Your QM Law For All Society Newsletter
Welcome to the sixth issue of our newsletter, Unorthodox
Welcome back! This is our first edition of the new year, and there's already so much to talk about! We know the Christmas holiday period has been really busy, but we hope everyone has got off to as best a start as possible in Semester 2 and that this newsletter makes keeping up with the legal world easier.
Now onto your favourite fortnightly legal updates brought to you by the LFA newsletter team.
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What's going on in the world?
1) WallStreetBets: A Reddit group played Wall Street at its own Game, and Wall Street quickly put a Stop to it
Last Wednesday, a group of independent traders on Reddit decided to come together to drive up the share value of GameStop. This caused issues for hedge funds such as Melvin Capital that had shorted GameStop stocks based on the assumption that stock prices would decrease. A simple definition of a short is as follows - a short is when you borrow a stock from a broker and sell it straight at its current price. Then you wait on the stock’s price fall in order to purchase the stock back at a lower price and return the shares you borrowed to your broker, keeping the difference. With Redditors purchasing stock and driving up their value, shorts incurred significant losses, sending hedge funds into serious losses and even bankruptcy. Melvin Capital lost approximately 30% of its assets and took an emergency cash injection from firms Citadel LLC and Point72 Asset Management to the tune of $2.75 billion. What does this mean? This manipulation of stock prices has brought to question the validity of the system, and whether the system favours certain traders over others. With trading companies such as Robinhood halting the ability to purchase GameStop stock after the significant surge, floods of negative responses ensued online. 'An app named Robinhood stealing from the poor to give to the rich, you can't make this up', was the resounding feeling, with CNN taking a similar stance when interviewing Robinhood CEO Vlad Tenev (view here). Why is this important? GameStop wasn't the only company to see rapid rises in stock price. WallStreetBets also targeted other failing companies such as Blackberry, AMC, Naked Brand, and Nokia. This group of stocks have also been referred to as 'meme stocks'. Whilst this was a single, unprecedented incident, it demonstrates the power of independent traders to influence markets and brings to question whether there is much to stop people from doing this again. State regulators, the Biden administration, and the Securities and Exchange Commission (SEC) have been looking into the issue, but it's unclear as to what measures will be taken to remedy this situation, and what future restrictions will be implemented on trades in the future.
2) Brexit: The EU triggered Article 16 of the Northern Ireland protocol and then reversed it soon after The EU has triggered Article 16 of the Northern Ireland (NI) protocol which is usually only ever invoked when there is the suspicion that something is causing "economic, societal or environmental difficulties". There had already been several rows over vaccine delivery as many EU countries are way behind in distributions and some areas have even had to pause the process. In triggering Article 16, the EU hoped to protect vaccines going from EU factories to outside countries, or more specifically the UK, which already has a larger number of vaccines available. What does this mean? The NI has a different status to the other UK nations which means it can still run under EU customs and regulations, being a part of its single market. Therefore, under the NI protocol, all products are normally allowed to be exported from the EU to the NI without any checks. However, the EU was worried that trade arrangements under the NI protocol would be used as a 'backdoor' to get around trade restrictions and effectively allowing more vaccines to be supplied to the UK. With exports being unchecked, vaccines could be moved in and out unchecked under the protocol. Therefore, in triggering the article, it can be seen as the EU's efforts to place controls on exports of Covid vaccines amidst the clashes over AstraZeneca's supply contract. Why is this important? Article 16 is only meant to be triggered in the face of serious issues, however it has not been officially outlines what 'serious' entails. But one thing that is certain is that once the article is triggered, the other side is open to respond in taking rebalancing action. In triggering the article in this manner, it has shed a negative light on the EU. People have begun to accuse the EU of preparing to use Northern Ireland whenever it suits their interest - over the provision of a vaccine that is designed to save lives.
3) Workers at Google have taken a stand by forming one of the first Big Tech unions Workers at Google formed the Alphabet Workers Union in early January in partnership with CODE-CWA (Campaign to Organise Digital Employees in the Tech, Games and Digital Industries). The union currently has over 800 members, with the aim of 'reclaiming power' from dismissive leadership and protecting Alphabet workers. This union is the result of a year of secret planning, and in retaliation to Google's poor response to previous protests and attempts to organise in the last few years. AWU is a non-contract union, which means that US labour laws provide the basis for its collective bargaining protections that cover all groups of workers. This is in contrast to unions with legal certification from the National Labor Relations Board. What does this mean? This union only consists of a small number of staff compared to the 260,000 full time contractors and employees under Alphabet, but the union main priority is to make activism at Google structured, durable and sustained. Numerous workers at Google also felt that it was time to push management to enforce necessary changes to workplace problems. Why is this important? This union is particularly important because it demonstrates the growing prominence of employee activism that has been taking on Silicon Valley in the last few years. There has been opposition to unionisation in the past from tech workers, who felt that labour groups don’t tackle the issues of the role of technology in society or ethical problems. Only a few tech unions have successfully been established at companies such as Kickstarter and Glitch. Keep an eye out on developments with this union and unions in other big companies such as Amazon, which is rumoured to be undertaking a unionisation process in one of its warehouses.
Opportunities
Our top podcasts to tune in to:
1) Commercial Awareness with Watson’s Daily business and financial news - Watson's Daily is a daily newsletter written by ex-stock broker Peter Watson.
2) Shearman and Sterling Barrier Blasters - a series dedicated to enhancing diversity and inclusion in the communities in which we live and work. The podcast features conversations with individuals and industry leaders who have challenged the status quo, broken through barriers, and in doing so, have created opportunities for others.
3) Slaughter and May Insights - regular podcasts on various topics within law. The most recent podcast discusses data regulation in an increasingly digital world.
TCLA Event Summary: This week TCLA ran a webinar on understanding law firms as a business. When applying to law firms, demonstrating an understanding of how firms operate and the different ways in which they make their money is a great way to make you stand out. These are some of the key terms mentioned in the webinar:
The two main global partnership models are Swiss Verein and Global Partnership Model. Swiss Verein is a formal legal structure recognized under Swiss law, similar to a voluntary association under U.S. law. In Global Partnership Models, on the other hand, all partners and lawyers work for the same firm under a single Limited Liability Partnership (LLP). To learn more about the implications of each model, this video by Shearman and Sterling provides a great starting point (click here).
There are two fundamentals that are essential to understanding billing at law firms.
Product - A lawyer is selling time
Price - The amount the client agrees to pay for the time worked by the lawyer.
This being said, there has been increasing discussion about whether the billable hour is an outdated method of payment, with alternatives such as flat-fee pricing increasingly coming into consideration. With technology being implemented increasingly in firms, time taken and efficiency varies, and time spent on a project may fail to reflect the value of work completed.
Gross revenues are fuelled by rates, hours, utilisation, realisation, billing speed, AFA's, and leverage.
Revenue leakage can be caused by unbilled/lost time, write-offs, collections/non-payments, rate discounts, and bill disputes.
Two tiers of partners:
Equity partners - buy directly into the company, and their income comes directly from the profit the firm generates.
Non-equity partners - used to refer to lawyers 'in transition'. Usually bill substantially less than equity and associates.
If you're looking for daily law updates that are student-friendly and engaging, look no further! LittleLaw is a student-led website that aims to make commercial law easier to understand for students. Check out their Instagram page here to find out more!
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