InView Spring/Summer 2016

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10 InView | An independent eye on Insurance ASSESSING THE RISKS OF UK PROFESSIONALS WORKING ABROAD UK professionals operating overseas are facing a greater number of claims. Patrick Gaul explains why. © Copyright. Weightmans LLP 2016. All rights reserved.
Issue 3 | Spring/Summer 2016 11 The need for UK professionals to work abroad is increasing due to a number of factors including globalisation, the importance of English law, the significance of London, the insurance market and the widespread use of the English language. The upshot is likely to be a corresponding increase in the number of claims against UK professionals. A number of major cases reported in 2015 illustrate the perils that professionals face when working in foreign jurisdictions. Symrise AG v Baker & McKenzie The law firm advised on a large company acquisition that involved loading subsidiary companies with debt to gain a tax advantage. This resulted in an investigation by Mexican tax authorities. The company settled the tax claim for $162 million, which it then sought to recover in damages. The solicitors were found negligent, but avoided liability because the company’s action in settling the tax liability was not reasonable. Not only were significant sums at stake, but there was also much complex evidence and uncertainty as Swiss, German and Mexican tax laws were involved. Watson Farley & Williams v Itzhak Ostrovizky The solicitors drafted agreements for a solar energy scheme in Greece and were blamed for the claimant’s loss of investment. The claimant alleged that the law firm failed to protect him against actions by his partner and in failing to set up the right vehicle for the project. The solicitors were again successful (at first instance and on appeal). However, the first hearing lasted 10 days and the appeal involved a substantial revisiting of the facts and very significant documentation. Expert evidence on Greek law and Greek solar energy was required and quantum was around £13 million. Timothy Wright v Lewis Silkin LLP Timothy Wright entered into a contract as chief executive of a company involved in setting up the lucrative Indian Premier League cricket competition. The solicitors had drafted the employment contract entitling him to £10 million in the event of constructive dismissal. After dismissal he sued his employer but proceedings to enforce the judgment in India proved fruitless and he lost over £1 million without recovering a penny. He succeeded in establishing that the solicitors were negligent for failing to advise about jurisdiction and the court found that, as a result, Mr Wright lost the chance of securing his entitlement, assessed at 20%, leading to a damages award of £2 million. Titan v Colliers International (In Liquidation) Colliers lost at first instance in a very substantial valuation case. Colliers had valued a commercial property in Nuremberg at £135 million in 2005 when the market was strong. In 2009 the tenants became insolvent and the property was sold later in administration for £22.5 million. The judge at first instance valued the property at £103 million. Colliers’ appeal was successful on the issue of negligence. At the Court of Appeal the court said the trial was complex and clearly there was great difficulty regarding expert evidence, with both parties alleging that the other’s was inappropriate because of a lack of familiarity with Germany or because of conflicts. The Court of Appeal found that the valuation was within a 15% margin and therefore Colliers were not negligent. A claim involving law firm Fox Williams being sued by a client for failing to include an English jurisdiction clause in his retirement agreement with EY Russia, is more evidence of the added difficulties and dangers of involvement in foreign work. The broader picture As well as the foreign element introducing multiple layers of complexity – with substantial figures at stake – the cases also show that any subsequent litigation against the professionals is particularly challenging, expensive and uncertain. Insurers should be vigilant about the amount of work being undertaken by professional services firms which has a foreign element. As well as obtaining data about the amount of work and revenue generated in foreign jurisdictions they should also know what element of work undertaken domestically has a foreign angle. Moving forward, insurers need to increase their knowledge and awareness of the added risk presented by such work and regularly review their underwriting policies to cater for potential greater exposure. Patrick Gaul, Partner 0151 242 7925 patrick.gaul@weightmans.com
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InView Spring/Summer 2016

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