The business of crime

BUSINESS CRIME UNITS

AS COMMERCIAL LAW FIRMS SEEK TO MAKE CRIME THEIR BUSINESS, PHILIP HOULT LOOKS AT THE MOTIVATION BEHIND CRIME UNITS AND THE POSSIBILITY OF CONFLICT WITH SPECIALISTS IN THE FIELD

After years of steadfastly avoiding the practice of criminal law, a number of the UK's largest commercial law firms are now setting up dedicated business crime units.

Last month, Baker & McKenzie announced the launch of a unit made up of 16 partners and 31 other lawyers drawn from across its various practice areas.

Andrew Keltie, head of the new team, says the spur for the initiative was the enactment of the cartel offence (centred on the criminal law concept of dishonesty) under the Enterprise Act 2002.

The new law, which will come into force on 20 June, heralds a much tougher approach to cartel behaviour in line with a similar regime already in place in the US.

Individuals found guilty of an offence face up to five years in jail, fines or both, as well as extradition to the US and other countries to face similar charges in appropriate cases.

Directors can also face up to 15 years' disqualification for breach of competition law.

Competition law specialists are expecting to have clients turning to them for urgent criminal law advice as a result.

'We have a large and active competition law group and it is quite possible that clients will need advice on complying,' Mr Keltie says.

'We thought we needed to make sure that we can continue to meet their needs.'

The idea for the Baker & McKenzie business crime unit came about as the firm assessed how best to tackle the provisions of the Enterprise Act.

'We began to think about the other areas where we come into contact with criminal law,' Mr Keltie continues.

'We found that we have nearly 50 lawyers who, on occasion as part of their practice, will need to consider criminal law issues and advise on them.'

Areas where criminal law regularly impinges on commercial practice include financial services, Customs & Excise, fraud, tax and money laundering.

Mr Keltie says legislative developments such as the Enterprise Act reflect a growing trend to 'criminalise' certain types of activity that in the past would not have attracted such sanctions.

'There is a clear political trend for extending criminal law into new areas,' he says.

Although Baker & McKenzie's initiative received the most publicity, other major commercial firms have been considering how to react to this trend and putting together multi-disciplinary teams.

Jeremy Sandelson, a dispute resolution partner at Clifford Chance, says that in response to the Enterprise Act, the firm has put together competition and business crime specialists, and last October launched COMPLY, an on-line competition law training tool.

But the firm has a wider business crime practice already, he says.

'We might be a slight exception in that, partly because after our merger with Rogers & Wells three years ago, we found ourselves involved in quite a few criminal investigations,' Mr Sandelson says.

As a result of the merger, a strong white-collar crime practice in the US, led by former Department of Justice lawyer John Carroll, was added to the existing London team that includes George Staple QC, former head of the UK's Serious Fraud Office.

Mr Sandelson says the widespread use of the Web in business crime gives an advantage to firms such as his that are able to provide a global one-stop shop for litigation, particularly in areas such as cross-border asset recovery work.

So, are the top commercial firms gradually muscling in on territory that up until now has largely been the domain of the leading white-collar crime firms?

The firms themselves insist that what they are offering is complementary to, rather than in competition with, the service offered by the crime specialists.

'We are a full-service corporate firm and we are not setting ourselves up as a criminal law specialist, except in one or two areas,' says Mr Keltie.

In fact, far from threatening the long-standing informal referral relationships between the big firms and the specialist criminal firms, new legislation such as the Enterprise Act 2002 is likely to strengthen the links.

Already, a number of firms have held joint training for partners and associates as well as client workshops on the impact of new anti-cartel legislation.

Freshfields Bruckhaus Deringer, for example, has set up a loose joint training, marketing and business development alliance with four specialist City firms with particular areas of criminal law expertise - Peters & Peters, Simons Muirhead & Burton, Tarlo Lyons and Corker Binning.

Freshfields partner Jon Lawrence, a competition litigation specialist who set up the initiative, explains the reasons behind the move.

'It would be wrong for me to hold myself out to a corporate client as being able to represent its individual directors in criminal proceedings,' he says.

'What I can do is advise the company on the risks and conduct of civil proceedings, on the conduct of regulatory proceedings by the Office of Fair Trading (OFT) and European Commission under the Competition Act 1998 and article 81/82 of the EU Treaty, on the co-ordination of immunity applications at EU level, UK level, US level and elsewhere, and generally advise the undertaking on its corporate exposure and strategy.'

Other firms have taken similar steps to forge closer relations - Baker & McKenzie has held seminars with Kingsley Napley, Russell Jones & Walker and Matrix Chambers.

As for the specialist crime firms themselves, they appear relatively relaxed about the creation of business crime units and other initiatives that the top City firms are putting in place, confident that their large criminal litigation teams are strong enough to withstand a challenge if one materialises.

Monty Raphael, senior partner of Peters & Peters, says he welcomes others borrowing his firm's skills.

'They are experts in competition law, with many specialists and many clients who need those services,' he says.

One of the key areas of concern for the major commercial firms, Mr Raphael says, is the issue of conflicts in cartel investigations.

'The large firms want to know everything about how to approach the issue of conflicts between officers and the companies that employ them,' he says.

'The firms want to know how to receive proper instructions.

In a crisis situation, you have to make sure as quickly as possible whom you are acting for - you have to make sure that those who are instructing you are not those likely to be in the firing line.'

Michael Caplan QC, a partner at London counterparts Kingsley Napley, also says his firm has no difficulty with commercial practices branching out into aspects of criminal law.

But he sounds a note of caution for those firms that think they can concentrate on a few discreet parts of criminal law in isolation to other areas.

'In a crisis, the areas of criminal law that come up immediately are issues such as search and seizure, arrest and police interviews, and these require lawyers who have hands-on experience,' he says.

'That is something that a firm with a very large specialist crime department can give assistance with.'

Practitioners expect that when a cartel investigation is launched by the OFT, the commercial firms will stick to advising the companies and the specialist firms will represent individual directors or employees.

Lesley Ainsworth, head of the competition law team at Lovells, says: 'I envisage we will be acting for the corporate client and we will provide that advice either from within the firm - we have a number of people with expertise in this area - or, depending on the circumstances, by bringing on board a barrister or a firm of solicitors who specialise in white-collar crime.'

If anything, the prediction is that it is the top specialist criminal law firms - limited in number as they are - which will benefit most.

With the OFT predicting up to 40 cartel cases a year, they are likely to see more work than ever.

As one competition law specialist says: 'Where one of these cases takes off, it will be quids in for the specialist crime firms, as there will be an almighty scramble to get them on board.'

Philip Hoult is a freelance journalist