RSG

European Lawyers: Collaborating or Stagnating post the Crisis?
by Reena SenGupta

The FT’s investigation into innovation in the European legal industry is now in its fifth year. Last year we covered the lawyers’ role in the credit crisis, an extreme set of circumstances in which the lawyers took centre stage. We called the 2009 report the ‘Change’ issue as many commentators predicted that the crisis would accelerate fundamental change in the profession. Were they right? Has the legal profession answered the challenge of one of the severest economic crises since the Great Depression or is it back to business as usual?

We called the 2010 report, the ‘Collaboration’ issue in order to prompt law firms and in-house legal teams to show us how they were working differently to service their business clients. The response from the industry was enthusiastic. Over 600 submissions from law firms and legal departments all over Europe were received this year. After four months research and 600 interviews, the RSG Consulting team and the FT journalists have come to the conclusion that there is no one answer to the question. It is both yes, there has been significant change and no, in some areas, it is business as usual.

In a conservative sector such as the legal profession, change tends never to be fast. Instead it comes incrementally. But taking a longer-term retrospective view the one area where firms have made strides has been in the area of efficiency. Unlike other industries or professional services sectors, law firms have historically been able to hike prices and enjoy double digit growth without delivering better quality service or new and different products. They have in effect been able to maintain inefficient practices whilst still growing their businesses.

The Efficiency section in this year’s report sought to un-cover the improvements law firms have made to the delivery of their services. The good news is that many more firms are embracing the concept of un-bundling their services so that repetitive or low value work can be done either through the smart use of technology or in a low cost jurisdiction. Legal process outsourcing, which was commended as the cutting edge of innovation a couple of years ago is now firmly ensconced in the industry. No one would deny an LPO provider a seat at the ‘panel’ table.

The next iteration of un-bundling has seen other alternative suppliers, such as Axiom, the virtual law firm, consolidate its position in the market.  Another interesting trend has been “insourcing”, which reflects the leaps that in-house legal teams have made in terms of becoming smarter in the way they deliver legal services. Insourcing is where work that was previously outsourced is kept in-house where it can be transacted more efficiently.

One of the most common client complaints about law firms centre around fees and billing practices. A majority of firms in the UK and to a lesser extent in continental Europe have accepted the need for transparency and predictability and relegated the hourly rate to one of several billing approaches. Whilst some firms have commendably shared risk with their clients, the innovations in this area that really impress are those fee arrangements which are sustainable and repeatable such as the litigation self-funding model designed by Addleshaw Goddard.

Although firms have made strides in accepting the need to be efficient, law firm management overall remains relatively un-changed. No major law firm has radically overhauled the compact it has with its people or the partnership structure. The IE Law School in Madrid along with the IE Business School has devised the ‘Lawyers Management Programme’ to tackle the perceived need of law firm managers to improve their skills and business education. Unbelievably, it is the first, comprehensive global leadership programme for senior lawyers.

Programme director Moray McClaren says the inspiration for the programme came from the worldwide General Counsel of businesses such as British Airways, General Electric, Nokia, Shell and Vodafone.  “With the onset of the crisis, these GC’s told us that their external law firms were in acute need of management training.” The LMP is both academic and commercial and draws on experts from other leading education centres such as Harvard, Oxford and Georgetown with input from managing partners from major law firms.

In the wake of the credit crisis and recession, lawyers are battling directly for clients in a different business environment. “The nature of the work is changing,” says Avril Martindale, Intellectual Property Partner at international law firm Freshfields Bruckhaus Deringer. “It is becoming more genuinely cross-border and difficult, with so many interests to balance.”

This is clearly seen throughout the report as lawyers have to take on a host of different roles from diplomat to inventor, from coach to conservationist, from deal doer to business man. Emerging markets such as China and India are bringing IP considerations to the fore and increasingly corporate lawyers are finding that a more generalist knowledge of the law is crucial – a direct reversal of the trend in the 90’s and early noughties, which saw the private practice practitioner move steadily into specialist silos.

If there was one refrain throughout the research for the report, it was this emphasis on market complexity. Deals such as Freshfields’ work for Ford in its sale of Volvo to Geely the Chinese car maker is an example of the impact of emerging markets and the importance for lawyers to be able to straddle cultures.

At the forefront of leading this cultural integration are actually the General Counsel working for major companies. These lawyers who’s position has been far more clearly transformed by the crisis find themselves at the heart of business, respected in a way that the legal function was not three years ago. An example of this is Philip Bramwell who took on an intensely challenging role as legal counsel for BAE Systems in early 2007 at a time when the company was battling allegations of bribery. In three short years, Mr Bramwell has made sure the legal function is represented and involved in all the key management teams of the organisation and made its value appreciated.

The FT is publishing once more its index of the most innovative law firms in Europe as they have emerged from this year’s research. Moving up four places into pole position is Eversheds. The firm has a track record of being first in a variety of ways and probably ruffled more feathers in the City when it came top of the Superbrands survey in February 2010, beating magic circle law firms. Helen Mahy, General Counsel of National Grid called the firm, “the new kids on the block” three years ago. These kids have finally grown into adult players in Europe, with a genuine commitment to trying to do things differently.

(An edited version of this article appeared  in the FT Innovative Lawyers report on the 21 October 2010)