the legal industry

Filed in archive Global Economy on February 28, 2004

Law firms have a status setting them apart for most of the rest of the economy. Restricted in marketing and bewildered by legal restrictions this industry hasn't too much publicity. Now the Economist tries to evaluate the success of recent strategies of many law firms to pursue internationalization:

"British firms will never succeed in America without adopting at least a modified system of "eat-what-you-kill", says John Lynch of Latham & Watkins, a Californian firm that is expanding rapidly in Europe. A merit-based system of pay has always existed in America, but rewarding by results has become much more prevalent in the past few years. It is now beginning to undermine the traditional career path of gradual progress to the top.

Marc Bartel at Lovells, a British firm that used to harbour American ambitions, agrees that compensation is the core of the problem for British firms wanting to gain a foothold in the highly competitive American market. In the most profitable British firms, a senior partner may earn �1m ($1.87m) a year, but a top American partner can expect to earn almost twice as much. While some British firms are beginning to consider the introduction of a modified lock-step system, most are reluctant to go all the way down the American road. "Pure eat-what-you-kill can be very ugly," says Hugh Crisp, who takes over in April as chief executive of Freshfields Bruckhaus Deringer, another of London's Magic Circle firms. "

"Instead of buying up other firms around the world, Slaughter and May, Britain's most prestigious and profitable firm, has built up an informal network of what it describes as non-exclusive referral relationships with the "best of the best" firms around the world. All of them have agreed not to compete in each other's home jurisdictions, and to share documents, exchange lawyers, invest in joint developments, run joint training programmes and pool bills. All but two of America's Charmed Circle have signed up to the network. The aim, says Slaughter and May's David Frank, is to provide "horses for courses"---the very best lawyer for any particular client in any particular jurisdiction. Mr Frank maintains that no single firm acting alone can provide this."