What is the current state of Irish legislation on ESG?

Environmental, social and governance considerations have always been important to our clients but in recent years conversations about ESG matters have risen to the top of many organisations’ agendas, especially following the pandemic.

At Arthur Cox, we have seen demand for ESG-related advice increase over recent years and we expect that trend to continue as ESG considerations are pondered by governments, regulators, companies, investors and wider society.

The Irish legislative landscape on ESG matters is made up of domestic and EU measures (all of which exist in the context of global initiatives and discussions).

ESG touches upon multiple policy areas, such as climate action, biodiversity, energy, water, financial services, commercial enterprise, and transport. This means that legislation on ESG covers a broad range of topics and has an impact on multiple stakeholders.

When we talk about ESG, many of the legislative measures over the past decade have focused on the E of ESG, ie environmental goals (particularly those related to climate), but it is important to remember that there have also been significant legislative and policy initiatives connected to the S and the G.

Irish domestic initiatives over recent years are many and varied. They include the publication of Ireland’s first statutory National Adaptation Framework in 2018, the passing of the Climate Action and Low Carbon Development (Amendment) Act in 2021, committing Ireland to specific greenhouse gas emission reduction targets by 2030 and 2050, the Circular Economy and Miscellaneous Provisions Act in 2022 (supporting Ireland’s transition to a circular economy) and the Work Life Balance and Miscellaneous Provisions Act in 2023 (setting new ‘S’ rules for Irish workers).

At an EU level, measures such as the European Commission’s 2018 Action Plan on Financing Sustainable Growth, 2019 Green Deal and 2021 Sustainable Finance Strategy have led to a proliferation of European legislative measures, some of which are directly effective in Ireland with others being transposed into Irish law.

Are there any recent or upcoming changes to Irish ESG legislation that our readers should be aware of?

There are a number of measures that Irish businesses should be aware of and the key one to mention is the Corporate Sustainability Reporting Directive (CSRD).

Irish legislation transposing the Corporate Sustainability Reporting Directive (CSRD) is expected to be published ahead of the 6 July 2024 deadline. Companies within scope of the first phase will be preparing to report in 2025 on FY 2024.

We recognise that ESG considerations are impacting all of our clients across sectors not just through law and regulation but through other potential ESG-related exposures.

What legal obligations do Irish companies have in terms of ESG reporting?

Many of the legal obligations concerning ESG in Ireland stem from EU legislation. The focus of EU ESG measures in recent years has been on disclosure and reporting (as opposed to mandating specific actions).

The measures include those set out in:

• the Non-Financial Reporting Directive (2014/95/EU)
• the Corporate Sustainability Reporting Directive (EU) 2022/2464
• the Sustainable Finance Disclosures Regulation (EU) 2019/2088
• the Taxonomy Regulation (EU) 2020/852
• the Capital Requirements Regulation (EU) No 575/2013
• the Low Carbon Benchmarks Regulation (EU) 2019/2089
• the Climate Law Regulation (EU) 2021/1119
• the Gender Balance on Corporate Boards Directive (EU) 2022/2381

How does Irish law enforce ESG disclosure by companies?

Enforcement covering matters that are now labelled ESG is not new. Up to now, Irish law has overseen ESG disclosures under general rules of company law, eg, through examining company reports for material misstatements. Given the new and upcoming ESG-specific disclosure requirements, we expect enforcement to become increasingly robust with companies’ sustainability information being scrutinised by various stakeholders including regulators, lenders, insurance companies, shareholders and the general public.

The reach of ESG regulation is very broad and the regulatory sanctions will vary depending on the particular regulator engaged by the event that triggers an investigation. The regulatory and reputational implications of investigations are likely to be particularly significant if greenwashing allegations emerge.

It is important to remember that enforcement action by regulators is not the only means by which company disclosure will be scrutinised and challenged and we expect a rise in actions through litigation.

What are the penalties for non-compliance with ESG regulations in Ireland?

Regulatory sanctions will depend on the nature of the specific regime engaged. They can include directions, cautions, reprimands, fines, suspensions or revocations of authorisations.

Given the number of different sources of ESG regulations in Ireland, it may be most helpful to give an illustrative example. Taking the CSRD as that example, the CSRD will require companies to report sustainability information in compliance with new reporting standards. Failure to comply with these standards can result in substantial fines, eg, financial penalties of up to €50,000 and administrative fines of up to 2% of a company’s annual average revenue if it exceeds €400m.

Outside formal, financial penalties, it is also important for companies to consider the reputational risks associated with getting ESG disclosures wrong.

How does Irish ESG legislation address social issues such as employment rights and diversity?

Irish ESG legislation has been increasingly attentive to social issues, including employment rights and diversity, which underscores a broader commitment to equality, diversity and inclusion issues.

The introduction of the Gender Pay Gap Information Act in 2021 marked a significant step towards transparency in the workplace, requiring organisations with more than 250 employees to report gender pay gap metrics. From 2024, companies with 150 employees or more will be required to submit gender pay gap reports, and from 2025 this will be extended to companies with 50 employees or more.

How does Irish legislation ensure the environmental aspect of ESG, specifically in terms of sustainability and climate change?

Irish legislation has taken significant steps to ensure the environmental aspect of ESG, particularly focusing on sustainability and climate change.

The Climate Action and Low Carbon Development (Amendment) Act, signed into law in 2021, commits Ireland to a legally binding path to net-zero emissions by 2050 and a 51% reduction in emissions by 2030 from a 2018 baseline.

This act is a cornerstone in Ireland’s framework to meet its international and EU climate commitments, aiming to transform the economy towards a greener future.

What is Arthur Cox’s approach to ESG issues in its legal practice?

At Arthur Cox, we recognise that ESG considerations are impacting all of our clients across sectors not just through regulation but through impacts on their business proposition.

Our ESG group works with our clients to identify and integrate ESG priorities at all levels of their businesses. We advise clients on areas such as energy transition, climate action, sustainable finance and green bonds, ESG disclosures and sustainability reporting, sustainable real estate investment and development and green leases.

What sets us apart from other firms is the breadth and cutting-edge nature of our ESG practice. Our ESG group is at the forefront of the market, providing clients with advice across the entire ESG space.

We have assembled a cross-disciplinary team of experts who bring a wealth of knowledge and experience across sectors to work with our clients to meet their ESG-related goals and obligations.

Our approach is collaborative and client-focused. We work closely with clients to understand their unique goals and challenges, providing tailored solutions that reflect the latest legal updates and industry insights.

What measures has your firm taken to improve its own ESG performance?

Sustainability for us involves a commitment to robust governance, policies, and practices. That commitment includes a relentless focus on diversity and inclusion, respect for human rights, responsible procurement and environmental sustainability. The integration of each of these elements is a key part of the decision making for our business.

Our ESG strategies are overseen by our Sustainable Business Committee, which manages our Sustainable Business Programme. At the core of this programme is the annual publication of our Sustainable Business Impact Report. Launched in 2021, this report is a comprehensive overview of our initiatives and accomplishments across four essential dimensions: community, workplace, marketplace, and environment. By aligning with the UN Sustainable Development Goals, we aim to show our commitment to global sustainability standards.

We aim to play an active role in contributing to positive change while minimising our environmental impact through a programme of monitoring and continuous improvement.

What are the biggest ESG challenges your firm currently faces, and how are you addressing them?

As a firm, we have set ambitious targets in relation to reducing our Scope 1, 2 and 3 emissions. Over the past 12 months, we have continued to work with our people and external stakeholders to assist us in the delivery of the key measures required to achieve our carbon reduction goals.

Our work in this area is continuing and we are very aware that we need to continue to work with our people to reduce our carbon footprint as an organisation. To address this, we are working hard to explore alternatives so that we can provide more sustainable options through an updated travel policy, online meetings, events and other operations.

How does the firm assist clients in integrating ESG factors into their business strategies?

We assist clients in navigating reporting obligations and advise boards on strategic planning, risk management and internal controls to support disclosure in relation to their business operations and value chains.

Our ESG group advises on disclosure and sustainability reporting obligations in relation to climate, diversity and other aspects of ESG in compliance with local and international legislation and voluntary frameworks, including the CSRD, the Taxonomy Regulation and Task Force on Climate-related Financial Disclosures.

We also advise companies on all aspects of their governance arrangements. Board governance and oversight is essential in developing and delivering effective ESG strategy, managing risks including activism and litigation, supporting robust disclosure and maintaining stakeholder engagement.

We provide regular ‘horizon scanning’ insights to legal teams and company boards regarding ESG-related developments and advise boards on topical issues including board diversity, executive remuneration, directors’ duties and the implications of new legislation such as the proposed Corporate Sustainability Due Diligence Directive (CSDDD).

Can you share some examples of how Arthur Cox has helped clients navigate complex ESG issues?

Our ESG team offers advice on a multitude of complex ESG issues, such as:

Environmental: Under the environmental pillar we advise on energy system transition, energy efficiency and demand side response, resource management and the circular economy, carbon sequestration and emissions reduction, sustainable finance, climate-related plans, disclosures and activism and environmental due diligence.

Social: On the social side, we have extensive experience advising on the social impacts of organisations on internal and external stakeholders. We advise on equality and discrimination matters, environment, health and safety issues, community investment and capacity building as well as human rights and the rule of law.

Governance: Good governance is a core aspect of ESG, and our team regularly advises clients on all aspects of their governance arrangements, including areas such as strategic oversight, risk management, shareholder engagement and reporting and transparency.

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Despite recent laments from London corporate pundits over a depressed deals market, the view of many is that the Irish market is bucking global trends.

Stephen Keogh, William Fry’s head of corporate, says: ‘From a transactional point of view, the big feature this year so far has been a smaller amount of multi-billion deals and probably a lower average deal size, but all of our data is pointing to a similar volume of transactions this year compared with last year, which is kind of surprising given there’s so much negative global sentiment out there.’

Pointing to the Irish market’s anomalous resilience, he notes: ‘Global M&A is at its lowest level since the start of the pandemic, falling 38% to $1.3trn in the first half of 2023. Irish M&A volume only fell by 2%, which is pretty spectacular. It doesn’t take an awful lot to move the dial, so two or three very big transactions would keep a lot of us busy for much of the year, and we’ve had more than our fair share of those.’

David Widger, managing partner of A&L Goodbody, says a ‘chunky mandate’ for the firm was advising NatWest on the closure of its subsidiary, Ulster Bank, which completed last year. Geoff Moore, managing partner of Arthur Cox, notes that his firm was also involved, advising Permanent TSB on the landmark acquisition of €7.6bn of assets from Ulster Bank as it departed the Irish market.

Michael Jackson, managing partner of Matheson, is also sanguine, observing: ‘There has been a noticeable pick-up in activity since August. Maybe the fact that everyone finally got a chance to recharge after a few years of Covid restrictions on travel has added a new sense of energy!’

Jackson points to a lengthy list of standout matters, including advising Circle Internet Financial on all aspects of its announced transaction to go public through a business combination with Concord Acquisition Corp, a publicly-traded SPAC, placing an enterprise value of $9bn on Circle, as well as acting for MariaDB on its business combination with NYSE-listed SPAC, Angel Pond Holdings Corporation, reflecting a combined enterprise value of $672m.

Will Carmody, who in January 2023 succeeded Declan Black as Mason Hayes & Curran’s managing partner, has had a good run of it so far, pointing to 7% revenue growth to €114m (still the only elite Irish firm to publish its financial performance) and standout matters including advising AIB on the sale of a non-performing loan portfolio known as Project Sycamore to a consortium led by Cerberus and LCM Partners.

Many are cognisant of the opportunities that the country’s dynamic tech sector has to offer. Asserts William Fry’s managing partner Owen O’Sullivan: ‘Ireland has managed to be an outlier, economically, to a lot of the other jurisdictions, partly due to a life sciences and pharma bounce, which has passed since the pandemic. But tech could be interesting. We are heavily engaged with and love that space. A lot of interesting global tech companies are based in Ireland, so we want to get our fair share of that activity.’

Widger points to a standout instruction for A&L Goodbody, advising CluneTech on the €575m sale of its Immedis business, while several others report an uptick in demand for employment advice, given the rise in redundancies in the tech sector.

Carmody notes that Mason Hayes & Curran has been busy advising Meta subsidiaries Instagram and WhatsApp on regulatory engagements in the European Union and on various GDPR compliance issues.

However, it is clear that, in spite of Ireland’s relative fiscal bullishness, the worst repercussions of the coronavirus pandemic and also the cost-of-living crisis wrought in part by the ongoing conflict in Ukraine, have yet to play out.

And while hybrid working may have been a lifesaver during various protracted lockdowns – it has now become something of a double-edged sword. Many of Ireland’s law firm leaders report the decline of footfall in the capital caused by the continuing trend of working from home, prompting the demise of small businesses and a knock-on effect on the local economy. Indeed, if there is more than a hint of foreboding in the air, it seems inevitable that this will have an impact on the business of law in Ireland and on the types of work firms are preparing to handle.

As Keogh explains: ‘Pressure on the commercial property market is pretty severe in Ireland, and then throw in rising interest rates. People are sitting on their hands, waiting to see what sort of revaluations are set by the big funds that might move first because they might have redemptions coming up and might have to sell something, which would set a new valuation threshold. That’s the most-impacted sector of the Irish legal market still.’

‘There has been a noticeable pick-up in activity since August. Maybe the fact that everyone finally got a chance to recharge after a few years of Covid restrictions on travel has added a new sense of energy!’ Michael Jackson, Matheson

O’Sullivan agrees: ‘The funding associated with that is quiet too. As we’ve learned from previous downturns or soft markets, people are very reluctant to call it. Whether that’s a ticking bomb, no-one really knows.’

Adds Jackson: ‘We have many senior lawyers who have experience of the financial crisis and of the issues that it threw up, and our restructuring team is the largest of any in the market. Our balance sheet is healthy, and we believe that we are well prepared both for further growth and for a downturn.’

For now, Ireland’s legal community is sanguine without being arrogant. There are clear challenges on the horizon and, as experience of previous downturns has shown, hubris never pays. LB

nathalie.tidman@legalease.co.uk

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Nathalie Tidman, Legal Business: Welcome everyone. We have a fantastic panel of extremely talented and insightful people here this evening.

As a starter for ten, what do you see as the real opportunities and benefits for in-house lawyers using generative AI in your day-to-day dealings?

Helen Dooley, AIB: In-house lawyers add value to the business, but we are an overhead. I am scared by GenAI, but I see it as a huge opportunity for in-house lawyers. I am sure law firms can utilise this for the low-value, high-volume type work to free up lawyers, who tend to be expensive resources, to do the strategic value-add. It is about harnessing the opportunity.

David Hackett, Addleshaw Goddard Ireland: We are only at the beginning of this.

‘GenAI is a broad piece. It is drilling in and finding the piece that is useful for you. It is absolutely strategic and useful on all levels.’
Cíara Garahy, Salesforce

The most logical use of generative AI is around those quasi-legal tasks that land on our desks and take up a lot of time. We can see that the technology can be really revolutionary for that, and the hope would be that we can deploy the technology successfully, that it will free up lawyers’ time from some of those tasks. We can let the AI do that, and do it well, so we can really concentrate on the type of advice that we are trained to give and becoming more involved in analysing the results that come through the AI tools, and inputting on strategic matters that really add value to the business.

Cíara Garahy, Salesforce: If you even look at a small use case, if you are trying to hire someone into your team and the HR person says, ‘Can you write a job description?’ ChatGPT can write that. There is a huge range of opportunity, not only on the legal aspect, but especially for in-house counsel. A portion of our job is contracts, but a larger portion is actually dealing with the business, writing communications, marketing and talking to people. AI is a huge opportunity within that and in driving efficiencies. For the things that come across your desk that are not actual strategic legal work, it is game-changing.

Nathalie Tidman: Is GenAI just a way of saving time and being more efficient, or are you seeing this as a real tool for actually making strategic decisions?

Cíara Garahy: It depends on which tool you are using and how you are using it. Are you using it for an NDA review that you had an intern doing? Are you using it to analyse a huge set of data that came in and you need to get a response for your board in time? GenAI is a broad piece. It is drilling in and finding the piece that is useful for you. It is absolutely strategic and useful on all levels.

Helen Dooley: AIB has done a few acquisitions in the past couple of years. We have bought a couple of companies, and we have bought some loan books to use it, for example, to accelerate your due diligence. Months can be spent on due diligence, and all the while, you are spending money, but you are using valuable resources, whether it is business analysts and internal and external lawyers, to get a quicker answer on something like, ‘Is this feasible? Are there any problems there? Is this a company that is going to fit with our strategy?’ To short-circuit all that brings huge business benefits.

David Hackett: To get the best use out of AI now and in the future, you are really going to get benefits if you stand back a little bit, look at your business, your role, the industry you are in, the type of tasks that you do, and really figure out what the use cases are. The possibilities are endless, so we should not be constrained by just saying we are going to use it for what occurs to us now.

Time spent strategically thinking about how we are going to deploy AI in our businesses is really going to be valuable, and it is going to be time well spent.

Nathalie Tidman: Have there been any ‘wow’ moments where you have thought AI is really driving change in quite a short space of time? Any experiences of actually having really good results from using it?

Cíara Garahy: Salesforce uses GenAI products, but they are not the big game-changer for us. The big game-changer is that Salesforce sells GenAI products. Einstein GPT is the big play at the moment. We are looking at it from the other side of the house as well, and the customer’s concerns. When you see how it can change our customers’ day-to-day and you actually see what can be done with the GenAI product that we are selling, then you are like, ‘Oh my gosh, this is huge’.

If you take something like an online retailer, they can apply it everywhere, from them buying the fabric to the person at the end of the purchase. For example, if you buy a knit jumper every winter, they know you are buying a knit jumper, but now, not only do they know that, but they can also create a marketing piece around it. They can provide you with a sales piece. That is all fed through your product suite that you are already using. That is when you go, ‘Wow, look at it go’.

Helen Dooley: Working for a regulated financial service means that we are some way off. Banks, and certainly Irish banks, in the context of the Irish regulatory framework, are going to be slow to get ahead here. We use a lot of AI today. For example, we would have automated credit decisioning, but that is just based on, ‘If these facts are true, then the person can be approved for a personal loan up to £10,000’.

We looked at some research, which I think was in China. China obviously has a huge population, and for many years, it has been sharing its data. It did an analysis of recovery of loans going bad. If somebody took out a loan and they had the equivalent in China of a Hotmail account, rather than a more established email account, and a mobile phone that was pay-as-you-go, they had a higher default rate. That was proven time and time again with many datasets.

The Irish banks are particularly hampered with holding more capital because of our history through the financial crisis. Can machine learning help us with our lending decisions? We also have to think about the ethics of that. Are people being excluded from basic credit? If the machine has identified that the loan will go bad, it does not necessarily mean they should not get the loan in the first place. There are interesting concepts to consider.

David Hackett: In terms of ‘wow’ moments, it is just seeing the practical application of how the technology can work and the ability to use plain English with the technology to get it to analyse data and documents with an accurate result. The narrower AI tools have been successful, and there is still a place for those. I am thinking of something like Kira, which is used a lot in litigation, and Discovery. Again, the way things needed to be phrased, and the inputs that were needed to drag out the information, it needs to be quite specific.

This is completely different. You can almost talk to it in regular, plain English, ask it a question. It might clarify what you are seeking to look for, but then it goes off and it delivers the results. Something I think we are all going to have to get over is the ability to trust the AI and rely on what it is doing.

‘Can machine learning help us with our lending decisions? We also have to think about the ethics of that. Are people being excluded from basic credit?’
Helen Dooley, AIB

Nathalie Tidman: There are clearly risks associated with GenAI, such as data privacy. What do you think are the most salient points around the challenges of using it?

Cíara Garahy: There are a few massive challenges. One is obviously the data piece and, going back to the techie side of it, that applies whether you are doing open source or closed source. If you are using open source and feeding data into it that is coming out on the far side, whose data is being used? How is that safely being protected? Who is the processor? Who is the controller?

You also have to think of IP and who owns the output, and you have to back-to-back your agreement. For an in-house lawyer, realistically, none of us are at the point, unless we are working in open AI, of using a third-party process. You need to back-to-back your agreements because of your IP, your data and ethics. If you are in a regulated industry, can you trust what comes out of it?

AI is very good at predicting and using its dataset, but it is not very good at the nuances, so there are huge risks there and you have to look at them all individually for your own unique business and how it is being worked out.

David Hackett: It is difficult to go down into the weeds, but you need to look at the contractual basis that governs the use of whatever technology you are using, be it something that is open or a bespoke model that might be developed for you. What are the terms of use that you are permitted to use it under? It might restrict the scope of use. There can be restrictions that you need to be aware of in terms of how you use it. As lawyers, our primary job is that we give advice and people need to be able to rely on that and trust us, and that is absolutely sacrosanct.

When you are providing services to clients that effectively use AI technology as part of those services, are your clients aware of that? You need to be transparent so that they understand how it is going on. That may lead to more questions, but again, that is the contractual framework that you have in place, both in terms of your receipt of the technology but also in service delivery.

In terms of the in-house environment, it is going to be a huge pressure. The businesses will want to use these things and then, again, your role as in-house counsel is to say, ‘How do we deliver that for the business but protect the business in the best possible way?’ You are not going to be able to find a perfect solution to that. It is finding the best workable solution because the business will want to use these tools and will ask how you can allow that to happen.

Helen Dooley: In-house legal teams spend a lot of their time enabling the business but also keeping the business from walking into glass walls. I see a point coming very quickly where various business units will see the value these tools can deliver but then we are faced with the issues of if it is open software, we cannot put our clients’ data into it. Are the algorithms fair? Are there any biases in there? There is a huge learning for us here.

Again, as a regulated financial services entity, we will be very slow on the uptake, because the risks in the near term are going to outweigh the benefits, because we do not know enough.

Nathalie Tidman: Some of us – and I am including myself in this – are Luddites. Have you been in the position where somebody has resisted the use of technology like ChatGPT? What are the barriers to rolling it out across the business and making people buy into it?

‘This is a complete change in the entire business environment, so you do need to get on board with generative AI because I do not think that opting out is an available option.’
David Hackett, Addleshaw Goddard Ireland

David Hackett: What I would say to people is this is not an optional extra in your set of tools that you use as a lawyer. It is not something where somebody is coming along trying to sell you a piece of technology and you say, ‘Maybe I would use that’, or ‘That might be useful’, or ‘It might be a little bit of help in my job’. This is a complete change in the entire business environment, in the legal environment, in lots of different environments, so you do need to get on board with it because I do not think that opting out and saying, ‘I am not going to use this’ is an available option.

As much as possible, you need to embrace it, see what it can do and be open to that, because you see all these headlines, buzzwords and slogans going around. When that review came out that said 44% of legal jobs would be replaced by AI, that is a headline clickbait story, but it is not so much that AI is going to replace lawyers. Another line I heard used that I thought was quite accurate was that lawyers who use AI will replace lawyers that do not use AI.

Helen Dooley: AIB will not be at the forefront of this. When ChatGPT was getting traction, as a precaution AIB disabled the screenshot element on people’s work phones. I presume that was in case we took a screenshot of customer data and put it into ChatGPT. We are behind the curve.

Nathalie Tidman: If you had a junior member of the team using GenAI, you clearly could not take what they produced as read, or as being the finished article. Are there any risk mitigation processes that you are developing or using already in your businesses?

Cíara Garahy: I feel like you have to review everything. ChatGPT is probably quicker than a trainee but is it more accurate? You still have to review the work regardless. You would not send something out blindly and most people would not do that anyway, with the legal products that are for sale and for use. I was listening to a podcast and it said, ‘Do not be afraid that the robots are coming. If a robot is coming, close the door’. They have not been trained to open doors.

Nathalie Tidman: David, from your perspective, there is the client piece and not putting client data into GenAI to come up with a result. How do you manage that?

David Hackett: It is a moving target, and we are at the very beginning of this journey, so we are developing those policies and frameworks. There are some basic ones which say, be careful with what data you put in and make sure you have the relevant permissions and that you are entitled to do that. Approach with caution, but, that said, I am not saying it should be a runaway train, but you do not want to be overly restrictive. That may lead to some restrictions on what you use the technology for, and it may not be helpful, but they are common sense things like taking a step back and looking to see what you are using the AI for. If it is to draft an email to somebody, that is absolutely fine; it can do that and do it very well.

On the other hand, if it is litigation involving commercially sensitive or valuable data, then you do want to think, ‘Should we be feeding that into an AI technology?’ and specifically, ‘What is the agreement? How are we entitled to use it? Who gets access to this data once it goes in? What protections do we have in terms of contractual remedies?’

Helen Dooley: Operating in a regulated industry sometimes means we are slower to adopt new technology. For example, with having our data in the cloud it took us a long time to be comfortable with that. Part of the reason is half the people in this country have a bank account with us and we have your sensitive personal data, and we know what you spend your money on so there is a huge trust element.

We have sensitive personal data that would be catastrophic if in the wrong hands or used wrongly. Banks, certainly in Ireland, are still a long way off from having high trust levels, however, we need to accelerate our thinking around AI, because I see the benefits. If we go at the glacial pace that we might sometimes approach other new technologies or new innovations, we will be left behind.

Nathalie Tidman: One of the risks at the moment is that GenAI is not regulated, so is that a self-regulating thing that each business has to do itself? Do you think it should be regulated by an external body?

David Hackett: There are different types of regulation. Are we talking about legal regulation or general regulation of AI? On general regulation of AI, does it need to be regulated? Definitely. ChatGPT itself has said it would welcome regulation. ChatGPT may be trying to get ahead of the curve, and it is a good soundbite. Undoubtedly, this is going to be a massive area and, frankly, how do you regulate it? It is tricky. From a European perspective, we have the AI Act coming down the tracks and there has been great progress on that. There is talk of it being adopted by the end of the year; that is very ambitious. In terms of what it sets out and the type of issues it is trying to grapple with, it is going to be difficult to effectively regulate AI. I suspect you will always be chasing the genie a little bit and trying to get it back in the bottle.

Looking at the example of GDPR, we are five years in with that now and it was trumpeted as, ‘It is going to fix everything on data protection, making sure individuals’ rights are protected and that organisations are regulated’. There is no doubt it has achieved some of that, but it has not functioned in the way that people were expecting. Although data protection is a huge area, it is very small in comparison to regulation of AI. Regulation is needed, but there is a balance needed as well. If you are overly prescriptive on the regulatory side, it may stifle innovation.

There is a trust question here as well and for people to feel comfortable using it and that their data is being used by it, they are going to want to see a level of regulation and certainly, in the legal regulation sphere, additional controls and restrictions on lawyers using it. In essence, lawyers need to be able to do a stand over with whatever results are generated by AI. That is what we are paid to do, to give advice that clients and our businesses can rely on. That is fundamental. Whether that is set out in regulation or not, we need to be able to do it. As a regulation piece, it is going to be huge.

Nathalie Tidman: Are you already training people internally on how to use AI to mitigate risk?

Cíara Garahy: Absolutely. You have to. It is like any new piece of technology, you have to take it, look at it, adopt it, learn it and then everyone needs to learn a new piece of technology when it comes in.

First, the lawyers have to upskill. We can then put the guardrails in place and then push it out and also educate our customers, because they are trying to buy this piece of technology. It is a massive education piece for everyone.

David Hackett: At the moment it is about encouraging use in the correct environments and with the correct datasets. Using it is the biggest thing for people at the moment, because a surprising number of people have not used it yet, so you are talking about it in the abstract.

‘It is like any new piece of technology, you have to take it, look at it, adopt it, learn it and then everyone needs to learn a new piece of technology when it comes in.’ Cíara Garahy, Salesforce

Nathalie Tidman: What impact is GenAI going to have on the value for money question and on pricing?

Helen Dooley: Clients are going to expect to be paying for outputs, not time input. Aside from AI cutting through, the old billable hour for law firms is questionable today. As an aside, the alternative legal service providers, which are the Big Four accountancy firms that are going to embrace AI and not come at it from the traditional billable hour, are going to force the law firms to have a different approach.

David Hackett: The billable hour is a concept, it is there, but there are a lot of other factors that flow into what you charge for the work that you do. Certainly, my own experience is clients are not shy about raising the issue of fees. The majority of clients are fair, and they realise the firm needs to make a profit on that, but equally they do not want to be paying an exorbitant price, or paying for something that they feel is your learning and you are going to be able to use in the future. That is a reasonable conversation to have, and you need to be able to have it.

Some of these tools are very expensive and so there is going to be an investment by law firms in getting licences to deploy them throughout the organisation, but conversations around fees for a long time have been moving more and more in the direction of ‘What value are you delivering for us?’ Even if you are doing quite mundane tasks, that can be of value to a client, and they are very happy to pay for it. This is going to refocus the conversation on the value of the advice you provide. If it is the case that you are using AI to provide your advice more quickly, for example, in a competitive process where there are a number of bidders to buy a company and you can use AI to dig in and see where the issues in this company are and how that is going to affect the price we are going to pay, very quickly you get to a point of ‘This is what it is worth to the client. We are willing to offer this price to get the deal done’. If you can deliver that quickly, it is of huge value for the client.

Cíara Garahy: The other side of it is if we are in-house, we then also have to show our value. If we are getting the AI tools in, then what is the point in us being there? If I do ten NDAs a day as my day job and an AI tool can do it, then what is justifying my salary? Across the board we need to be careful about the value-add on this piece.

Nathalie Tidman: What are your takeaways on the future of GenAI?

Cíara Garahy: It is here, so get used to it. It is not as scary as you think it is and you are able to do it.

Helen Dooley: The more curious we are, the more benefit we are going to get from it. AI is in a lot of the things we do today, and so we are trying to harness the value it will ultimately bring.

David Hackett: Embrace it because it is happening. There is no getting away from it so better to be on the train than see the train pulling away from the station and you are not on it. Realise that this is a revolution and that this is a good time to be involved. We are not coming to it when everyone else is already way ahead and they know what they are doing.

Do not to be scared by it. AI is another tool that we as lawyers will use to do our job, but we direct what it does, we give it the data to analyse, we ask it the questions, it gives us results, we interpret that. Ultimately, we have the final say. LB

Photographer: Bryan Brophy

nathalie.tidman@legalease.co.uk

The post The Ireland debate: Don’t fear the robots appeared first on Legal Business.

‘What’s happening with Kirkland would make a great Netflix documentary, although maybe a bit niche,’ quips one managing partner of the recent saga of the Chicago-bred powerhouse and Paul Weiss’ London office. ‘Let’s hope they’ve had cameras dotted around the office!’ The amused detachment with which the remark is delivered could be said to sum up the stance of Ireland’s law firm leaders in the round – often looking on at the dramas besetting other international markets from a rarefied position of relative immunity to the worst of the upheavals faced elsewhere in the world.

However, no market is an island, and many of the challenges faced by Ireland’s leading firms this time last year not only remain but have become more urgent. Managing partners are just as alive to reversals created by an ultra-competitive recruitment environment, not helped by a cost-of-living crisis that shows little sign of releasing its grip any time soon, while the ongoing war in Ukraine and related upward spiral of interest rates and inflation continue to make themselves felt.

Whereas those running law firms have just about got their heads around dealing with these constant tribulations, fresh and more sinister difficulties regrettably loom large. Even as LB embarked on our tour of Dublin’s law firm offices, Israel had just declared war on Hamas in response to the invasion of Israel from the Gaza Strip in early October. Although clearly, the human and financial cost of this conflict on global businesses will take some time to play out, this just goes to show the fragility of an already damaged geopolitical environment, and the impossibility of truly being able to look around corners, however astute your forecasting may be.

‘Looking down the runway to the end of this year, the pipeline is pretty strong on the deals front.’
James Duggan, Flynn O’Driscoll

Putting to one side these big-picture calamities for now, LB sat down with Ireland’s c-suite to catch up on how their businesses have fared over the last year, and asked what the future is likely to hold for a market still relatively unperturbed.

Deal with it

Having become accustomed to the laments of London pundits on a depressed deals market over the past 18 months, the word on the ground in Dublin poses something of an anomaly.

James Duggan, managing partner of Flynn O’Driscoll, and also a partner in the firm’s aviation and asset finance practice, can’t resist an aeronautical turn of phrase to note that, ‘looking down the runway to the end of this year, the pipeline is pretty strong on the deals front’.

Duggan echoes the view of many canvassed for this feature in asserting that the Ireland market is bucking the global trend. ‘At the beginning of the year we anticipated that M&A would slow down, and certainly that’s what we were hearing from our counterparts in Australia and the US. Typically the trends seen in those jurisdictions will come over here, but that hasn’t happened,’ he says, while also conceding that the bullish deals market is tempered somewhat by a less dynamic investment sector.

Indeed, Duggan points to a distinguished list of mandates that includes advising Mediahuis Group, the Antwerp-headquartered publisher behind news titles including the Irish Independent and Belfast Telegraph on its acquisition of Switcher.ie, the Irish online price comparison platform. Other standout matters have seen the firm advise Aergo Capital on its acquisition of Dublin’s Seraph Aviation Management and act for shareholders of The City Bin Co on its sale to Thorntons Recycling.

‘Global M&A is at its lowest level since the start of the pandemic, falling 38% to $1.3trn in the first half of 2023. Irish M&A volume only fell by 2%, which is pretty spectacular.’
Stephen Keogh, William Fry

Stephen Keogh, William Fry’s head of corporate, tells a similar story: ‘From a transactional point of view, the big feature this year so far has been a smaller amount of multi-billion deals and probably a lower average deal size, but all of our data is pointing to a similar volume of transactions this year compared with last year, which is kind of surprising given there’s so much negative global sentiment out there.’

Pointing to the Irish market’s anomalous resilience, he notes: ‘Global M&A is at its lowest level since the start of the pandemic, falling 38% to $1.3trn in the first half of 2023. Irish M&A volume only fell by 2%, which is pretty spectacular. It doesn’t take an awful lot to move the dial so two or three very big transactions would keep a lot of us busy for much of the year, and we’ve had more than our fair share of those.’

One such substantive deal has seen a William Fry team, including corporate partners Myra Garrett and Mark Talbot and banking partners Jason Hollis and Ciarán Herlihy, acting alongside Sullivan & Cromwell to represent Amgen, a leading independent biotechnology company, on its acquisition of Horizon Therapeutics, a global biotech company headquartered in Dublin, for an equity value of $27.8bn.

In early September, the US Federal Trade Commission agreed a consent order with Amgen to address anti-competition concerns surrounding the deal, paving the way for the transaction to complete on 6 October.

David Widger, managing partner of A&L Goodbody, says a ‘chunky mandate’ for the firm was advising NatWest on the closure of its subsidiary, Ulster Bank in Ireland, which completed this year. Geoff Moore, managing partner of Arthur Cox, notes that his firm was also involved, advising Permanent TSB on the landmark acquisition of €7.6bn of assets from Ulster Bank as it departed the Irish market.

Michael Jackson, managing partner of Matheson, is also sanguine, observing: ‘There has been a noticeable pick-up in activity since August. Maybe the fact that everyone finally got a chance to recharge after a few years of Covid restrictions on travel has added a new sense of energy!’

Jackson points to a lengthy list of standout matters, including advising Circle Internet Financial on all aspects of its announced transaction to go public through a business combination with Concord Acquisition Corp a publicly traded SPAC, placing an enterprise value of $9bn on Circle, as well as acting for MariaDB on its business combination with NYSE-listed SPAC, Angel Pond Holdings Corporation, reflecting a combined enterprise value of $672m.

‘There’s a definite uptick in mood coming out of London and an increase in referrals, and ditto on the East Coast of the US, which is another very strong referral source for us.’
Owen O’Sullivan, William Fry

Will Carmody, who in January 2023 succeeded Declan Black as Mason Hayes & Curran’s managing partner, has had a good run of it so far, pointing to 8% revenue growth this year and standout matters including advising AIB on the sale of a non-performing loan portfolio known as Project Sycamore to a consortium led by Cerberus and LCM Partners.

Peter Stapleton, Ireland managing partner of Maples and Calder, notes similar dynamism: ‘Our corporate and M&A practice experienced robust activity levels, driven by a keen focus on innovation-driven businesses and private equity. Notable transactions included multiple acquisitions for the prominent Irish private equity firm Cardinal Capital, substantial debt and equity capital raises, and acquisitions on behalf of AMCS. We also played a crucial role in Wayflyer’s successful $150m equity raise. On the sell side, our practice showcased its depth and advanced execution capabilities across innovative companies by leading key transactions, including the sale of SteriPack to Inflexion, Version 1 to Partners Group, and Taoglas to Graham Partners.’

Owen O’Sullivan, managing partner of William Fry, flags as another standout matter its advice to Ontario Teachers’ Pension Plan, alongside lead counsel Freshfields, on the disposal of its majority shareholding in Premier Lotteries Ireland DAC, the operator of the Irish National Lottery, to La Française des Jeux, the operator of France’s national lottery games.

O’Sullivan is sanguine on the state of play with inbound referrals: ‘There’s a definite uptick in mood coming out of London and an increase in referrals, and ditto on the East Coast of the US, which is another very strong referral source for us. We’re getting a bit from the West Coast too; things have picked up. The US hasn’t been anywhere near as negative as people were fearing it might be. Speaking to people on the ground quite often, the mood is quite optimistic so we’ll happily ride on that and hope it comes through.’

‘Sustainable finance has been a core part of our strategic plan for the past few years and will continue to be for the next decade and beyond.’
Peter Stapleton, Maples and Calder

Practice-wise, O’Sullivan says that referrals have taken the form of ‘some good disputes-related stuff and restructurings, some interesting deals, as well as financings. The banking teams were quiet for the first six months of this year but that has turned in the last six weeks. The strongest source for that is London. And we’ve had some pretty strong financings from Germany.’

Aside from corporate, there is a decided growth mindset among leaders, with various ambitious strategies already paying dividends.

For his part, Duggan has recently overseen Flynn O’Driscoll’s rebrand and the implementation of a three-year strategy which has given the firm a new clarity of purpose.

He says: ‘Since we last spoke, we’ve bolted on a new banking practice (with the hires of Michael Hanley and Danny Heffernan from Hayes Solicitors, who were head of banking and finance and an associate respectively). We’ve always done private banking through the corporate partners but we’ve wanted to set up a stand-alone banking practice for a while now. That has been strong as we continue to build out the full-service offering. There’s no practice area where we’re not seeing growth.’

He notes that the main thread of the strategy is growth. ‘We have expanded geographically as well, opening a new office in Shannon, and we are hiring there from a financial services perspective. There are further plans in that regard,’ he says, hinting at ambitions for another office opening, which he hopes will be ready to announce by financial year end.

In a similar vein, recent entrant to the Ireland market, Addleshaw Goddard, is also looking to capitalise on opportunities in the sector, in September opening a new financial services regulatory practice in Dublin with the hire of partner Jeanne-Marie Moriarty from Beauchamps.

‘ESG considerations are now at the forefront of corporate strategy. Increased global regulation and changing expectations are leading companies to place increased focus on their ESG priorities and sustainable business practices.’
Alan Connell, Eversheds Sutherland

Elsewhere, Alan Connell, Ireland managing partner of Eversheds Sutherland, points to standout hires including the March appointment of Trevor Dolan as partner and head of asset management and regulation in the financial services practice of Eversheds from LK Shields.

Aviation-related matters, whether in the finance or litigation sector, have also continued to generate work, with Duggan citing an instruction on insurance claims arising out of the aircraft that were stranded because of the Ukraine war, the largest litigation in the history of the state, as a notable mandate.

Jonathan Sheehan, managing partner of Walkers Ireland, is similarly bullish: ‘We are continuing to invest in asset finance with the aviation sector enjoying strong growth. It is a very important practice area for us across legal and professional services and we are well placed in particular to capitalise on the increased involvement of private equity players in the aircraft finance sector as they seek to bridge the funding gap caused by interest rate volatility.’

One such investment has seen Walkers hire Donna Ager as a partner in its global asset finance group from Maples.

Sheehan’s highlights include the firm acting for the lenders to SMBC Aviation Capital on a $1.7bn syndicated financing and advising as lead counsel to aviation lessor LCI on a joint venture to build a $300m aviation and helicopter portfolio.

Easy as ESG

It stands true that some market trends are ubiquitous, and the continuing focus by Ireland’s managing partners on environmental, social and governance (ESG) imperatives is no exception.

Flynn O’Driscoll’s Duggan voices a common refrain among Ireland’s leaders: ‘ESG has been hugely important and it has exceeded my expectations of how quickly it has become ingrained as a feature of almost every transaction that we’re involved in. It has really captured the imagination from a client perspective and a financier perspective.’

‘We are seeing wide interest in ESG and green finance and have advised on several large sustainable financing projects and innovative ESG-related legal and
regulatory matters. ’
Jonathan Sheehan, Walkers Ireland

Moore notes that, in addition to a dynamic corporate practice illustrated by Arthur Cox topping the Mergermarket legal adviser league table for value in 2022, many of its standout mandates have a strong ESG element. ‘This includes our work advising Ørsted, a global leader in offshore wind, on its agreement with ESB, the state-owned electricity company, to jointly develop an Irish offshore wind portfolio – one of the most ambitious partnerships in this area in Ireland to date.’ Indeed, the trend is creating a rich seam of work for the firm, as Moore says: ‘ESG is a key area of activity and investment. We are advising clients on areas such as energy transition, climate action, sustainable finance and green bonds.’

Stapleton is similarly upbeat about the opportunities. ‘Sustainable finance has been a core part of our strategic plan for the past few years and will continue to be for the next decade and beyond. We’ve worked with some specialist managers in the sustainable and renewables space who have done incredible things well before the niche term “ESG” became so mainstream. So we’ve built up dedicated in-house expertise over a long period and have also been providing significant amounts of pro bono work and CSR funding to help accelerate the mission of some of the non-profits in the sustainability and renewables space.’

He continues: ‘Earlier this year, we were delighted to launch a detailed assessment of the current state of ESG integration in Ireland. Our SFDR Impact Analysis has been assisting asset managers who are considering establishing or marketing sustainability-focused funds in Europe. Positively, the assessment showed a 40% growth in sustainability-focused funds in Ireland and we anticipate that this figure will grow exponentially in the coming years with investors demanding a move towards more ethical and responsible investment.’

For his part, Connell notes that the firm has an entire division dedicated to ESG to advise on sustainability regulations, rules and guidance being introduced around the world. ‘ESG considerations are now at the forefront of corporate strategy. Increased global regulation and the changing expectations of investors, employees, clients, consumers, communities and other stakeholders are leading companies to place increased focus on their ESG priorities and sustainable business practices. Assessing ESG challenges and risks and taking appropriate and informed steps can help businesses find new opportunities, build long-term financial value and establish operational resilience.’

He echoes the view of many that the energy crisis has prompted an increase in demand for alternative and renewable energy sources and consequently an uptick in related mandates. ‘One of our recent standout transactions that had great strategic importance to Ireland and the EU – in fact it is probably the most important infrastructure project of the decade – involved the Celtic Interconnector. We advised on this €1.5bn interconnector project for a 700MW sub-sea cable, or “electricity highway”, to allow electricity to be exported between Ireland and France. This cutting-edge energy transition project was supported by our European energy team based in Ireland, working alongside our colleagues in the UK and France and is also a great example of the global reach of our work and the strength and depth of our cross-border capabilities and expertise.’

‘One major highlight over the past 12 months has been the enhancement of our climate and renewable energy practice, where we have made some exciting hires.’
Jonathan Kelly, Philip Lee

It is also an area of strategic importance for Widger, who notes that A&L Goodbody this year introduced a new role of ESG lead with the hire of Jill Shaw from Walkers to help co-ordinate and deliver ESG-related advisory work.

Sheehan also predicts continued growth in ESG-related work. ‘We are seeing wide interest in ESG and green finance and have advised on several large sustainable financing projects and innovative ESG-related legal and regulatory matters. EU taxonomy legislation should assist with the harmonisation of the green loan and green bond market across Europe, while green finance and sustainability-linked loans will continue to increase in volume as banks look to deliver on their sustainability commitments. The Sustainable Finance Disclosure Regulation should also provide for consistent disclosure requirements in relation to sustainability. ESG litigation is also likely to increase, whether as a result of regulatory scrutiny or investor action.’

Jonathan Kelly, managing partner of Philip Lee, has also been investing. ‘One major highlight over the past 12 months has been the enhancement of our climate and renewable energy practice, where we have made some exciting hires. Lev Gantly is one of the world’s leading carbon finance lawyers, and after joining us from an international firm [Simmons & Simmons] he has very quickly built a substantial practice in carbon market project finance and development.’

Mark Walsh, Addleshaws head of Ireland, agrees: ‘The energy and utilities sector is one in which we anticipate real growth, particularly in the area of renewable investment. That’s why we recruited partner Gavin Blake [from ByrneWallace] to lead a new team in Dublin.’

Raging about (or against) the machine?

Of course, one major development that has exploded onto the scene, arguably as never before – and onto the agenda of law firm leaders the world over – is generative artificial intelligence (AI) technology made popular by ChatGPT.

Our recent Ireland GC Forum in Dublin, in partnership with Addleshaw Goddard, on the risks and opportunities presented by generative AI drew much interest among in-house counsel and showed that the industry is being forced to grapple with such technology, and fast.

‘Our first full year as Addleshaw Goddard in Ireland has been exceptional and we are tracking ahead of the plan we announced when the merger with Eugene F Collins took place.’ Mark Walsh, Addleshaw Goddard

However, most recognise that is not a panacea or a risk-free way for businesses to boost efficiency, and perhaps the historically luddite legal community has cause to be sceptical about its applications.

Walsh remarks: ‘Ever since ChatGPT burst into the public lexicon almost a year ago, tech has increasingly formed part of any conversation we have with clients. If anything that is accelerating and I think that’s more than a trend – it’s here to stay.

‘The firm recently launched its own Gen AI tool called AGPT which has a document review feature to analyse and process documents at lightning speed, plus a Chat Q&A which ensures smooth and seamless information retrieval and conversations.’

However, as Duggan argues: ‘We have locked down ChatGPT, we don’t want it in the business for now, until we get our head around it and have a policy around it. There are plenty of examples of firms that have used it and it has gone wrong. The limitations are well-publicised. Equally we recognise there are opportunities. We won’t be a first-mover but we are looking at harnessing AI.’

Meanwhile, Connell is alive to both sides of the argument: ‘AI has the ability to transform business. Deployed appropriately, it can give companies a competitive advantage by helping them better understand and engage with customers, improve efficiency and decision making, reduce costs, enhance security and accuracy, and drive innovation.

‘However, there are also risks and as machine learning, natural language processing and generative AI become more commonplace. Governing bodies, regulatory authorities and law makers around the globe are introducing new laws and enforcing existing ones to protect businesses and individuals from AI’s potential harms – this includes the EU’s AI Act. We continuously scan the horizon to help our clients stay abreast of evolving legislation and guidance in real time to ensure their use and deployment of AI systems is legally compliant.’

‘We have many senior lawyers who have experience of the financial crisis and of the issues that it threw up, and our restructuring team is the largest of any in the market.’
Michael Jackson, Matheson

Yet the common thread among Ireland’s c-suite and the in-house community at large is that AI is not going away, and we had better adapt accordingly. As Connell says: ‘We recently surveyed 700 senior executives worldwide to investigate the adoption of digital technologies and how they manage the related legal, ethical, ESG and other corporate digital responsibilities. We found that in the next three years, 47% of companies plan to use AI technology, compared with 32% in 2022. We expect that trend to continue at pace.’

Aside from AI, many are cognisant of the opportunities that the country’s dynamic tech sector has to offer. Asserts William Fry’s O’Sullivan: ‘Ireland has managed to be an outlier, economically, to a lot of the other jurisdictions, partly due to a life sciences and pharma bounce, which has passed since the pandemic. But tech could be interesting. We are heavily engaged with and love that space. A lot of interesting global tech companies are based in Ireland, so we want to get our fair share of that activity.’

Eversheds’ Connell agrees: ‘There is no pullback in terms of the scale of ambition by the multinationals investing in Ireland. We see this across our client base with large tech, energy and pharma companies in particular very much still growing their footprint in Ireland.’

Widger points to a standout instruction for A&L Goodbody, advising CluneTech on the €575m sale of its Immedis business, while several others report an uptick in demand for employment advice, given the rise in redundancies in the tech sector.

Carmody notes that Mason Hayes & Curran has been busy advising Meta subsidiaries Instagram and WhatsApp on regulatory engagements in the European Union and on various GDPR compliance issues.

Healthy competition

Where the repercussions of Brexit were originally the forces behind creating an attractive proposition for non-domestic entrants into the Ireland legal industry, national managing partners now find themselves with the perpetual headache of international firms continuing to spot opportunities and open up shop in the lucrative market.

As Keogh notes: ‘There has been a relentless arrival of more foreign firms to our shores.’ Indeed, Bird & Bird, K&L Gates and Squire Patton Boggs have all recently opening up in Dublin. ‘There are rumours of three or four more firms yet to announce. That has quite a way to play out before we start to see the market stabilise.’

This residing appeal has in part been stoked by a number of success stories for international interlopers. Although it is still early days, Addleshaw Goddard’s foray into Dublin with the March 2022 acquisition of Eugene F Collins could prompt others to follow suit.

As O’Sullivan asserts: ‘If that’s seen to have worked, that might interest some other international players vis-à-vis some established players here that would give them much bigger scale than if they were to come in, be niche, and grow organically from that.’

He is candid about the impact of non-domestic pretenders. ‘Costs are up, due to wage inflation and wage expectation – and managing those expectations is an issue. We do have challenges in terms of talent retention, what London can offer to people in Ireland. The international firms here, particularly the ones that don’t run training contracts, are prepared to pay people to get them to move out of a firm like ours to theirs. That drives wage inflation and expectation around wages.’

On whether he would countenance an Addleshaw Goddard/Eugene F Collins-type deal, he comments: ‘Doing nothing isn’t an option for us. The market is moving, but exactly how we grow, or if that necessitates some kind of a get together, we’ll keep an open mind on that.’

Walsh is bullish on the tie-up, commenting: ‘Our first full year as Addleshaw Goddard in Ireland has been exceptional and we are tracking ahead of the plan we announced when the merger with Eugene F Collins took place. Internationally, the firm bucked the trend by reporting 18% revenue growth and Ireland has played its part in that, delivering against our ambitious three-to-five-year growth strategy in Ireland.’

To prove the point, Walsh points to a list of standout matters, including advising Phoenix Equity Partners on its acquisition of a stake in IT service provider Nostra and acting for Q-Park Ireland, a provider of car parking services, on its acquisition of the Tazbell Group, including Park Rite and Dublin Street Parking Services.

Flynn O’Driscoll’s Duggan takes a balanced view. ‘The international firms have been responsible for some of the upward inflation as they seek to attract people in. And from a client perspective, we see them competing for the deals we are competing for. That continues to be something we are monitoring very closely. Every month I hear that a firm is considering opening up here or actually opening up here. To the extent that they’re winning business from us, I don’t see that per se, but it’s certainly responsible for changing the market and the landscape of law in Dublin, I’d say.’

Meanwhile, Keogh is watching the progress of international disruptors with interest. ‘Those first firms to arrive two, three or four years ago will presumably be doing strategic reviews on how it’s going. Some will double down on the investment, some will keep going as they are, but we do expect some to cut their losses and say it hasn’t worked. Brexit didn’t turn out to be such a disaster for legal services, or whatever reason they came in the first place.’

O’Sullivan adds: ‘It remains to be seen whether this is a big enough market for big international firms, when they’re used to New York or London charge-out rates. In our experience, Dublin isn’t a market that sustains that.’

For Connell, the rationale for Eversheds staying in Ireland is clear. ‘A lot of Ireland’s continued success is driven by us being a bridge or gateway to many jurisdictions. When we engage about overseas investment in Ireland, particularly with our US colleagues and clients, we talk about Ireland being effectively like the “quarterback” for Europe and beyond. We know internationally focused clients are not only investing in Ireland just to access the Irish market. They see Ireland as the jurisdiction of choice to operate in Europe, as a launch pad into the single market and beyond.’

Trouble ahead

However, it is clear that, in spite of Ireland’s relative fiscal bullishness, the worst repercussions of the coronavirus pandemic and also the cost-of-living crisis wrought in part by the ongoing conflict in Ukraine, have yet to play out.

And while hybrid working may have been a lifesaver during various protracted lockdowns – it has now become something of a double-edged sword. Many of Ireland’s law firm leaders report the decline of footfall in the capital caused by the continuing trend of working from home, prompting the demise of small businesses and a knock-on effect on the local economy. Indeed, if there is more than a hint of foreboding in the air, it seems inevitable that this will have an impact on the business of law in Ireland and on the types of work firms are preparing to handle.

As William Fry’s Keogh explains: ‘Pressure on the commercial property market is pretty severe in Ireland, and then throw in rising interest rates. People are sitting on their hands, waiting to see what sort of revaluations are set by the big funds that might move first because they might have redemptions coming up and might have to sell something, which would set a new valuation threshold. That’s the most impacted sector of the Irish legal market still.’

O’Sullivan agrees: ‘The funding associated with that is quiet too. As we’ve learned from previous downturns or soft markets, people are very reluctant to call it. Whether that’s a ticking bomb, no one really knows.’

Similarly, Stapleton notes: ‘There is undoubtedly an increase in market uncertainty and volatility. Consequently, we have received a growing number of enquiries related to restructuring and insolvency-related matters.’

Connell adds: ‘We have conducted over 60 examinerships and our observation, in advising directors of insolvent companies, is that they will tend not to elect to put their company into some form of restructuring process until they absolutely have to. Corporate insolvencies and restructurings have, however, begun to pick up in recent months following a period of exceptionally low business failures resulting from the extensive state supports provided to companies during the pandemic. Corporate insolvencies had been at very low levels, but that this situation is beginning to reverse.’

Adds Jackson: ‘We have many senior lawyers who have experience of the financial crisis and of the issues that it threw up, and our restructuring team is the largest of any in the market. Our balance sheet is healthy and we believe that we are well prepared both for further growth and for a downturn.’

Many managing partners lament a sense of disjointedness created by hybrid working, with some resorting to bribery to encourage lawyers back into the office. As O’Sullivan quips: ‘The biggest attraction for getting the juniors into the office is food. The more we upped our food offering, the more they came. The real icing on the cake, pardon the pun, is on a Friday – we do a full Irish breakfast. The numbers go through the roof!’ he says, while also noting that Keogh wheeling out the drinks trolley on a Thursday and Friday in the corporate department has also boosted attendance.

For his part, Keogh raises an interesting point about the potential hidden consequences of remote working. ‘I was talking to a partner at another firm at the weekend and he made an interesting comment – I wonder if any of the insurance companies will start to reprice on the basis that presumably some of the juniors aren’t getting the same degree of supervision that they would have gotten, had they been in the office. Will insurance really accept that supervising on Zoom is the correct level of supervision? I don’t know. It may be the case that the insurers chip into this debate and that may drive our behaviour as well.’

For now, Ireland’s legal community is sanguine without being arrogant. There are clear challenges on the horizon and, as experience of previous downturns has shown, hubris never pays. LB

nathalie.tidman@legalease.co.uk

The post Ireland focus: No line on the horizon appeared first on Legal Business.

Can you tell us a little bit about your career and how you ended up at Walkers?

When I graduated from University College Dublin in 2001 with a business and law degree I wasn’t entirely sure what I wanted to do. A friend in university had started working in a finance role within a fund administrator and he told me that if I joined and stayed for three months that he would get a €500 referral bonus. I joined. He got the referral bonus (which he didn’t share with me incidentally) and subsequently left to become a primary school teacher. Ironically, I have remained in the funds industry ever since. My legal career began a couple of years later with one of the leading domestic firms in Dublin, where I was earmarked for their investment funds group when I finished my traineeship. In 2011, I moved to London and joined the global asset management firm, PIMCO. I stayed in London with PIMCO for almost seven years before returning to Ireland in 2018 when I joined Walkers. During my time in London I completed an MBA at London Business School and briefly considered the idea of moving out of a legal role but ultimately stuck with a career in the legal profession. I feel that I have made the right choice and enjoy working in the funds industry in Ireland. Last year, I was elected to the Council of Irish Funds (the asset management and investment funds industry association here) and recently have been appointed to the role of vice chair of the association and consequently will assume the role of chair next year.

How has the funds industry changed over the last 20 years that you have been working in it?

From a legal and regulatory perspective there have been huge changes in the industry, particularly with the evolution and introduction of the UCITS and AIFMD Directives. The pace of regulatory change has continued unabated and more recently the growth of ESG and the introduction of new asset classes, such as digital assets, has meant that the need for specialism and expertise in particular segments of the market has developed. The growth of private market investing, for example, has seen the need for private funds lawyers increase and this has been something, alongside ESG expertise, that we have been focused on recently in our recruitment efforts.

The other major change that we have seen over the last number of years, which was intensified through Brexit, has been that many more asset managers have a physical presence here in Ireland. 20 years ago that was certainly not the case, but now many of the leading global asset management firms have people on the ground and in some cases employ in excess of 100 people here. Where we would have almost exclusively interacted with clients in the major financial centre hubs, such as London and New York, our client contacts are increasingly based in Ireland, which is great to see from an ‘Ireland Inc.’ perspective.

What challenges have you faced operating in this market sector and what has been successful?

The key challenge that most law firms have faced over the past few years has been retention and recruitment of talent. As we operate in a specialised sector there is a finite pool of asset management and investment fund lawyers and the market is extremely competitive. While compensation remains a key driver for employee satisfaction, there are many other factors which drive an employee’s decision to remain with a firm. This is an area that we have been extremely focused on and earlier this year the firm completed a global engagement survey to identify areas where we can improve and ways in which we can better engage with our staff. We have been fortunate in the asset management and investment funds group to have had strong staff retention over this period. However, this is not something that we can ever be complacent about as there are many competing options in the market, which not only include other law firms but in-house opportunities given the large number of asset managers and financial service providers here in Ireland. The lure of London is also a trend that we are seeing (and one I can sympathise with given my history) – and it has a pull for our junior lawyers in particular. We currently have two Irish investment funds lawyers based in our London office that support the group here and that continues to work well.

A key focus for us over the last few years has been to build out the team to ensure that we are adequately resourced and have strength in depth so that we are less vulnerable to departures or increased spikes in workload. Our asset management and investment funds group recently retained our tier 1 ranking with IFLR, one of the leading law directories, which is something we are very proud of but it is important not to get complacent. We are also lucky to be supported by other very strong practice groups within Walkers and our international colleagues across our ten global offices.

What trends do you see emerging over the coming 12 months?

We see great opportunities for the further development of ESG specialism with there being a continued focus on the development of innovative investment fund products in this area. Separately, the European Long Term Investment Fund (ELTIF) regime has been significantly enhanced and from early next year, the ‘ELTIF 2.0’ product will be available which provides retail investors with access to private market assets which will enable potentially higher-yielding longer-term return profiles. We are already seeing a significant amount of interest in the enhanced ELTIF product and industry have been working closely with the Central Bank of Ireland to ensure that Ireland will be ‘open for business’ when ELTIF 2.0 goes live in 2024.

The post Sponsored Q&A: Nicholas Blake-Knox – partner and head of Walkers’ asset management and investment funds group in Ireland appeared first on Legal Business.

Lisa Broderick of DAC Beachcroft examines the key problems and priorities for Irish clients, as well as the firm’s recent international growth and adaptations post-Covid

DACB Dublin is part of DAC Beachcroft LLP, an international law firm with over 2,800 professionals and a legal network advising across the United Kingdom, Europe, Asia-Pacific, Latin America and North America.

The Dublin team prides itself on providing clients with the full benefits of the advice and representation of a local, Irish law firm of experienced Irish lawyers who have full access to the wider infrastructure and support of a major international law firm.

For this feature, Lisa Broderick, partner and location head of DAC Beachcroft’s Dublin office, talks to us about the competition within the Irish legal market, the challenge of recruitment, the firm’s plans for growth, and why all lawyers now have an ESG focus.

What do you see as the biggest challenge for Irish market, and what is the impact of this for your clients and your firm?

Cyber is classified as the top risk to the majority of businesses, and we are seeing the impact of this through the support we provide for our clients.

There has been a number of high-profile data breaches and cyber attacks across various sectors, which have made this area, quite rightly, a boardroom issue. Businesses are recognising the severe consequences should the worst happen, particularly from a reputational and financial standpoint.

This means we have seen significant growth in our data, privacy and cyber practice area in Dublin. Our 24/7 cyber response hotline, which provides clients with access to our specialist cyber and data risk lawyers, IT security experts and experienced PR consultants, has had an uplift in calls.

As businesses become more cyber-savvy, there are also increased instructions to assist businesses in preparing for such an event through on-site bespoke training and planning sessions.

While the risk of a cyber-attack and a data breach is increasingly front of mind for our clients, we expect that this area of our business will continue to grow.

What do you think is the main challenge of Dublin’s increasingly competitive legal market, and how is your firm responding to it?

The main impact is on the employment market and the competition for talent, which is fierce.

We work hard to offer our people a different proposition, where they can take on quality work for excellent clients, while working in a culture in which our people can find more enjoyment both when they are at work and in life outside work.

It’s also important to us as a firm that we demonstrate our commitment to making sure that everyone at DACB feels that their voices are heard and they have the same opportunities to help make a difference.

As a result, we are very fortunate to have very committed and engaged colleagues who enjoy working with our firm. However, the highly competitive recruitment market remains a key challenge for all law firms.

What have been your firm’s strategic priorities over the past 12 months?

International expansion, which is based on client need, is a key pillar of DACB’s strategy.

As our clients’ needs continue to change, we are seizing opportunities to adapt and respond to their requirements, and futureproofing our business in the process.

In recent months we have launched a new office in Argentina and two new offices in Italy, in Milan and Rome, where we have also welcomed a top-ranked Italian team of three partners and five associates.

We now boast a presence in 23 jurisdictions around the world, showing our credentials as a truly international firm with ambitious plans on a global platform.

What is the business’s strategic focus for the next year?

ESG – environmental, social, governance – is a strategic priority for our firm, and we aren’t alone. In one of our recent client listening programmes, our clients told us about the growing importance of ESG within their own businesses. There is already a lot of work we have been doing in this area. In 2022 we launched our ESG strategy, which outlines our firm’s ESG commitments and what our key sectors are doing to support clients on their own ESG journeys.

We have also appointed a head of ESG for the global firm, and launched an internal ESG training series to enhance the capability of our firm’s lawyers in supporting clients. ESG considerations impact almost every decision and activity across the sectors in which we operate and the changing landscape is one of increasing regulation and litigation, which is why we are so committed to investing in our lawyers, so they can continue to navigate clients’ ESG concerns, commitments and ambitions through the delivery of our legal services.

How has business or working life at DACB changed post-Covid?

In terms of work, we have seen increased activity and interest in our offering following the impacts of lockdown. Areas of our business that are engaged in litigation have been extremely busy with the significant increase in the number of matters being dealt with before the courts, clearing the backlog from when many were closed.

The way we work has also changed. We launched DACB’s Flex Forward policy in Dublin and in the UK in 2021. The origins of this policy weren’t a direct result of Covid, but rather it provided an opportunity to build upon our firm’s already existing agile working approach.

This policy offers different types of dynamic, location-based working – office-focused and hybrid – and introduced the concept of Gliding Your Time, which provides a more relaxed approach to working hours. This gives us maximum flexibility in how we orchestrate our working day, guided by three principles: meeting client demands, collaborating as a team and delivering the outputs of our roles.

The post Sponsored briefing: Challenges and strategies in a competitive market appeared first on Legal Business.

What are some of the challenges and opportunities you foresee for the investment funds industry in Ireland, and how is Dechert positioned to navigate them?

Ireland’s success as domicile for investment funds has been further enhanced following the Brexit referendum with many managers choosing Ireland as their EU hub. We see opportunity for continued growth in this sector, both on the product and the manager side. Ireland recently upgraded our Investment Limited Partnership (ILP) structure, and we anticipate the ILP becoming more popular over time. As a firm with a strong private funds practice, we are focused on structures such as loan origination funds and the European Long Term Investment Fund (ELTIF). On the former, Ireland has been at a disadvantage because of the Central Bank’s specific rules for loan origination funds. However, with the implementation of AIFMD 2, which will impose pan European rules across all loan origination funds, Ireland will once again be on a level footing with our competitor jurisdictions such as Luxembourg. In terms of ELTIF, although being around since 2015, it has not been possible to date to launch an ELTIF in Ireland. The Central Bank has committed to facilitating the authorisation of ELTIF by adding a new chapter to the AIF Rule Book as soon as the Level 2 requirements are finalised. These regulatory developments should provide opportunity for industry to attract more private fund managers to establish product here in Ireland. In terms of challenges, we need to continue to be competitive as a domicile. We welcome the recent Department of Finance review of the funds sector (Funds Sector 2030: A Framework for Open, Resilient & Developing Markets) that recognises the importance of the sector to the national economy, and we have provided our own response to the consultation, having surveyed our clients, outlining the need for an unregulated investment fund structure that would be similar to what we see in other jurisdictions. As an industry, we need to continue to evolve in line with developments in technology and innovation while remaining a competitive and attractive destination for investment funds and managers.

How does Dechert stay ahead of regulatory changes and developments in the investment funds industry to better serve its clients?

Being able to anticipate what is coming down the track from a regulatory perspective is extremely important to our clients. They need certainty and the ability to plan for regulatory change. We leverage our very large global footprint to scan and monitor regulatory developments. We use our in-house knowledge management team to develop tools that can track trends across our clients so we can stay up to date and anticipate the needs of our clients. Information sharing is a top priority for our lawyers, and we have regulator practice group meetings to share relevant developments. We have formal training programmes that we run both internally and externally for lawyers. We participate in industry groups such as Irish Funds and AIMA, sitting on Working Groups and contributing to industry publications including responding to regulatory consultations.

What sets Dechert apart in terms of its approach to client service and legal expertise in investment funds law?

Dechert in Dublin is part of a global financial services practice group with more than 200 lawyers across 17 offices. We have a physical presence in the five key European fund centres of London, Luxembourg, Dublin, Paris, Frankfurt/Munich as well as throughout the US, Middle East and Asia. This allows us to not only provide truly ‘jurisdiction neutral’ advice focused on the client, it also enables us to provide advice to our clients with a more global perspective. We always say that while the funds may be domiciled in Ireland, they are sold globally. It is important to our clients when structuring their investment funds that we can also anticipate the requirements of the local markets into which the funds are being marketed or where the investors are located. A good example of this is ESG – irrespective of the fact that much of the legislation is at an EU level, many EU member states have established their own rules and doctrines. This becomes more complex for managers who market the same strategy in Europe and the US, as the approach to ESG in the US is diametrically different to the approach here. We work together as a cohesive practice group with client teams made up of lawyers from offices across our network. There is no other firm in Dublin that can provide all of these elements under one roof.

How has the introduction of the European Union’s Sustainable Finance Disclosure Regulation (SFDR) affected investment funds operating in Ireland, and how is Dechert assisting clients in compliance with SFDR?

The introduction of SFDR impacts all funds operating in Ireland to greater or lesser degrees – non-green funds or Article 6 funds have less disclosure and reporting requirements but still need to comply. Article 8 and 9 funds have more onerous requirements. The challenge has been the uncertainty surrounding some aspects of the legislation and the subsequent publications of various Q&As and clarifications emanating from the EU and indeed national regulators. All of our Irish lawyers are actively engaged in advising clients on SFDR, taxonomy and other related regulations. We also have the benefit of a specialist global ESG task force, which sits within our financial services practice that provides cross-jurisdictional advice, training sessions, thought leadership, webinars and tracks ESG trends and developments in jurisdictions around the world.

The post Sponsored Q&A: In conversation with Dechert Dublin’s managing partner – the case for a global law firm appeared first on Legal Business.

Introduction

The Central Bank (Individual Accountability Framework) Act 2023 (the Act) was signed into law on 9 March 2023 and provides for the introduction of Ireland’s IAF, which represents a significant development in Ireland’s regulatory landscape. The Act’s origins can be traced back to the Central Bank’s 2017 recommendation for enhancing senior individuals’ accountability within regulated financial service providers (RFSPs). It aligns with international efforts to mitigate misconduct risks and addresses cultural failings identified in RFSPs during the 2008 financial crisis.

This comprehensive piece of legislation introduces a framework designed to enhance risk management within RFSPs while prioritising consumer protection. The IAF has four main pillars:

1. Senior Executive Accountability Regime (SEAR):

One of the IAF’s primary pillars is the establishment of the SEAR. Initially, SEAR will apply to specific sectors only, including credit institutions, insurance undertakings, certain investment firms and incoming third-country branches. However, the Central Bank intends to broaden its scope in the future. SEAR redefines the responsibilities of senior individuals within these organisations, aiming to strengthen the Central Bank’s authority to hold individuals accountable for regulatory breaches in their respective areas of responsibility.

2. Enhancements to the Fitness and Probity Regime (F&P Regime):

The IAF introduces enhancements to the existing F&P Regime. Under the new provisions, RFSPs will be required to certify that individuals performing controlled functions (CFs) (to include pre-approval-controlled functions (PCFs)) comply with the F&P standards. Furthermore, RFSPs will not be permitted to allow an individual to perform a CF role without a valid certificate of compliance with F&P standards. This certification process must occur before appointment (or in the case of a PCF, prior to submitting an individual questionnaire to the Central Bank), on an annual basis, and prior to the appointment of an individual to a CF role.

3. New Conduct Standards:

The Act introduces a set of new conduct rules that apply to CFs and PCFs, namely the Common Conduct Standards and Additional Conduct Standards. They serve as a framework for establishing general conduct guidelines that can be directly enforced by the Central Bank. The concept of ‘reasonable steps’ is central to these standards, requiring in-scope individuals to take reasonable steps to achieve compliance. RFSPs will be required to providing initial and ongoing training to CFs to ensure their understanding and adherence to these standards.

4. Enhanced Central Bank enforcement powers:

The Act introduces important changes to enhance the Central Bank’s enforcement toolkit. It removes the so-called ‘participation link’ requirement, enabling the Central Bank to pursue individuals independently for failure to prevent breaches of financial services legislation. While the overall structure of the enforcement process remains the same, certain procedural amendments have been made to incorporate additional safeguards to and to facilitate the expanded population of individuals coming within the scope of the Central Bank’s enforcement remit.

Timeline and application

The IAF will come into force on a phased basis. SEAR will apply to certain sectors only in its initial phase. Enhancements to the F&P Regime and the introduction of the Conduct Standards are expected to take effect by January 2024 (subject to confirmation by the Central Bank).

Conclusion

The IAF represents a significant regulatory milestone in the Irish financial services regime. It redefines the roles and responsibilities of senior individuals within RFSPs, aiming to enhance risk management, consumer protection and overall accountability. RFSPs must prepare for these changes, ensuring compliance with the new framework. The IAF’s phased implementation allows for a smooth transition while promoting a culture of responsibility and accountability within Ireland’s financial services sector.

The post Sponsored briefing: What you need to know: Ireland’s Individual Accountability Framework (IAF) appeared first on Legal Business.

While Ireland’s competitive legal market has enjoyed a buoyant period post-Covid, fresh challenges have emerged to challenge this optimism. Ireland has not been insulated from the overheated recruitment market and is as alive as global peers to reversals wrought by the cost-of-living crisis, the war in Ukraine and a slowing of deals as concerns over interest rates and inflation continue to gather pace.

However, Declan Black, Mason Hayes & Curran’s managing partner, predicts high single-digit revenue growth for the 2022 calendar year, even as it comes on the back of a 2021 banner year for much of the Irish market at large. ‘Corporate transactions are down from the 2021 peak and that has spread through the western world,’ he says. ‘Valuations have tumbled amid concerns over interest rates and inflation. Deals have slowed down.’ That said, he points to real estate, financial services, contentious, regulatory and data regulatory as areas of sustained growth.

Geoff Moore, managing partner of Arthur Cox, is sanguine. He flags good levels of activity in corporate, with the finance group being kept busy with new mandates in real estate finance, private equity, corporate banking and infrastructure finance. The litigation group has also had a good run, with regulatory investigations and dispute resolution work being a large driver of activity.

‘Corporate transactions are down from the 2021 peak and that has spread through the western world.’
Declan Blank, Hayes & Curran

He insists there is no shortage of opportunity. ‘ESG has been a key area for us as businesses, particularly listed companies, continue to focus on this. We are working with our clients to help them identify and integrate ESG priorities at all levels of their businesses and our cross-disciplinary team has been busy with increased client demand in the areas of green financings, bonds, fund disclosures as well as energy conscious M&A and financial regulation.’

He reels off a list of substantive mandates for Arthur Cox that includes advising Greenlink on its 500MW, 190km interconnector project and acting for ESB and Bord na Móna on the development and financing of the 83MW second phase of the Oweninny windfarm, Ireland’s largest wind development project. Other standout matters include advising Brookfield Asset Management on its acquisition of the entire issued share capital of Hibernia REIT for €1.089bn and Starwood Capital Group on its debt finance provision for Echelon Data Centres, an Irish-owned company.

Stephen Keogh, William Fry’s head of corporate, points to advising Echelon on the €950m Starwood Capital financing; online food ordering service and Irish unicorn Flipdish on its series B and series C fundraising rounds; as well as deals for Melior, the spin-off private equity fund managed by the former Carlyle team in Ireland. Keogh says the first half of 2022 tracked that of 2021’s stellar run but he has also noticed a slowdown. ‘We would like to see more term sheets,’ he admits. ‘We are not yet seeing the same volume of new instructions to see us through to next year, but we can’t expect to be flat out forever.’

Owen O’Sullivan, William Fry’s managing partner, is similarly philosophical. ‘We can’t ignore the headwinds but we’re not panicking. The firm works to the calendar year and we have built in provisions around things slowing down and factored in inflation pressures.’

For his part, Matheson managing partner Michael Jackson’s highlights include advising Generation Investment Management (the investment management firm of Al Gore) on establishing the fourth vintage of its flagship private equity fund range; advising Bank of Ireland on its acquisition of the Irish assets of the Belgian bank, KBC, which is leaving the Irish market; and advising Octopus Renewables on the acquisition, development and project financing of a 250MW solar plant, which will be the largest in Ireland.

‘We can’t ignore the headwinds but we’re not panicking. We have built in provisions around things slowing down and factored in inflation pressures.’
William Fry, Owen O’Sullivan

With competition being so fierce, it doesn’t do for firms to hide their light under a bushel. As Black says: ‘Economic headwinds are obviously horrible but the business of law is very resilient. Brexit has been the gift that keeps on giving. There is an extraordinary centre of gravity in the Irish market which means that, because of its smaller size, it doesn’t take all that much to create a positive impact.

‘We now have 2.5 million people in employment, many in high-value jobs in tech, financial services and pharma, and that is driving a lot of activity. There are many problems in Ireland, but they are problems of growth rather than problems of contraction. There is a good set of indigenous companies. From a legal services point of view, that means just a lot of activity.’

Speaking with Legal Business at the end of 2022, Jackson noted the full effects of the slowdown were still to play out. ‘Earlier [in 2022] when things looked like being a little less busy than in 2021, I wondered whether we were just seeing a return to the pre-Covid “normal” where some practice areas were a little seasonal.’ He also predicted any downturn would not be felt until this year.

The message from Dublin’s law firm leaders is for the most part ‘prepare for the worst and hope for the best’. Black concludes: ‘I’m not expecting anything radical or a step change over the next few months but the macroeconomic environment makes me nervous. An energy shock and the cost-of-living crisis will feed into harder times for business. Ireland is resilient and performing very well. It will be squeezed but hopefully it will fit through the gap without too much damage. Ireland will suffer in a global downturn but it will bounce back quickly. That is a factor of our size.’ LB

Return to the Euro Elite contents

The post Euro Elite 2023: Ireland – Slight return appeared first on Legal Business.

To a London hack hitting the streets and the meeting rooms of Dublin for the first time since coronavirus struck, Ireland’s capital is abuzz, perhaps more so than usual. Somewhat inexplicably, there are excited hordes of Americans wherever you turn, many of whom look as if they’ve just stepped off the set of a spaghetti western.

All becomes clear in the first coffee meeting of the day. ‘Garth Brooks is playing five shows at Croke Park,’ laments one managing partner, with an eye-roll. ‘It’s bloody desperate.’ Clearly not a fan.

Notwithstanding divisive views on Stetson-donning country music singers (some of the people LB spoke with had actually been to a concert, one super fan more than once, naming no names), the mood in the city is firmly festive. Indeed, among the legal community there is a palpable sense of enthusiasm for in-person meetings again after some of Europe’s most protracted – and strict – coronavirus rules ended as recently as January.

‘2021 was an extraordinary year for me as managing partner – every practice went up. I should have quit while I was ahead!’
Declan Black, Mason Hayes & Curran

However, fresh challenges threaten to usurp this air of optimism. Ireland has not been insulated from the overheated recruitment market and is as alive as global peers to reversals wrought by the cost of living crisis, the war in Ukraine and a slowing of deals as concerns over interest rates and inflation continue to gather pace. LB decided to get the view from the ground and asked Ireland’s law firm leaders how their businesses are likely to fare over the next few months. Can Dublin’s regained mojo endure?

View on the ground

Declan Black, Mason Hayes & Curran’s managing partner, is in buoyant mood, predicting high single-digit revenue growth for the 2022 calendar year, even as it comes on the back of a 2021 banner year for much of the market at large. ‘2021 was an extraordinary year for me as managing partner – every practice went up. I should have quit while I was ahead!’ Black may have his tongue planted in his cheek, but the sentiment of last year being a tough act to follow rings true around the market. ‘Corporate transactions are down from the 2021 peak and that has spread through the western world,’ he adds. ‘Valuations have tumbled amid concerns over interest rates and inflation. Deals have slowed down.’

That said, he points to real estate, financial services, contentious, regulatory and data regulatory as areas of sustained growth.

Peter Stapleton succeeded Nicholas Butcher in December as Maples Group managing partner in Dublin. ‘May you live in interesting times!’ he quips, of the anything-but-dull set of circumstances that have defined his time at the helm so far, pointing to a list of corporate mandates that includes acting for UK wealth management group Fairstone on its inaugural deal in the Irish market – its acquisition of financial planning firm Pax Financial. The firm also advised the first Irish-regulated funds to be granted permission by the Central Bank of Ireland to take exposure to crypto assets, among many other mandates.

‘ESG has been a key area for us this year. We are working with our clients to help them identify and integrate ESG priorities at all levels of their businesses.’
Geoff Moore, Arthur Cox

Meanwhile, Walkers Ireland managing partner Jonathan Sheehan takes a balanced view: ‘Given current market volatility arising out of the current geopolitical and economic headwinds, inevitably the secondary market continues to be quite dislocated as evidenced by a recent spike in sell-offs towards the end of September.’ Conversely, there have been upsides. ‘We have seen a significant increase in volume and complexity of low-risk fund finance products driven by the continued success of Ireland as a leading European fund formation jurisdiction. ESG and sustainable finance continues to be a dominant theme across the asset management, structured finance and commercial lending sectors.’

Sheehan also notes a trend for increased participation of private equity funds in the commercial aviation lending market post-pandemic. ‘These funds have carved out a strong niche in the aviation lending market providing much needed liquidity for lessors and airlines. They can be nimble and often more flexible in terms of financing older aircraft as they are not subject to the same regulatory requirements as traditional aviation banks,’ he explains.

Standout matters for Walkers include the Norwegian Air Irish Examinership, Orange Capital Re DAC, a catastrophe bond programme structured through an Irish Solvency II MA SPV, and advising CK Asset Holdings on the $4bn sale of AMCK Aviation to Carlyle Aviation Partners.

James Duggan, managing partner of Flynn O’Driscoll, observes: ‘Aviation and asset finance has been really strong, notwithstanding fleets being grounded for the best part of two years. The employment group has been busy with queries around redundancies.’

‘The energy sector is particularly vibrant in light of the emerging issues around energy consumption and an energy crisis.’
Alan Connell, Eversheds Sutherland

Geoff Moore, managing partner of Arthur Cox, is sanguine. He flags good levels of activity in corporate, with the finance group being kept busy with new mandates in real estate finance, private equity, corporate banking and infrastructure finance. The litigation group also had a good run, with regulatory investigations and dispute resolution work being a large driver of activity.

Moore insists there is no shortage of opportunity. ‘ESG has been a key area for us this year, as businesses, particularly listed companies, continue to focus on this. We are working with our clients to help them identify and integrate ESG priorities at all levels of their businesses and our cross-disciplinary team has been busy with increased client demand in the areas of green financings, bonds, fund disclosures as well as energy conscious M&A and financial regulation.’

He reels off a list of substantive mandates for Arthur Cox that includes advising Greenlink on its 500MW, 190km interconnector project and acting for ESB and Bord na Móna on the development and financing of the 83MW second phase of the Oweninny windfarm, Ireland’s largest wind development project. Other standout matters include advising Brookfield Asset Management on its acquisition of the entire issued share capital of Hibernia REIT for €1.089bn and Starwood Capital Group on its debt finance provision for Echelon Data Centres, an Irish-owned company.

Alan Connell, managing partner of Eversheds Sutherland Ireland, also points to opportunities around energy and ESG. ‘The energy sector is particularly vibrant in light of the emerging issues around energy consumption and an energy crisis. We are seeing an increase in demand for alternative and renewable energy sources and we have worked with several providers on energy financing projects, particularly renewables. This has also led to increased levels of work for our clients across ESG.’

‘Retention is our biggest challenge. There is definitely a Covid-generation lawyer, working deal after deal, after deal. The effect of being so busy has been no work/life balance.’
Stephen Keogh, William Fry

Connell also notes an increase in activity across TMT, including data centres projects, and across the financial services, life sciences, and real estate sectors.

Stephen Keogh, William Fry’s head of corporate, points to advising Echelon on the €950m Starwood Capital financing; online food ordering service and Irish unicorn Flipdish on its series B and series C fundraising rounds; as well as deals for Melior, the spin-off private equity fund managed by the former Carlyle team in Ireland. Keogh says the first half of this year has tracked that of 2021’s stellar run but he has noticed a slowdown. ‘We would like to see more term sheets,’ he admits. ‘We are not yet seeing the same volume of new instructions to see us through to next year, but we can’t expect to be flat out forever.’

Owen O’Sullivan, William Fry’s managing partner, is similarly philosophical. ‘We can’t ignore the headwinds but we’re not panicking. The firm works to the calendar year and we have built in provisions around things slowing down and factored in inflation pressures.’

For his part, Matheson managing partner Michael Jackson’s highlights include advising Generation Investment Management (the investment management firm of Al Gore) on establishing the fourth vintage of its flagship private equity fund range; advising Bank of Ireland on its acquisition of the Irish assets of the Belgian bank, KBC, which is leaving the Irish market; and advising Octopus Renewables on the acquisition, development and project financing of a 250MW solar plant, which will be the largest in Ireland.

The tussle for hustle

Although it’s a close-run thing, there is one conversation piece overshadowing the Garth Brooks invasion – the question of talent retention in the wake of lockdown.

High on that agenda is how to strike the balance between nurturing young lawyers while giving them the flexibility they have come to expect from working remotely for so long. Black explains the conundrum: ‘What’s missing are the intangibles – the esprit de corps you get from coming into the office. There is absolutely no craic working from home! But we don’t have any rules. We are highly-flexible on the basis of high productivity. We are dealing with fully formed adults. We don’t have a dress code either because fully formed adults know how to dress.’

Nevertheless, there are only a certain number of experienced Irish practitioners and the new entrants into the Irish market are competing for the same talent. That has inevitably driven wage inflation.

Keogh expounds: ‘Retention is our biggest challenge. There is definitely a Covid-generation lawyer, working deal after deal, after deal. After 12 months one of our lawyers said he wanted to leave as it was far too relentless. We told him to take a long break but not to walk away. He came back. That has been the effect of being so busy – no work/life balance.’

‘Our priorities are culture, people and technology, in that order. We want to create a rewarding environment with flexibility around time spent in the office.’
Peter Stapleton, Maples Group

O’Sullivan adds: ‘We are losing people to London. They tend not to lose their connection with the firm and often come back, and with skills and networks they otherwise wouldn’t have had. We lose people to tech in-house roles too but very few to local competitors,’ he says, adding that the firm has bolstered headcount through recruiting from South Africa and Australia.

Duggan has also gone down the South Africa hiring route for corporate talent, and says the problem is existential. ‘It’s expensive to live in Dublin and there is a big housing issue. We have someone from France that is having to live in an Airbnb. Families are living out of hotels. Dublin has taken in 70,000 Ukrainian refugees, many of whom are staying in hotels and army barracks.’

That clearly ties in with the ever-pressing question of remuneration. ‘If the only reason people are leaving is money, that’s fixable, but there is a perception that we don’t make counter-offers. Three years ago, NQs were getting €55k and now they’re on €72k. We never used to use recruitment consultants but in the last year we’ve spent a fortune,’ says Duggan.

Notes Connell: ‘We have invested in several senior hires across our business –ranging across our corporate, commercial, IP, technology and DP, employment, real estate, tax, litigation, banking and financial services and our projects and energy departments. We have also remained focused on our own talent retention. Ensuring our talented people have the platform to achieve their own goals and aspirations has been a key component of our ongoing success. In April we appointed five senior associates and four associates to our lawyer group across our Dublin and Belfast offices. They will be able to grow their expertise and utilise our global network as we continue to provide excellent service to all our clients.

‘Diversity is also an important cornerstone for our firm and this work is continuously ongoing in response to the changes happening in our society. Before Covid, we were the only Irish business to be recognised for our commitment to diversity and inclusion in the workplace and business, and D&I will continue to be a priority focus for us.’

For its part, Addleshaw Goddard entered the Ireland market in March 2022 through its combination with Eugene F Collins. Mark Walsh, now head of AG Ireland (formerly Eugene F Collins managing partner), notes: ‘Salary is obviously a factor, and we pay a competitive salary, but it’s one of several factors that are now key to retaining talent. AG has a strong and supportive workplace culture that offers our people the opportunities and supports to pursue ongoing professional development, and ensure they feel valued as they do so. Alongside an inclusive, and diverse work environment, which we continue to strengthen through the recent rollout of our reverse mentoring programme.’

For Moore too, investment is critical. ‘In January we promoted six new partners in the key areas of finance, tax, technology and innovation and corporate and M&A, strengthening the firm’s expertise in these areas, and demonstrating the firm’s commitment to the highest level of client service.’

While alive to the challenges, Matheson’s Jackson cites the recent hires of Niall Collins from Mason Hayes & Curran to its EU and regulatory practice, Maireadh Dale in the banking group from Dentons and Karen Sheil from William Fry into the commercial real estate group as evidence that the firm continues to be attractive to lateral hires.

He adds: ‘Our hybrid model has worked well for us and it is a great way to help our people achieve the greater work/life balance we all crave. While we continue to offer highly competitive benefits packages and opportunities for personal and professional development, as well as remaining committed to promotions and to hiring throughout the pandemic, the key strategy to help mitigate attrition remains communicating with staff, listening to their concerns and issues and empowering them to help us make sure that they are fully engaged and invested in improving the work experience.’

‘It certainly looks like we are going to be very busy right through to the end of the year and so any downturn is not likely to be felt until 2023 at the earliest.’
Michael Jackson, Matheson

Moore echoes this view: ‘I would say hiring senior lawyers is a challenge for everyone, but we are able to offer a really attractive proposition to new hires, including a hybrid working policy which has an emphasis on trust and flexibility. Our overall purpose is to offer the best law firm experience, both for our people and our clients and this has resonated well with our staff and new recruits.’

And the hiring market has been on Flynn O’Driscoll’s side of late, with the firm in September hiring Michael Hanley and Danny Heffernan from Hayes Solicitors, who were head of banking and finance and an associate respectively.

Stapleton is confident. ‘Our priorities are culture, people and technology, in that order. We want to create a rewarding environment with flexibility around time spent in the office. We have over 2,500 people globally and Ireland is a very important part of our global network. Our retention rates have been consistently high and that is due to us differentiating ourselves on a number of unique grounds. With 16 offices globally, we have opportunities to bring our Irish expertise to clients whether as part of a wider international project, or as the centrepiece of a deal, for example, acquiring an Irish company. That allows our people to have a wider perspective on what’s happening globally on the client side and also gives them the opportunity to work, move and transact globally within our network. The legal market is shifting and what we’ve seen is that there is a greater demand for career diversity and progression. The Maples Group offers a lawyer starting their career in Ireland the chance to travel to our offices in North America, the Caribbean, Europe or Asia, while remaining and progressing within the same organisation.’

On his firm’s organic growth, Sheehan notes: ‘As a firm, Walkers had its largest ever round of global promotions this year, and we were delighted to recognise the contributions of Damien Barnaville in asset management and investment funds and Shane Martin in regulatory as they became the newest members of the Irish partnership earlier this year.’

However, one managing partner highlights the clear tensions between attracting talent against the backdrop of a likely downturn, echoing a common refrain among law firm leaders, not just in Ireland. ‘People want remote working, car parking and 30 days’ holiday a year. This is a corporate law firm and the work is deadline driven. They want the right to switch off, but no-one has told the clients that. In theory, everyone is supportive of that flexibility but the truth is that the right to switch off is not compatible with a career in corporate law. If there is a recession we’re faced with a whole group of people who haven’t experienced that before. People will have to be out there hunting for work again. That will become normalised again, instead of having to turn away work.’

Healthy competition

Needless to say, the fallout of Brexit has created a changed dynamic for the Ireland market, paving the way for non-domestic pretenders to the throne.

Observes one managing partner: ‘There has been a vote of faith in the Irish legal system, with international firms opening up in Ireland. It has become a very competitive environment for new entrants coming in. Clients demand a level of service that some of the new entrants might struggle to provide.’

‘In Covid we forecast 75% down on people paying bills but in reality it was only down 25% in the first month and 20% the next month. We are expecting problems with clients paying bills in the event of a downturn.’
James Duggan, Flynn O’Driscoll

Connell believes Eversheds Sutherland has the competitive advantage. ‘After many decades without change, the legal sector in Ireland is changing, and changing significantly. The attraction of Ireland as a hub for investment, particularly post-Brexit, has seen an increased number of internationally-focused organisations looking to establish operations in and from Ireland. This globalisation has meant that the number of global decision-makers based in Ireland, whether that is in Irish or multinational organisations, with significant budgets, has increased rapidly in recent times. Such global decision-makers need to be advised by global advisers. They require multi-jurisdictional services and solutions as their businesses are global. The indigenous law firms in Ireland are focused solely on Irish legal matters and as such, do not offer this.’

And with competition being so fierce, it doesn’t do for firms to hide their light under a bushel.

To that end Duggan is working on a formalised strategy and a rebrand for Flynn O’Driscoll. He is candid about the challenges. ‘Strategically, we have never talked about the deals we do on the assumption that what our competition doesn’t know, can’t hurt us. We lived by that for 15 years. It has led to a lack of understanding from clients about what we are doing and we realised that a lack of formal strategy will hurt us now. We are stronger for coming out of Covid and we want people to know that we are a business firm for big and small businesses.’

And there is a consensus that the market is feeling a lot bigger these days. As Black says: ‘Economic headwinds are obviously horrible but the business of law is very resilient. Brexit has been the gift that keeps on giving. There is an extraordinary centre of gravity in the Irish market which means that, because of its smaller size, it doesn’t take all that much to create a positive impact.

‘We now have 2.5 million people in employment, many in high-value jobs in tech, financial services and pharma, and that is driving a lot of activity. There are many problems in Ireland but they are problems of growth rather than problems of contraction. There is a good set of indigenous companies. From a legal services point of view, that means just a lot of activity.’

Remarks Walsh: ‘Certainly, in the current economic environment there is an element of wait and see. Cost of living is at record highs and the energy situation remains precarious. The recent budget support packages show just how challenging a time it is for individuals and businesses alike. Like all businesses, AG is being impacted by these market pressures, as are all of our clients, and we are working to support clients managing these challenges. In terms of activity, the outlook remains positive across our core practice areas, and we continue to focus on growth in real estate, dispute resolution, corporate and finance.’

Boom to bust?

Irish law firm leaders are notoriously reticent about hazarding guesses as to what the coming months will bring. That reluctance for once seems justified, given endemic volatility.

Stapleton takes a stab: ‘Our global teams have deep experience in advising our clients through turbulent times. So there is an institutional memory bank we can draw on from challenges posed as far back as the dotcom crash in the 1990s, through the global financial crisis just after we opened up in Ireland and up to the Covid-19 pandemic. That Europe is going through a major conflict as we cautiously exit the current phase of the pandemic, means there is a very high risk of contagion in key markets and unfortunately a very real potential for further military escalation. We hope to see a near-term resolution to the conflict, but as long as it continues we expect further impacts on the markets and potentially a mix of economic shocks reminiscent of the severity of the GFC.

‘However, we have had some of our most rewarding years and forged strong ties with our clients. So, while my glass remains half full in terms of our ability to act for our clients in that capacity, the question appears to be not “if” there will be an economic slow-down or even a recession, but rather how long it might last.’

Jackson believes the full effects are still to play out. ‘Earlier this year when things looked like being a little less busy than in 2021, I wondered whether we were just seeing a return to the pre-Covid “normal” where some practice areas were a little seasonal. It certainly looks like we are going to be very busy right through to the end of the year and so any downturn is not likely to be felt until 2023 at the earliest.’

Nevertheless, he notes that Matheson is prepared. ‘Should a downturn happen, we benefit from the fact that we are well spread as a firm with no over-reliance on any one sector or practice area. We also have shown an ability during Covid to redeploy talent from areas which were quieter (the property sector was shut down in Ireland for long periods of time), to areas which had high demand, and that experience will stand to benefit us. We have many senior lawyers who have experience of the financial crisis and of the issues that it threw up, and our restructuring team is the largest of any in the market. Our balance sheet is healthy, and as a firm we believe that we are well prepared both for further growth and for a downturn.’

Duggan also sees the danger. ‘Working capital and cash flow are a big concern. In Covid we forecast 75% down on people paying bills but in reality it was only down 25% in the first month and 20% the next month. We are expecting problems with clients paying bills in the event of a downturn.’

Conversely, firms could see opportunities if the glut of insolvencies expected in the pandemic but which never happened is finally triggered by the energy crisis, especially affecting low margin businesses.

‘The sharp and welcome bounce-back in travel post-Covid has had a positive impact on activity generally.’ Jonathan Sheehan, Walkers

As Sheehan observes: ‘While we cannot ignore the concerning global economic outlook, particularly as the true effect of Brexit and the economic fallout from the pandemic continue to emerge, we have historically performed strongly in downturns with an increase in counter-cyclical mandates in terms of restructuring work, corporate consolidation, the provision of alternative finance and disputes.

‘Competitiveness and fee sensitivity will continue to increase. As with any business we will have to manage our cost base and price work appropriately. However, none of this is new and we take confidence from the fact that we have weathered storms in the past. As the Irish office of an international law firm, we also look with confidence to the strength of our European offering which represents not only a differentiator to our domestic competitors, but also an opportunity to continue to broaden and deepen relationships with our existing clients.’

For Sheehan and his peers there is also a lot to be said for the generative impact of in-person networking: ‘The sharp and welcome bounce-back in travel post-Covid has had a positive impact on activity generally – with in-person board meetings, business travel and conferences all happening with renewed frequency and vigour which inevitably leads to increased mandates and deal flow.’

The message from Dublin’s law firm leaders is for the most part ‘prepare for the worst and hope for the best’. Black concludes: I’m not expecting anything radical or a step change over the next few months but the macroeconomic environment makes me nervous. An energy shock and the cost of living crisis will feed into harder times for business. Ireland is resilient and performing very well. It will be squeezed but hopefully it will fit through the gap without too much damage. Ireland will suffer in a global downturn but it will bounce back quickly. That is a factor of our size.’ LB

nathalie.tidman@legalease.co.uk

For more information on the Ireland market, see ‘The Ireland debate: Top GCs gather in Dublin to thrash out the strategic role of in-house counsel’

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