Michael Ford (post until Oct. 31/19)
Corporate, The Profession

Large law firms, networks competing on global stage

As law firms grow to meet client needs, they often consider joining a firm network or expanding internationally, but Toronto business lawyer Bill Northcote poses an interesting question in Lawyers Weekly: are networks and global firms competitors, or do they serve separate markets and clientele?

As Northcote, chair of Shibley Righton LLP’s business law practice group says in the article, the 18 largest law firm networks each include more than 7,000 lawyers and have members practising in 80 to 100 separate jurisdictions. The largest law firm is Dentons, which reportedly has some 7,000 lawyers in 52 jurisdictions.

While the two concepts often compete for the same business, Northcote says, there are distinct differences.

“Law firm networks are generally non-exclusive, informal, relatively inexpensive to participate in and have a modest number of staff and overhead. Within these networks there is considerable diversity in size, geographic scope, membership fees and non-legal resources available to members,” writes Northcote.

In contrast, he explains, “large international law firms are exclusive and have significant overhead but can deliver a worldwide brand and a more closely integrated billing process.”

For small and medium-sized enterprises in particular, law firm networks have more affordable legal fees and generally provide easier access to senior lawyers, writes Northcote, while international law firms have the advantage of larger marketing budgets to pitch the largest of cross-border transactions.

Recently, however, Dentons announced the formation of a new form of network — the Nextlaw Global Referral Network — without membership fees or territorial exclusivity.

“Its stated goal is to recruit, vet and admit a large number of law firms as members in the next few months, clearly a very ambitious and costly goal, particularly when no application or membership fee is charged. The attraction to applicants is obvious — the possibility of referrals with no cost,” says Northcote.

This is essentially an acknowledgement that multijurisdictional growth within a single law firm structure can be difficult and not sustainable. For example, the conflicts of interest that arise in a single large law firm are frequently insurmountable, says Northcote.

For law firm networks, a recent trend has been focusing on internal quality assurance programs, in part as a response to the brand equity enjoyed by large multijurisdictional law firms, says the article.

“In essence, law firm networks can flourish by providing international legal services in a cost-efficient manner to small and medium sized enterprises through reduced overhead and simpler structures, while international law firms can provide a more integrated offering (including invoices covering multiple jurisdictions) but at a greater cost due to higher hourly rates and more overhead which is less significant in only the largest international transactions and ‘bet the company’ international litigation,” says Northcote.

Between these two extremes, he explains, these two concepts compete.

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