Thursday, 04 December 2014

Law firm networks: the other route to going global

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Law firm networks: the other route to going global

Whilst reading up on the law and Googling yourself dizzy about the big legal world out there you may have stumbled upon things known as law firm networks. What exactly are they? How do they operate? What’s their purpose? The Lex 100 takes a look…

A law firm network is a membership association of independent law firms based across a variety of jurisdictions. Each firm in a given network retains sole responsibility for its own work and the representation of its own clients, but fosters close relations with its fellow member firms. The reasoning behind this is that, by having connections with firms based around the world, it is easier to represent clients whose businesses and interests extend beyond the borders of their base jurisdiction. The vast majority of such networks are non-exclusive, allowing member firms to refer business to any firm they like, whether a fellow member or not, as their primary duty is to serve the needs of their clients in the best way possible. That said, if a client needs to work with a firm in a new jurisdiction it’s never done business in before, its fellow network member firm makes a good place to start.

The rise of networks

It is striking to note that the oldest and most prominent networks all seem to have emerged in the late 80s/early 90s. This band of upstarts includes the US-headquartered giants Lex Mundi and TerraLex, whose membership stands at over 21,000 and 17,000 respectively and stretches to over 100 countries each. Lex Mundi’s website defines its organisation as an “assurance of connected, on-the ground expertise in every market in which a client needs to operate,” and that by “working together, our members are able to seamlessly handle their clients’ most challenging cross-border transactions and disputes.” TerraLex, meanwhile, describes its mission as “to help member firms serve their clients' legal needs and business interests through a worldwide network of quality law firms that meets high professional standards.”

Another network which was part of this initial wave is UK-headquartered Multilaw, whose executive director Adam Cooke describes the early 90s as a period in which the world was “opening up.” He says it heralded “the emergence of the first global law firms, and firms that weren’t a part of these global giants started to worry. There was a view that global firms might take all the global business. The response from those non-global firms was to try to come together across the world and form networks.”

Multilaw now numbers over 8,000 lawyers across 60 countries, and Cooke defines its function as “allowing good, independent, well-established firms in particular jurisdictions to service clients with needs in more than one jurisdiction.” He also feels that the close relationship between Multilaw’s member firms is integral to its success, adding “if a member is not engaging in the network we encourage them to leave. This isn’t just about membership fees.”

The firm view

Shoosmiths is the English member firm for the World Services Group (WSG). Gary Assim, one of the partners responsible for managing the firm’s relationship with its network, says that membership of WSG gives the otherwise domestic firm an invaluable international reach. “From the point of view of the firm, it gives us experience of dealing with people outside of the UK. It also provides further income for the firm, because it is work which we otherwise wouldn’t have got, and it provides the potential for new clients.”

In illustrating how the network model can be a useful alternative to the global law firm model, Assim recounts the example of a FTSE 100 client which employs Shoosmiths for middle-sized corporate matters and a City firm for higher value cases. The client wanted to purchase a company in Birmingham, Alabama and asked both firms about how to obtain American counsel. The City firm advocated their New York office while Shoosmiths were able to directly refer the client to a fellow WSG member based in Birmingham, Alabama. The client engaged the Alabaman firm, which was able to advise the client to wait for the state government to introduce imminent tax-break measures before purchasing the company. The City firm’s New York office, Assim suggests, would not have possessed this local knowledge. This offers us an example of how networks function and differentiate themselves from the global firms and illustrates how they offer smaller firms a chance to get in on the international action.

Taylor Wessing partner Charles Lloyd says that “one of the reasons that the successful networks have survived is that they’ve maintained the quality of the law firms in them. Good quality law firms are great adverts for the networks.” Taylor Wessing is the sole British member of the Interlex Group network, which generally operates with a ‘one firm per jurisdiction’ policy. Like the other firms mentioned, the Interlex Group operates on an entirely non-exclusive basis. “Ultimately, it’s the client’s choice,” says Lloyd, “it’s a purely loose arrangement of top-quality law firms in different jurisdictions and acts as a port of call in allowing us to provide a more seamless service to our clients.” Taylor Wessing has its own international presence with 26 offices around the world, and Lloyd accepts that “tensions can arise” as a result, but that the client’s interests and requirements are always foremost. Through both its own firm network and its membership of Interlex, Taylor Wessing’s international capabilities are considerable.

It is no revelation to say that we are living in a globalised world. This trend accelerated in the late 80s/early 90s and hasn’t stopped since. Law firms had to change and adapt in order to meet this new reality and they largely did this in two ways. The direct approach was to expand their own businesses and open up offices all over the world, and today Baker & McKenzie leads the way with offices in 47 countries. Other firms took the networking option, retaining their own independence whilst coming together with firms in other jurisdictions to assist one another in satisfying the needs of increasingly international clients. As you continue to build your knowledge of the legal industry, it’s worth remembering that even domestic firms can be international.

 

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