Construction: litigation not commonly involved

An international construction law consultancy has become an alternative business structure (ABS) in order to take advantage of the esteem in which English firms are held elsewhere in the world, in one of the more unusual ABSs seen to date.

Exarchou & Rosenberg International, which is based in Nicosia, Cyprus, but also has offices in Athens, London, and Muscat, Oman, does high-value construction work relating to major real estate projects in, among other locations, the Middle East and South-East Asia.

It received its ABS licence from the Solicitors Regulation Authority this week, effective from 1 March.

Among its seven lawyers and consultants are four English-qualified solicitors and one barrister. One of its two directors, George Rosenberg, qualified as a solicitor and barrister in New Zealand; as well as practising there and in Hong Kong, he spent 10 years with Surrey law firm Shadbolt & Co, which merged with Clyde & Co in 2010.

Fellow director Alexandros Exarchou has law degrees, as well as a PhD in international tax planning, but is not English-qualified.

The firm does 75% construction law work, with the remainder construction-related corporate and corporate finance. None of its work is located in the UK.

Mr Rosenberg, who is the ABS’s head of legal practice and of finance and administration, told Legal Futures: “We wanted to operate as a proper law firm, to be subject to SRA regulation, because that’s so respected.” He added: “We really have very little doubt that as a registered English law firm we have extra credibility.”

Construction law rarely ends in litigation but rather arbitration or other dispute resolution, he observed, yet English and Welsh regulation could prove useful. “We will now be able to do [litigation]… we simply haven’t even been able to talk to people about it before, so we’ll see.” The firm sometimes had to seek injunctions, he said: “Now we will be able to go and do that directly ourselves.”

The ABS does not plan to seek external investment, he said. “We have no real interest in it; we don’t need it and that’s not the motivation.”

The process of becoming an ABS took a total of two years and was complicated by the fact that Exarchou & Rosenberg is the owner of Nexus Global, a construction claims consultancy. Mr Rosenberg said this had “of course raised alarm bells for the SRA”.

He explained: “But it’s not like claims consultants in the PI industry. These are quantity surveyors, mainly, who deal with the preparation of claims for construction contractors and they give some advice of course in the process of that.”

The SRA was concerned about prohibited separate business activities, he said. “We satisfied them that there weren’t any but they felt that the best way of dealing with it was by asking for an exemption and that’s what they gave us.”

The ABS licence grants a waiver from the separate business rule so that the ABS, its managers and employees can be connected with Nexus Global Limited and Nexus Global (UK) Limited.

Another factor delaying the ABS licence was a problem with obtaining the promise of professional indemnity insurance, which was a prerequisite of the application. The absence of a track record of a UK-based practice meant “it was difficult to find anybody who was prepared to promise us insurance”.

Mr Rosenberg described the application process as “just step by step” and that the SRA “doesn’t seem to [have] a holistic view of it, so you give them something and then there’s another question, instead of you getting a whole collection of questions at the same time”.

But he said he didn’t blame the SRA for being cautious in the circumstances and that the firm’s complex application was “probably unique so far”.

In February 2013, licence was granted to global consultancey Systech International, which manages aspects of some of the world’s largest construction projects.

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