex regulations, making it difficult for any individual to have mastery of them all. Additionally, to interpret many of these programmes, it is important to understand their history and context. As a result, our environmental lawyers generally tend to specialise in particular areas, although we all try to maintain familiarity with the breadth of environmental programmes so we can see the big picture, provide practical legal advice, and recognise issues that require more in-depth analysis.
Jochem Spaans: Our global environmental and regulatory law group has noticed an increasing demand for highly specialised work: for instance, in areas where environmental and energy laws intertwine, and in the fields of chemicals regulation and producer responsibility. Drivers for this appear to be not just the increasingly complex and ever-changing environmental regulations, but also the multi-jurisdictional angle to most of the work we do. At the same time, environmental and regulatory compliance issues are part of everyday life for most businesses. Clients thus increasingly look for strategic advice from a legal expert who oversees the legislative field and understands the dynamics of a case or transaction. We believe that steering successfully through the regulatory jungle requires specialist expertise on a global scale. We were therefore one of the first law firms to develop a globally integrated environmental law practice. This enables us to advise on complex environmental matters at national, regional and international levels.
WWL: Respondents have noticed that various practices of environmental law that were active a decade or more ago are now no longer creating work or are being done in-house. Are there any parts of your practice that are no longer as active?
Paul Davies: We see environment as no different to many other areas of law in this respect. As certain issues become better understood and commoditised, then clients will become less willing to pay premium rates in respect of such work and will look to deal with the issues more cost-effectively (including in-house). However, we believe the “maturity” of an issue is only part of the profile as to whether the work will bear premium rates. If an issue presents a reputational risk issue, could set a precedent that has implications for the operations of a client, raises new and complex legal issues or requires multi-jurisdictional support, then it requires specialist practitioners with adequate knowledge and experience to handle the matter. As such, we would say that it is still possible to undertake premium work in all areas of environmental law and certainly our practice reflects that.
Jeff Civins: We tend to see fewer routine matters. Corporations with large in-house law departments or with dedicated environmental staff generally handle routine environmental matters themselves. Smaller companies with fewer environmental resources still have reason to routinely call on outside law firms, but depend also on non-legal environmental professionals. So more of our work tends to involve high-profile matters, matters involving complex issues, matters for which knowledge of and credibility with the regulators is important, and matters for which there is a need for dedicated resources over a period of time, for example, environmental litigation and contentious permit and enforcement proceedings.
Jochem Spaans: Many of our clients have, indeed, strong legal in-house teams that deal with environmental matters. We believe, however, that the demand for high-value environmental legal services will not go away. Not only because legal in-house teams face increased workloads, and dedicated support may be required for a particular project or deal, but also because certain matters ask for outside counselling from dedicated specialist practitioners – for instance, where operations may be affected or multi-jurisdictional issues come into play. We have noticed a shift to such multi-jurisdictional work, in both transactions and high-profile advisory work. Our global team offers a service with the resources to advise on the largest and most complex issues. As one of the first law firms to develop a globally integrated environmental law practice, our provision of this type of service has not changed.
WWL: Regulations seem to be constantly evolving and changing. What incentives are currently on the top of the agenda in your jurisdiction?
Paul Davies: Without doubt, renewable energy incentives are the headline issues in respect of current developments and concerns for clients in Europe. In the UK, for example, the Industrial Emissions Directive is leading to the potential closure of a number of coal-fired power plants and the government’s incentives regime for replacement renewable energy projects is now being tested on several fronts. The government has proposed changing the rules for solar projects from 2015 onwards, thereby removing the availability of certain renewable incentives for large-scale solar projects. This is likely to see a number of solar projects being brought forward to this year (2014) if possible, but has also impacted investment appetite. In addition, there is significant uncertainty around the government’s new regime – known as contracts for difference (CfDs) – for large-scale renewable projects (particularly coal to biomass conversion projects). The government’s most recent auction process for the award of CfDs has already been challenged. In addition, the UK government’s apparently generous CfD contract for a new nuclear project is attracting close scrutiny from the European regulators of state aid. Like many other countries, the UK government is struggling to balance the need to limit taxpayer subsidy with the requirement to provide investors with regulatory certainty. Whether the government achieves this balance is going to be a key part in whether it succeeds in guaranteeing the UK’s energy security for the foreseeable future.
Jeff Civins: The entire spectrum of energy-producing activities, from fossil fuel exploration, production, and combustion to renewable energy development, is the subject of public and regulatory attention. Federal and state governments have been creating regulatory sticks as well as carrots to drive industry towards energy efficiency and conservation, carbon management, and water recycling and reuse. The President’s climate action plan and the Environmental Protection Agency’s implementing regulatory actions encourage the use of renewables and relatively cleaner fossil fuels and the development of carbon capture and storage technology. In the oil patch, oil and gas exploration and development generally and the process of hydraulic fracturing or fracking have become a focus of media attention. Public concerns have focused on a number of areas, including water use, water pollution, air pollution, earthquakes, noise and truck traffic. These concerns have given rise to legislation, regulation and litigation that encourage sustainability.
Jochem Spaans: Clearly, energy is one of the most important and fastest-changing sectors. The need to reduce greenhouse gas emissions, growing global demand, security of supply and ageing energy assets mean that governments and energy sector participants globally are faced with some of the most complex and challenging decisions that will have an impact not only on economic prosperity, but also on the long-term health of the environment. Obviously, this has led to numerous legal developments across the world: for instance, in the follow-up to the shale revolution in North America, or with renewable energy (onshore and offshore wind, solar, hydro, biomass and marine power) being an essential part of the solution for slowing the pace of climate change and improving energy security. Naturally, this is reflected in the legal developments in the Netherlands where other hot topics include the increasing use of criminal law sanctions for enforcing environmental legislation, and the future Environmental Code that aims to integrate many existing Dutch environmental laws.
WWL: As the market has matured, respondents have noticed increasing differences in the type of work that is being picked up by certain firms. Is there a great division in the work that global, national and boutique firms acquire? And are there any advantages in how a firm is set up in your jurisdiction?
Paul Davies: Clients across the board are increasingly sophisticated in the way that they instruct firms, in particular, looking at overall value for money. At Latham, our clients value the global scale that we are able to bring, but more importantly, the breadth and depth of environmental expertise that we are able to offer. Clients want to feel that they are obtaining value-added services and that often comes from market knowledge, experience of similar transactions or familiarity with how a regulator might approach an issue. Having over 150 environmental lawyers spread worldwide really helps to deliver that.
Jeff Civins: Clients look for savvy counsel who understand their business and can provide pragmatic advice to help them achieve their business objectives, whether those counsellors are in global, national, local or boutique law firms. Our firm, being Texas-based, fields an especially strong team for energy sector clients in the US and, with attorneys in our Mexico City office, in Latin America as well. We have also established a Shanghai office, believing there to be significant business opportunities in the US–Latin America–Asia triangle. Our environmental practice is a key component of our client service team, with practitioners who understand the businesses they represent as well as the regulatory programmes that affect them. With the recent addition of experienced environmental and energy practitioners in our DC office, we have added another dimension to our practice – regulatory development and policy making – to better serve client needs in whatever forums they may arise.
Jochem Spaans: Our flexible and innovative approach towards the changing industry makes it possible to maintain a top position in the legal market. We constantly invest in innovative services and ensure we meet the clients’ demands. Allen & Overy commissioned independent research into how the delivery of legal services is changing around the world. Overall, more work is done in-house and increased procurement involvement drives the price down. The research shows, however, that top law firms will always have a place in delivering complex, international assignments. Of the six new legal services examined in our independent research, Allen & Overy has already invested in five: document review, online legal services, contract lawyers, legal consulting and hybrid legal solutions. We constantly think about how we are going to innovate, evolve and keep pace with changing markets, products and client expectations. The report – “Unbundling a market: The appetite for new legal services models” – is available on our website.