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TMC Writes

TMC Writes is just one of many resources that mentees will benefit from at TMC. This weekly feature delves into the developments shaping the legal and commercial worlds, providing thoughtful and comprehensive insights to bolster your commercial awareness. Whether you are looking to improve your understanding of how law firms operate, prepare for an applications or excel in your interviews, TMC Writes ensures you have the information to stay informed and stay ahead of other applicants.

Space Satellite

DLA PIPER'S COSMIC LEAP:

NAVIGATING THE NEW FRONTIERS OF SPACE LAW

Written by Mikaeel Memon

INTRODUCTION

Last year witnessed the launch of nearly 2,500 objects into space, raising critical questions about the control, governance, and regulation of these space-bound entities. This topic of governance in space is not an isolated concern. Various nations, governmental bodies, and attentive corporations have significantly invested in managing and regulating these extra-terrestrial ventures. Notably, DLA Piper, recognised as one of the world's largest firms, has recently stepped into this arena, aiming to capitalise on the lucrative 1 trillion-dollar space industry. This move places DLA Piper in direct competition with other major players like Hogan Lovells and Mayer Brown, who are also navigating this expansive and financially promising sector.

 

EMERGENCE & PROSPECTS OF SPACE LAW

Although NASA, the first and most significant global space agency, was established in 1958, the space industry has predominantly gained significant momentum over the past decade. Frank Ryan, the Global Chair of DLA Piper, recently remarked, ‘Years ago, only entities with the financial power of a sovereign state could genuinely venture into space, but that paradigm has shifted.’ This change has been driven by a substantial reduction in launch costs, enabling numerous space start-ups to enter the public market through special-purpose acquisition companies. This development has led analysts at Citi to forecast that the space industry could produce an annual revenue of $1 trillion by 2040.

The complex nature of space law coupled with the growing number of start-ups call for firms like DLA Piper and others to advise and assist these space agencies regarding Government Contracting, Regulatory Compliance, IP Strategies, Licensing, National Security and Global Trade to name a few. 

 

CURRENT AND POTENTIAL AREAS OF PRACTICE

In their latest publication, DLAP provided a comprehensive overview of their 'Space and Satellite' practice, emphasising their principal competencies and the specialised areas within the practice. A notable highlight from this overview was their bold forecast which claims that in the near future, most global corporations will be classified as space companies due to their significant assets in space, underscoring the industry's potential and DLAP's eagerness to capitalise on it.

The firm also delves into the complex realm of 'Spectrum allocation' – the distribution of electromagnetic spectrums to space entities – which is stringently regulated both nationally and internationally. DLAP plays a pivotal role in this area, serving as an intermediary for some of the world's largest satellite networks. This includes conducting independent due diligence assessments that scrutinise the regulatory and technical dimensions of satellite platforms, operations, and procurement contracts for systems.

Moreover, DLAP has been instrumental in assisting satellite imaging clients with the intricacies of U.S. regulatory licensing and compliance procedures. These activities are governed by the National Oceanic and Atmospheric Administration (NOAA) Commercial Remote Sensing Regulatory Affairs office, and DLAP's guidance in navigating these processes has been invaluable for their clients.

Furthermore, DLAP has been actively collaborating with key regulatory bodies such as the Federal Communications Commission (FCC), the Federal Aviation Administration (FAA), NOAA, the Department of State, and the Department of Commerce. These collaborations aim to deepen their understanding and provide assistance to space agencies that are pioneering innovative services. These services challenge traditional definitions and do not conform to conventional regulatory and commercial frameworks. Examples of such services include non-Earth imaging, commercial Positioning, Navigation, and Timing (PNT), among others. This involvement, coupled with DLAPs renowned presence in the satellite industry, underscores their commitment to navigating the evolving landscape of space industry regulations and innovations.

 

THE CONSULTING ARM

Despite being well-prepared to counsel major space enterprises and agencies, DLAP recognizes the need for internal growth in this sector. Through a thorough SWOT analysis, they have strategically partnered with The Cohen Group, a distinguished consulting firm known for advising IT companies, telecommunications firms, and investors in the satellite sector on public policy, business development, and transactions. DLAP leverages The Cohen Group's expertise for strategic and political guidance in expanding services globally. The Cohen Group offers initial strategic counsel and insight to clients as a complimentary service and is available for more extensive project leadership as required.

Additionally, DLA Piper's team of attorneys in the United States collaborates under a teaming agreement with a specialised satellite consulting group. This partnership operates on an integrated basis, combining their expertise seamlessly. The consulting group brings a wealth of experience in satellite registrations, having aided DLAP in securing numerous such registrations in recent times. Together, they offer services that are not only efficient and effective but also more cost-effective compared to the rates typically charged by most law firms. Additionally, the client confidentiality, under attorney client privilege, offered by law firms such as DLAP, which diligently safeguards sensitive information, makes law firms an attractive advisor for multinational space agencies. 

 

ISSUES OF THE SPACE INDUSTRY

Presently, space law is governed by five key treaties: the 1967 "Outer Space Treaty," the 1968 "Rescue Agreement," the 1972 "Liability Convention," the 1976 "Registration Convention," and the 1984 "Moon Agreement." However, a prominent concern is that these treaties, with the most recent being enacted over thirty years ago, were established in an era when space law was not as developed as it currently is. This time gap highlights the need for updates to keep pace with the advancements in space law.

Timiebi Aganaba, an authority in space law and an assistant professor specialising in space and society at Arizona State University, has expressed apprehension regarding the lack of a regulatory framework for lunar expeditions. ‘With over a hundred projects aimed at the moon, there exists a significant gap in both information and regulation concerning protocols for site access. This issue becomes particularly pronounced in scenarios where multiple companies, agencies, or countries aim to explore the same location, especially in cases like the discovery of vital resources such as water ice, for which no specific regulations currently exist.’

Firms such as SpaceX have had to maneuver their broadband satellites over 25,000 times in the period from December 1, 2022, to May 31, 2023, to avert close encounters with other spacecraft and orbital debris. This frequent need for evasive action not only highlights the increasing congestion in space but also brings to the forefront the potential legal complexities that could emerge from these near-misses or, in more severe cases, actual collisions.

 

CONCLUSION

Recent lunar landings by India, combined with China's ongoing endeavours to retrieve lunar samples – some successful, others not – and NASA's escalating investments in space exploration, underscore the urgent need for comprehensive space law regulations. These laws should address critical issues such as the pollution of space caused by rocket and satellite debris. Additionally, regulations to prevent potential collisions in space and strategies to mitigate such risks should be prioritised in the coming five to ten years. This evolving landscape of space activity necessitates a focused legal framework to govern these expanding frontiers.

 

KEY TAKEAWAYS: 

Rapid Expansion in Space Activities: The significant increase in space activities, with nearly 2,500 objects launched into space in a single year, reflecting the dynamic and expanding nature of the space industry.

Emergence of Space Law as a Crucial Field: The growing complexity of activities in space, such as satellite launches and lunar expeditions, underscores the need for specialised legal frameworks to manage these activities. This includes addressing issues like space debris, satellite collision risks, and resource exploitation on celestial bodies.

DLA Piper's Strategic Involvement: DLA Piper's active engagement in space law, providing specialised legal services in areas like spectrum allocation, satellite registrations, and regulatory compliance. Their involvement demonstrates the increasing importance of legal expertise in this sector.

Legal and Regulatory Challenges: The outdated nature of current space treaties and the need for modernised legal frameworks to keep pace with technological advancements and new challenges in space exploration and utilisation.

Potential for Legal Firms: The burgeoning field of space law offers significant opportunities for legal firms to specialise and provide much-needed services in areas like treaty negotiation, regulatory compliance, and dispute resolution in space-related activities.

Competition Among Law Firms: As the space industry grows, it is likely to attract more legal firms, in addition to Hogan Lovells and Mayer Brown, increasing competition in this specialised area. Firms with existing expertise and a proven track record, like DLA Piper, may have a competitive edge, but new entrants can also capitalise on emerging aspects of space law that are yet to be fully explored or regulated.

Paul Weiss' Bold Expansion in London's Legal Arena: The Poaching Game

Written by Reet Lath

Paul, Weiss, Rifkind, Wharton & Garrison (Paul Weiss), a renowned American law firm with a history dating back to its establishment in London in 2001, has embarked on an ambitious journey to expand its presence in the city. In recent months, this remarkable expansion has seen a series of strategic poaching raids on rival law firms, most notably the private equity powerhouse, Kirkland & Ellis (K&E). This article delves into the aggressive poaching culture, the high demand for skilled private equity lawyers, and the significant implications of these moves on the legal landscape in London.

 

Competing for Legal Talent

The legal industry is very involved in insolvency proceedings and restructurings, particularly in the private equity space, given the challenges posed by the turbulent market. This means that money is not an issue for these private equity-focused firms, and K&E, with its deep pockets and robust reputation, was not the only firm keen on retaining its talent through significant one-time payments. Paul Weiss, equally financially sound and ambitious, competed vigorously to offer incentives in the six-figure bonus area to lawyers to leave their former firms or stay with their current employer. The legal talent market has proven to be a fiercely contested arena, where firms must continually prove their worth to retain top performers or attract fresh talent. 

 

Expanding Through Poaching

Paul Weiss' London office started its massive expansion campaign this September by luring talent from other firms. As of now, the firm lists three partners and two counsel who continue to operate from their London office. However, in June of this year, they lost two prominent London partners, M&A and private equity specialists Ramy Wahbeh and Kaisa Kuusk, who chose to leap to another U.S. competitor, Sidley Austin, indicating the volatility of the legal talent market.

 

Early August saw the first major move as the leader of Paul Weiss' London office, Alvaro Membrillera, left to join K&E. This marked the beginning of a poaching spree that continued into September, with the firm managing to poach a remarkable 12 partners from K&E to enhance their private equity capabilities in the London market. Notable among these recruits were Neel Sachdev, who had been with K&E for over two decades, and Roger Johnson, a former chair member at K&E. This strategic raid exemplifies the competitive nature of the legal industry and the high demand for exceptionally skilled private equity lawyers.

 

Paul Weiss' poaching strategy also extended beyond K&E, as they successfully recruited Will Aitken-Davies from Linklaters. This move underscores the importance of law firms being well-positioned to navigate a market facing economic uncertainty. This represents the problem of poaching - just because a certain hire has been made, does not mean they will stay. The volatility of the market makes it so it is a never-ending cycle, serving as a challenge to the security of firms’ senior partners in London.

 

Implications

The massive haul of partners from K&E has inevitably led to concerns about client relationships and the overall stability of the firm. K&E must now take proactive steps to reassure clients that their business interests remain secure during this period of transition. Simultaneously, the firm must persuade its lawyers to remain steadfast amidst the instability that naturally accompanies such significant organisational changes. Convincing lawyers to stay and proving credibility in a competitive market requires both finesse and determination. These developments underscore the ongoing need for high-performing lawyers and the robust competition among law firms to secure their services. K&E’s response to this poaching has been to hire two partners, Ian Barratt and Sinead O-Shea from their US rival, Simpson Thacher in late October.

 

Paul Weiss, with a significant presence in the United States and a substantial client base, exemplified by their close relationship with Apollo, was one of the few major U.S. law firms that had yet to make a substantial mark in the London legal market. Their recent expansion endeavours demonstrate their commitment to adapt to changing times and expand their footprint in a global market that demands growth and adaptation.

 

Key Takeaways:

1. Poaching Talent - A Significant Challenge: The aggressive poaching culture in the legal industry presents a considerable challenge for well-established law firms. Firms are engaged in fierce battles to attract and retain top legal talent, resulting in a dynamic and competitive environment. Poaching is a reality that law firms have to accept as ever-present in the legal market. 

 

2. Instability in the Legal Market: The recent expansion efforts by Paul Weiss and their poaching of numerous partners from Kirkland & Ellis illustrate the inherent instability in the legal market. These strategic moves can disrupt established relationships and business dynamics and therefore create an uncertain environment for clients and lawyers alike. With many clients following their trusted advisors when they get poached, and teams having to restructure leadership around the void that poaching leaves, its impact is not to be underestimated.

 

3. Publicity of Private Matters: The poaching of high-profile lawyers from one firm to another often leads to a significant amount of public attention. Private matters, such as client relationships and the internal workings of law firms, can become highly publicised, further emphasising the challenges and consequences of aggressive talent poaching in the legal industry.

 

Paul Weiss' bold expansion in London through strategic poaching raids on prominent law firms, most notably K&E, has sent shockwaves through the legal landscape. It highlights the aggressive nature of poaching culture, the high demand for skilled private equity lawyers, and the changing dynamics of the London legal market. It seems that the competition does not only exist for vacation scheme applications (although it feels like it). As these developments continue to shape the industry, it proves a startling reminder of the brutality of competition in the legal market. 

Business Lunch
British Pounds

To Borrow or not to Borrow: The Private Credit Dilemma   

Written by Zainab Nadeem

The unstoppable rise of private credit is now at the forefront of all economic news as the private credit market is expected to grow to $2.3 trillion by 2027 from just $500 million in 2015. As stated by White & Case partner Eric Leicht, it is “shocking how many more direct lending deals there are than syndicated deals”. 

 

What is Private Credit

Private credit is also known as private debt, direct lending, or private lending. Such lending is provided by sources other than banks and is normally negotiated directly between both parties in order to ensure suitability specifically to the borrower’s unique needs. Moreover, unlike corporate bonds, private credit is not traded on public markets. It often matures (becomes due for repayment) after three to seven years, and has a floating (variable) interest rate. While high-street banks have some appetite for riskier corporate lending, most of their lending tends to be through more standardised products focused on lower risk. As a result, private debt is often the only, or most viable, funding solution for small and medium-sized businesses that need their financing to be flexibly structured.

 

Why is Private Credit on the Rise?

With rising interest rates, shareholder pressure and capital adequacy regulation mean banks are lending mainly to larger companies for safe return and insulation from default. However, private credit funds are not limited by such factors and can freely issue loans. With higher interest rates charged and investors receiving a greater return, private credit is a popular investment option. Moreover, private entities, such as Blackrock and Apollo, have large funds to draw down as global private equity dry powder has crossed $2 trillion. This has led to a shocking dual track process where borrowers are receiving competing bids from banks and direct lenders. 

 

In fact, with the upwards trajectory of the private credit boom, banks are now trying to get involved in the race as they do not want to miss out. However, it is difficult for banks to lend at the same level due to PRA regulation and Basel 3. Moreover, with the recent Silicon Valley Bank crisis, following the UBS-Credit Suisse crisis, American regulators are trying to make banks safer with the ‘Basel 3 endgame’. As a result, banks cannot fully compete with private credit because attempting to win this race would cost them much more. We would not want a repeat of 2008 now would we? 

 

Opportunities for Law Firms

This provides firms, mainly with a transactional focus, with opportunities to utilise their expertise and help clients. Their private equity, corporate, and funds lawyers can help advise on commercial agreements, contractual joint ventures, or special companies incorporating or setting up a specific fund for private credit. Moreover, finance lawyers can help firms’ sponsor clients to access pools of private credit capital considering the periodic closures of the syndicated loan market. Finance lawyers can also help banks looking to get involved in private credit to navigate capital adequacy regulations, set up their own direct lending facilities, and raise capital specifically for direct lending. This includes advising them about their loan portfolios and rebalancing this, assessing whether facilities permit this, and determining whether some loans may need to be sold to accommodate this.

 

Firms are quickly responding to the private credit boom. For example, Kirkland & Ellis recently advised asset manager Blackstone Credit on its Blackstone Green Private Credit Fund III, which raised $7.1 billion and is the largest private credit energy transition fund ever raised. Moreover, the firm is already meeting demand and expanding its private credit practice through, for example, the recent addition of Partner Adam Shapiro in New York. Similarly, earlier this year Reed Smith strengthened its London finance team with a private credit partner hire of Linn Mayhew. Akin Gump also welcomed private credit partner Fergus Wheeler to its London office. In terms of UK firms, Freshfields had a double partner hire of Carol Van der Vorst and Lisa Stevens with a “wealth of experience and connections in the private credit”.  This demonstrates that firms are determined to stay ahead of the rapid expansion of the private credit deal market.

 

Challenges for Law Firms

On the other hand, the rise of private credit may also present challenges for law firms. Whilst the emergence of private credit has opened more avenues for borrowers and the law firms that work with them, there is a finite pool from which funds are drawn. If a company is using a private creditor, they might not be using an institutional lender. As a result, law firms that lean heavily into the institutional side may be seeing less debt finance deal activity during this private credit boom. However, in contrast, one may argue that the potential competition between syndicated and private credit debt provides more opportunity as private credit has multiplied, therefore indicating that this market is available for the long term. Additionally, firms are not too worried as the tides of practice areas are known to continuously eb and flow. Whilst demand in private credit may have picked up, this does not mean it will stay this way. 

 

Risks 

Whilst banking activity is drowning in regulation, the private credit market is largely unregulated. As explained by Ana Arsov, managing director and co-head of global banking for Moody’s Investors Service, “this raises concerns as these loans become more vulnerable to higher interest rates, a slowing economy, and a desire by many to avoid riskier investments”. She further elaborates that there is increasing concern about why this industry is growing so fast with very little transparency to the regulators and the marketplace”. A mostly unregulated market indicates a possibility that the credit quality of the companies that have relied on private credit may go down due to increased defaults, particularly since higher interest rates are charged. This may trigger a domino effect such as unemployment and further aggravation of the economy. However, this truly is unprecedented and the risks are unknown. 

 

Conclusion

The private credit market has experienced a significant boom since its birth following the 2008 financial crisis. This provides many opportunities for law firms, particularly in economic downturns, as they can expand their private credit advice offerings to clients. Not only does this show the truly counter cyclical nature of commercial law, but it is also an indicator of how abruptly firms respond to changing client needs and general economic trends. 

 

Key Takeaways

  1. Private credit is lending provided by sources other than banks and is normally negotiated directly between both parties in order to ensure suitability specifically to the borrower’s unique needs.

  2. The private credit market is expected to grow to $2.3 trillion by 2027 from just $500 million in 2015.

  3. With rising interest rates, shareholder pressure and capital adequacy regulation mean banks are lending mainly to larger companies for safe return and insulation from default. However, private credit funds are not limited by such factors and can freely issue loans.

  4. Firms, mainly with a transactional focus, are provided with opportunities to utilise their expertise and help clients. As such, firms are expanding their private credit offering through partner hires with a focus in this area. 

  5. There are many risks associated with private credit as the market is largely unregulated. 


 

A huge thank you to Adnan Shafi for his podcast (The Firm Analyst S2E2) and mentorship which played a significant role in helping me write this article

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