Interview: Robert Elliott, Linklaters

‘I’ve been involved in a lot of messy situations during my career, and that was one of them!’ Robert Elliott cheerfully confesses at the outset of our interview.

He is alluding to the now antique but still notorious Blue Arrow affair, a landmark City scandal dating from the turn of the 1990s.

Four high-profile bankers had their convictions overturned by the appeal court, a ruling which some allege permanently inhibited the Serious Fraud Office from pursuing ambitious prosecutions of big City institutions and their senior executives.

Then at Wilde Sapte, which he joined in 1976, Elliott advised NatWest bank over an inspection by what was the Department of Trade and Industry. Three of the convicted quartet were senior executives at the bank’s investment banking arm.

During that period, Elliott first got to know key movers at what was then Linklaters & Paines – where, two decades later, he would become chairman and senior partner.

‘Linklaters had what was called an international finance section. It did capital markets, banking and project finance,’ he recalls. ‘Because I’d been running a banking group at Wilde Sapte, I got talking about what Linklaters was doing in that area. And the idea of getting a banking practice going at Linklaters gained traction.’

Despite Elliott’s track record, lateral hires were rare at that time. He was initially hired as a senior assistant with a profit share and elected to the partnership a year later.

It was his good fortune to be joining a firm that was rising fast. A leadership that included legendary figure Terence Kyle drove through a strategy of European alliances that saw the firm eventually rebrand as Linklaters.

‘It was truly transformational for us,’ Elliott reflects. ‘The Americans will always challenge this, because they think we’re not big enough in the US. But it did make us truly international.’

Elliott spent his first few years building Linklaters’ banking and restructuring practice, with people like John Tucker (former global head of banking) and Giles White (former global head of finance). Their object was simple, says Elliott – ‘to get on terms with our two immediate competitors, Allen & Overy and Clifford Chance’.

Already strong in M&A and capital markets, Linklaters had to ‘rebalance’ toward the banking sector, he says. By the time Elliott succeeded Tucker, the banking group comprised over 65 partners and 200 lawyers in 22 jurisdictions.

His appetite for leadership thoroughly whetted, the high-flying Elliott lost out to the ‘estimable’ David Cheyne in the senior partner election of 2006.

It proved the right election to lose, given what came next.

‘As it happens, it was a good thing,’ he admits. ‘I was right at the coalface during the financial crisis, starting from the back end of 2007 and into 2008. All the bank rescues and rehab work – that was huge, so I think I was in the proper place in the firm at the time.’

He is not exaggerating. The magic circle giant landed a plum role on the most high-profile collapse of the lot – Lehman Brothers – an assignment dubbed one of the ‘instructions of the century’. The firm advised administrators PwC.

‘Lehman Brothers International Europe (LBIE) was put into administration by the judge at 7am one Monday morning, 15 September [2008],’ Elliott remembers. ‘Our team immediately went down to Canary Wharf with PwC, and I went at the end of the day to see how they were getting on.

‘Everyone in that building was in a state of disbelief. You’ve seen the footage from New York – people leaving with their boxes. It was a truly pathetic sight.

‘When I sat down with three partners [Tony Bugg, now global head of banking, David Ereira and Richard Holden] they said they questioned whether Lehman should have been let go. It really did feel like it was too big to fail.’

He adds: ‘The very next day, AIG was failing and the US government saved it. [But] with credit derivatives that had been booked around the world, AIG had created a connectedness in the financial system.

‘George W Bush’s famous words that week were “this sucker could go down”. So it was extremely hairy, and extremely worrying after Lehman. We had five weekends with a bank rescue going on. The fifth weekend it was my turn, with RBS’ [Elliott advised on the £45bn recapitalisation of Royal Bank of Scotland in 2009].

As the fires raged, Elliott must have been in day-to-day contact with government, I suggest.

Now, in other strands of diversity such as black and minority ethnic candidates, the pipeline is not as one would like. Again, it is a challenge to make progress

‘The Treasury was all over it,’ he says, ‘and I think both the UK government and [chancellor] Alistair Darling did a pretty good job in difficult circumstances.

‘Subsequently, you had a lot of RBS taken into public ownership, along with part of Lloyds. [Our] corporate, finance and restructuring teams were all involved. So the firm did very well during that period.’

Indeed. By the time the next senior partner election came round in 2011, Elliott was the frontrunner. He saw off challenges from litigation chief John Turnbull and European managing partner Jean-Pierre Blumberg to get the top job.

In his manifesto, Elliott had stressed the importance of empowering individual partners to become more entrepreneurial, and to independently prioritise client relationships.

Looking at the numbers, this appears to have worked.

Linklaters signed off 2010/11 with profit per equity partner up 1% to £1.23m, on income up 1% to £1.2bn.

Pre-tax profit climbed 1.5%, to £514.8m.

In 2016, Elliott signed off as senior partner by toasting a new record year. Income topped £1.3bn for the first time, climbing 3% on 2015/16. PEP soared to a new high of £1.45m.

So how would Elliott ‘score’ himself, with reference to the promises he made to partners in his election pitch? Once again, by the extent to which he helped tipped the balance – though this time the other way.

‘One thing we realised in the financial crisis (and we also had the eurozone crisis in 2012), was that our banking sector client base would reduce in size,’ he says. ‘It was still very important, but we had to rebalance in terms of new corporate clients. We set about that systematically in 2011-2013, focusing in particular on US corporates and multinationals, and did pretty well.

‘I had two managing partners during the period, Simon Davies [who stepped down early to join Lloyds Banking Group] and then Gideon Moore. Both excellent people.

‘And as the partners were pretty aligned on this, it wasn’t very difficult to achieve.’

Asked if he left any unfinished business, Elliott says the firm must target further progress on gender diversity. In 2014, Linklaters pledged that at least 30% of new partners would be female, but just 19% of appointments went to women in the 2017 round.

‘We’ve got a record number of women in leadership positions on our executive committee,’ he says. ‘But it’s a really tough one. If we lose women at a certain stage [three to five years’ PQE] and our countermeasures for not losing them – such as flexible working – are not effective, your pipeline is inhibited.

‘Now, in other strands of diversity such as black and minority ethnic candidates, the pipeline is not as one would like. Again, it is a challenge to make progress.’

Since stepping down last September in favour of Charlie Jacobs, Elliott continues to act as partner consultant at Linklaters.

He is also building the portfolio of extramural activities he began to amass while in situ. One addition in the last fortnight has been the chairmanship of Permanent TSB group, a bank controlled by the Irish state.

If this ‘tremendously satisfying’ spread of activities has a unifying theme, it is probably to combat protectionism at a time of growing insularity among western and other economies. Elliott is also on the board at lobby group TheCityUK.

Before last June’s Brexit poll, Elliott penned a strident opinion piece for the City press, warning that leaving the EU would be a ‘walk into the unknown’ that would ‘put the country’s prosperity at risk’. He wrote in a personal capacity, but did obtain the permission of Linklaters’ board to do it.

We are speaking before Article 50 was triggered. While not exactly sanguine, Elliott says he is ‘optimistic’ the UK will be able to reach a ‘reasonable settlement’ with the EU 27.

He says: ‘We are hopeful we can get a deal on mutual market access for our clients and for us, and a satisfactory position on all the other things that go with free movement of talent.

‘We’ve got perhaps 50 nationalities here [in Linklaters’ City HQ] and a big issue for us is making sure we’ve got access to the right talent at the right time.’

Elliott is also sensible of the perceived gulf between the City and the population at large. ‘There has to be a response to this view that there is a metropolitan elite that doesn’t care about the rest of the world,’ he says.

‘The CityUK is definitely going to do more with the regions. We [Linklaters] are virtually the biggest employer in Colchester, for example [the offices there host services including payroll, marketing and HR].

‘There’s Allen & Overy in Belfast, Freshfields in Manchester and JP Morgan in Bournemouth. When the general population thinks of the “City” it doesn’t think of that, so I think there’s work to do.’

Of course, there is more to the backlash against globalisation than Brexit. As an ambassador for his firm, Elliott says there’s also ‘work to do’ for Linklaters in making fresh inroads into overseas markets, including the US and BRIC countries. One cannot assume an inexorable progress toward liberalisation – especially now.

‘In India, we have a “best friend” and there’s the promise of liberalisation, but that can is regularly kicked down the road,’ he observes. ‘We see more prospect of going onshore and local in a jurisdiction like China, which I think is very positive.’

He adds: ‘China is going through a period of change as the economy changes. It’s looking carefully at capital outflows and the debt overhang, but it is still growing at a very significant rate. We went in to mainland China 20 years ago (in Shanghai), Beijing 15 years ago and Hong Kong 40 years ago. It is the second-largest economy in the world and we think it has tremendous potential.’

Elliott has a stake in this process. Last May he represented Linklaters at the launch of a report on the landmark ‘One Belt, One Road’ policy at the Great Hall of the People in Beijing. ‘One Belt, One Road’ is neatly summarised by the Financial Times as: ‘A signature foreign policy initiative that envisions a new wave of global growth, spurred by roads and rail links spanning some of the poor regions such as east India, Africa and central Asia. It has been likened to the US Marshall Plan of the 1950s and interpreted as China’s first concerted effort to lead global development.’

‘We are committed to promoting the understanding of One Belt, One Road as a development policy, and the significant opportunities it provides for expanding world trade,’ Elliott said at the time.

Returning to home ground, there are now more than 100 US firms operating in London, partly populated by lateral hires from other firms in the capital. They have taken something like 20% of the market. Yet it seems to have been more of a struggle for UK firms to make similar inroads in the US. How has Linklaters dealt with this challenge?

‘The top US firms operating here and indeed across Europe are excellent, and really good competition,’ he replies. ‘The US is the biggest and deepest legal market in the world, and to their credit they also have very loyal clients. Some of the major US private equity houses, for example, are very closely attached to them. That gives them great strength, [as does] the mighty dollar.’

It has been suggested other UK firms have stolen a march on Linklaters stateside, either by merging with US firms or pursuing a more enthusiastic US hiring strategy.

Elliott says: ‘The area of activity we focus on, in and out of the US, deals with the cross-border element. So we’re not seeking to take on the US firms head to head in their own backyard. For now that is working, though it is a more limited platform than we would like.’

If ‘the Americans are coming’, then Elliott is unfazed. In some respects, it was ever thus. ‘When I qualified in 1976, computer time-recording was just coming in from across the Atlantic,’ he recalls. ‘American general counsel felt they were being overcharged by law firms coming up with a fixed price for a particular matter, so they wanted to see this backed up by time.’

The pendulum has since swung back: ‘It has reached a stage where charging for time alone has become quite controversial, and we’re back to more fixed pricing.’

Elliott witnessed the dawn of the Information Age, recalling a time when there weren’t even any word processors: ‘The best you had for churning out repeat documents was something called an IBM “golf ball” [Selectric], which had its own magnetic tape.’

So what does he make of the future of a profession where the Information Age is morphing into the age of Artificial Intelligence (AI)? ‘Client expectations are higher, in terms of response time, which can work against giving considered views. We need to hold our discipline on that,’ he says.

‘As for AI, it is already having an impact. [Linklaters] is using it in the context of ringfencing transactions with banks, where you’re moving portfolios of financial assets. You teach the machine to identify particular provisions in derivatives contracts, so you know whether to move them, what event you might trigger and so on. That would previously have taken a small army of lawyers or paralegals to review physically.’

Paradoxically, this does not mean fewer jobs at Linklaters. Quite the reverse – it means the firm can hang on to work it might previously have been priced out of.

‘We have clients wanting us to disaggregate work, by sending parts of matters to a firm with a lower price point perhaps. We do that quite often, or [use] LPOs (legal process outsourcers). With the uses and applications of artificial intelligence now, we can bring that work back in-house and be just as competitive, if not more competitive, than a firm outside.

‘I’m cautiously optimistic about AI. I don’t think it’s going to do every professional out of a job. Even in the applications we use it for– the clauses that might be ambiguous, for example – these are flagged up for human interpretation. This technology will continue to affect the way a legal career develops, but our smartest lawyers will embrace it.’

So what will the ‘smart lawyer’ of the future – ‘Robert Elliott 3.0’, perhaps – look like? ‘They will certainly need enhanced IT skills, that is inevitable,’ he avers – in major deals, understanding how clients deal with data and whether you can migrate it, and how their systems work.’

At some point soon then, ‘legal engineer’ rather than just ‘lawyer’ could be an attractive option at the college careers fair.

This interview was kindly brokered by Stephen Denyer, director of strategic relationships at The Law Society