Competing with Goliath: How independent law firms can compete with international law firms

22 Feb 2012Feature

Charles Martin

Almost all clients, big and small, now need legal advice internationally. Often this is point to point: they need specific advice in a very limited number of jurisdictions. Sometimes it is genuinely global and they need advice in many jurisdictions.

Some of the advice calls for bespoke, high-quality service and may have sweeping implications for that client’s business. Some of it is more bread and butter work.

Historically, many clients have felt that the right place to go for all of these types of advice is one of the law firms that have both offices in the client’s home jurisdiction and in all of the jurisdictions in which advice is required. Many law firms spawned global office networks and entered into mergers in order to provide this kind of capability.

Today, many clients turn to independent law firms to source a wide range of international advice. That may seem somewhat perverse in an age of globalisation: why do they do it?

Capabilities and conflicts

It is the long-term goal of many global firms to offer consistently high quality across their networks and practice areas. The reality today is that quality can be patchy across disciplines or geographies, particularly in specialist areas.

Often, a global firm will simply not offer enough competition law or tax work in a smaller jurisdiction, for example, to make it an attractive platform for a leading specialist practitioner. There may be many reasons for that, including charging structures (these can make building a domestic client base tricky) or the degree of personal autonomy that large international firms can offer.

Global law firms will often be reluctant to take on domestic clients sourced by a local office where the business interests of that client may conflict with an important global client of the firm. That is understandable, given the danger of being conflicted in acting for an important client, forcing it to work with a competitor global firm. Nonetheless, it can be a source of frustration for an ambitious younger partner who is looking for the professional satisfaction of building his/her own client base.

Leading practitioners in independent firms can be accessed through global firms as well as other independent firms. However, where an international firm also has a domestic office in the jurisdiction that has some relevant capability, it will often be difficult for a partner in another office of that firm to choose to go to an independent firm, rather than to the firm’s own office in the jurisdiction in question.

Independent firms devote a good deal of time to understanding the capabilities of leading independent firms around the world. The firm that they choose to work with for an IP matter in Italy (for example) will often be quite different to the firm that they would work with on a major corporate or tax matter. They seek to offer best execution, matching client needs to individual firms and often individual personal capability.

Integrated service

Global firms will often point to the benefits of working with a single brand around the world. This can be a powerful argument and addressing it is a competitive challenge to which independent firms have risen over ?recent years.

Over the past decade or so, information technology has driven a ?great deal of change in this area. It is now possible for independent firms around the world to work for clients or on a particular matter as if they were a virtual law firm.

If a combined report is needed on a point of law or a due diligence exercise has to be completed rapidly in multiple jurisdictions, it is possible to integrate the work product in a way that would have been impossible in years gone by (see box).

Cost considerations

Global law firms seek to introduce uniform charging structures for clients across their networks. Generally, this means that their rates will be higher than domestic firms in jurisdictions where the cost of doing business is relatively low.

That is understandable from the perspective of a global firm, given that many seek to operate a global profit ?pool and incur significant management ?and other costs that need to be passed ?on to clients.

Working with independent firms in such jurisdictions can therefore give rise ?to cost savings.

Local know-how

Leading independent local law firms can offer clients a degree of understanding about how to get things done in their jurisdiction, which local offices of international firms may not be able to ?offer to the same extent.

That is particularly true in matters such as litigation procedures, obtaining regulatory consent and second-guessing what the practical hurdles and issues will be, for example, in relation to dealing with the workforce.

Many large international clients also find that instructing a well-respected local firm creates a more empathetic environment through which to interact ?with local counterparts.

Service standards

One of the key drivers of international law firm growth has been the difficulties that both clients and instructing firms have historically experienced in obtaining the level of responsiveness and quality that international clients seek.

At one time, this was not only true in relation to emerging jurisdictions but also in sophisticated jurisdictions, where cultural issues nonetheless meant that independent firms did not operate to the highest levels of responsiveness.

There is no doubt however that today independent firms around the world know full-well that if they want to survive and do work for the highest-quality clients, they need to match or exceed the service standards of global firms.

They also know that the internal market between independent firms means that if they let an instructing firm down, it is unlikely that they will be used again by that firm. That level of competition has undoubtedly helped to raise standards considerably. Indeed, this is a force of competition that global firms do not have to quite the same degree.

Ensuring that clients whose core relationship lies elsewhere in the firm get priority treatment in a local office is a real challenge for many global firms. The independent law firm model invariably delivers the competitive tension that encourages work of the highest quality.

I would not suggest for a minute that global firms do not have much to offer certain clients for some of their work. Clients that operate globally may well find it more efficient to have certain categories of their work (such as regulatory compliance) carried out by a single firm on a global basis. But that is not true for all clients or for all of their work. Many independent firms now operate globally in a highly effective way to respond to this market need.

Developing an independent international strategy

An independent international strategy is not about waiting for the phone to ring. It is about building knowledge and working to integrate the service that independent firms offer to ensure that it is of a standard that is at least as good as international firms. In order to do that, the following are required.

One fee structure. Independent law firms now almost invariably buy in to the fee structure negotiated between the lead independent firm and the client. The days of abort fees and panel discounts being unacceptable to the independent firms instructed by the lead independent firm have long gone.
One engagement letter and one bill. This is an important convenience for many clients and one that underscores the importance of the lead law firm accepting responsibility to the client for integrating the service.
One client contact. It is essential that the lead firm coordinates the arrangement efficiently and that advice is properly communicated and understood. In return, the law firms in other jurisdictions must have as their objective the enhancing of the relationship between the client and the lead law firm and giving their very best service.
Streamlined systems. Independent firms must ensure compatibility of IT systems, not only in obvious areas such as document production, but also in billing efficiently and delivering, where appropriate, intranets and the like.
Strong communication. Ensuring that personal working relationships are good is essential so that communication is efficient and problems can be resolved effectively. Global firms invest in offsites and the like and independent firms need at the very least to replicate this level of personal relationship.