Outlook for law diverges in Asia, Europe

By Edward Poll

The Daily Record Newswire

I have the opportunity to write for and interact with the members of the Canadian Bar Association, and Canadians regularly tell me that they deal with foreign legal issues far more often than their American counterparts. Even medium-size Canadian law firms regularly deal with the European Union, international tribunals and foreign trade regulations, well beyond what the typical U.S. firm does. American law firms, of course, are not completely oblivious to the wider world of the law. Such influences include outsourcing of legal work offshore, and regulatory changes in the United Kingdom and Australia that allow nonlawyers to take an ownership stake in firms. But beyond this, experts discuss elements of a future law firm world with much broader impact on American lawyers.

The first of those elements is the growing role and economic power of China, suggesting that there will be a supply problem for legal services. The contention here is that the future will be pan-Pacific and that the current demand problems for law firms will be seen in retrospect as a mere blip. This scenario suggests, further, that there will be little pressure on fees; that is, that law firms may well return to the annual fee increases of 3 to 5 percent, or more in some cases thanks to demand for services from the Asia-Pacific powerhouse.

The second element centers on Europe, and the opposite suggestion that there will be an abundance of lawyers in the profession. Because of the oversupply, clients will succeed in their efforts to force legal costs downward; and nonlawyers will be allowed into equity positions. Many firms in the U.K. already use only the fixed fee billing model; there is no focus on the billable hour. They emphasize improving their technology infrastructure through such tools as knowledge management databases. With fixed fees, any improvement in efficiency will go directly to the bottom line. Such an arrangement is a definite contrast to the existing American law firm model, where profit is increased by raising the hourly billing rate. Clients have already revolted against annual price increases, so alternate fee arrangements and increased use of technology are increasing here.

Whatever the direct impact on American lawyers from the English law approach, globalization will affect all lawyers. Chinese investment expansion will require local lawyers. Thus even a lawyer in a small community may now be representing a foreign investor; a family law practitioner may have clients subject to an international treaty and have to take depositions outside of the United States or even be subject to the decisions of a foreign arbitration tribunal; and mergers between U.S. and non-U.S. firms will become more frequent. And of course outsourcing is the genie that likely will never return to the bottle.

We perhaps are seeing the development of two or more separate worlds of law. There are the large firms representing global clients. And then there are the rest. These other firms may have global clients and global issues, but their real focus is on small to mid-size businesses and individuals domestically. This may not be the only scenario; but it suggests the change that is coming.

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Edward Poll, J.D., M.B.A., CMC, a law practice management thought leader, is currently on a national tour to speak to bar associations and law schools.

Published: Wed, Oct 19, 2011

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