International law firm networks - IBA panel explores the good, the bad and the ugly
International law firm networks and alliances offer firms and clients many benefits - A recent IBA session involving a panel of industry experts discussed the pros and cons
Law firm networks: A useful strategic device for independent law firms
Alliances can be a very useful defensive tool to protect client relationships, so that clients do not defect to larger firms with more developed international structures. It is also a useful device to attract clients away from firms who cannot offer the international connectivity
A panel session hosted by the International Bar Association Law Firm Management Committee’s Business Development Working Group at the 2016 IBA Annual Conference in Washington DC, brought together a range of experts from the legal profession and from industry to discuss the benefits but also the drawbacks of membership in and use of international law firm networks. The panel, chaired by Melissa Davies of MD Comms, featured Alliott Group CEO James Hickey and London law member Paul Marmor, Head of International Services at Sherrards Solicitors.
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The importance of being non-exclusive
Dmitry Afanasiev, Chairman of Egorov Puginsky Avanasiev & Partners (“EPAM”), a leading Russian law firm, explained, and the panel agreed, that being part of an alliance or network is similar to the difference between being in a fixed, long-term relationship such as marriage and dating. However, he empasised: “It is important to be able to use other law firms and not be restricted to using a law network member. The important point is to deliver quality to the client, to ensure the client is best served in every circumstance. The analogy can be made between the local restaurant and a chain restaurant: the chain restaurant may be safer and more predictable, but the reality is that the best restaurant in town is always the local one!”
In Dmitry's view, to be competitive, members of a law firm network need to demonstrate five attributes:
- A high level of academic knowledge
- Adherence to international standards
- Local access
- A commercial approach, and
- Sound judgment.
One size does not fit all
Alliott Group CEO James Hickey gave his view that one size does not fit all when it comes to aligning with an international legal network. In Hickey's view, there are significant differences between the alliances and networks out there in the market and "firms should find the group that best fits their size, needs and profile, as well as their culture".
Hickey also mentioned that groups have different strategies, some being focused on size, practice areas, sharing of technical knowledge or business generation, while others are multidisciplinary, bringing together other professional advisors such as accountant: "Different professions can bounce off each other very successfully. There is a growing view that lawyers can learn from the innovative, more business focused approach of those in the accountancy profession."
Hickey also emphasized that joining a law firm network must be a "firm-wide decision" with as many at the firm getting involved as is practical to maximize the perception of value in the eyes of staff and clients. In Hickey's view, firms that participate and that "get it" will add value to the alliance as a whole.
In respect of exclusivity, Hickey comments that being a member of a law firm alliance should not get in the way of any existing relationships a firm has, adding that the majority of law networks do not have exclusive referral agreements.
Whichever law network a firm joins, Hickey stressed that they should go into the relationship with their eyes wide open and that value should be assessed regularly based on original objectives, usually revenues generated and time invested.
“Some firms do have a concern about losing business by promoting their membership, but in practice when firms evaluate their competitors they will find that many of their competitors, or the firms that they are doing business with overseas, are already members of one group or another."
James Hickey, CEO, Alliott Group
Choose strategically, and then make success your mission
Panelist Nankunda Katangaza, Director of Hook Tangaza International and former head of the International Department of the Law Society of England and Wales, gave her view that law firms must be strategic in their choice of international law firm network, with firms identifying the gap in their service provision and then deciding if membership of a legal network is the best solution. Other strategic objectives, according to Katangaza could be to increase profile, build technical capacity or develop relationships and new sources of referrals beyond their geographic borders.
“Do your research: Do you need a specialist law firm network, a region-specific group or a more general network? Identify the appropriate group and whether you can meet the membership criteria."
Nankunda Katangaza, Director, Hook Tangaza International
The different features and benefits
Panel chair Melissa Davis pointed out the differences in what is on offer from different legal networks, with some being more formal than others in their style and structure. Davis also point out how levels of cohesion vary from network to network:
"There are global networks that share common branding and profits, but also groupings of independent firms that work together with some level of cohesion and that are looking to generate work for each other."
Commenting on the fairly standard approach of member firms being given their own patch, Davis comments: “Often firms will receive an element of exclusivity, in terms of being given a territory, which may consist of a city or a particular region but this too, will vary from network to network."
Protecting the client base from larger firms
Sherrards Solicitors partner, Paul Marmor highlighted the often less tangible benefit of being able to protect the firm's client base and put clients with into the capable hands of known lawyers around the world:
"While law networks can generate referrals, they can also be a very useful defensive tool for protecting client relationships - clients do not defect to larger firms with more developed international structures. It is also a useful device to attract clients away from firms who cannot offer the international connectivity."
International experiences for legal staff
The benefits of being able to expose fee earning staff, particularly at the more junior end of the scale, to international work and to reward them through participation in an international internship or secondment, are, according to Marmor, other valuable benefits of law firm network membership:
"Being able to offer staff international travel and placements can work wonders for a mid-tier law firm competing with the top tier global firms in terms of attracting and retaining legal talent.”
The in-house counsel view
Jim Neath, Former Head of Global Litigation at BP, gave his view as a previous buyer of legal services, commenting that the fast globalization of the legal services market is rewarding law firm networks /alliances that are capable of providing consistent value across borders: "Above all else, a buyer needs to know that law firms can do the job and are going to deliver quality. Corporate clients are seeking to capitalize on legal market innovations that can deliver better overall value than large, high priced international law firms."
The importance of consistency and clear communication processes
Law firm networks/alliances must assure corporate buyers that they can deliver: (a) consistent quality legal services across regions; (b) streamlined, single point communication and coordination; and (c) commercial convenience in pricing, invoicing and payment flow.
Be alive to liability risks
Paul Marmor, discussing potential drawbacks with law firm networks, pointed out that firms need to tread carefully around shared exposure and liability. He pointed out that the risks are heightened where there are very close ties between member firms that share common identity elements and common procedures. While this a complicated issue, Marmor explained that there is case law in different parts of the world, and that firms should do their own due diligence in terms of whether a legal network is turning into an international firm or quasi-firm.
The importance of good governance
Marmor also pointed out the need to join a legal network that is well run by an independent secretariat or executive office paid for by the members, rather than join one that is controlled by a few dominant firms.
Can legal networks compromise independence?
Bryan Bourke, Managing Partner of William Fry, a leading independent Irish law firm, commented that he felt that in some smaller or emerging markets, joining an international law network might limit firms' opportunities to work with firms from other markets, particularly in those from cities or countries where the network is perceived to be particularly strong.
In Bourke's view, in a specialist area where the market is changing rapidly, tax for example, firms might want to look at joining a niche or specialist legal network, rather than a broader focused group.
While diverse views came from the panelists, there was consensus that no two law firm network are the same agreed that a wide variety of international law firm networks and the benefits to be accrued will vary from firm to firm. With the world becoming a smaller place logistically and electronically, the panel also agreed that legal networks are going to become increasingly important to independent firms