It’s A Small World: Globalization

It’s A Small World: Globalization

As technology breaks down barriers of time and distance, and with business going global, law firms are expanding internationally, as well. More than half of 2012 AmLaw100 firms now spread across three or more continents. Between 1992 and 2012, the number of overseas offices of National Law Journal’s top 250 firms increased more than two and a half times and the number of lawyers in those firms’ international offices increased more than eight-fold.

Even as the world experienced a financial slowdown, the interest in global expansion by law firms exploded over the past several years. An advantage to such growth is that a diversity of practices and geographical locations offers stability and balance. When one industry, practice area, or geographical area experiences a downturn, others remain strong. In addition, the deregulation of legal markets in foreign jurisdictions, particularly South Korea, played a strong role in promoting new foreign office activity. Fourteen US firms announced plans to open an office in Seoul and others filed applications to do so. As international business grows and regulations against foreign lawyers practicing law in additional countries relax, more law firms will expand around the world.

Currently, US- and UK-based law firms dominate the international legal market. In 2012, Canada, Australia, Brazil, Africa, and Asia were key locations of interest to US and Eurozone law firms. However, the creation of King & Wood Mallesons (Chinese/Australian law firm combination) with over 1,800 lawyers, effective March 1, 2012, was particularly significant as it represented the first Chinese law firm actively expanding in the global market. More law firms from other countries will follow suit.

As law firms grow, either nationally or internationally, they try to shift perceptions away from having a home base and satellite offices. Many firms no longer have any clear center of gravity because some of their subsequent offices grew larger than the original home base. The trend is toward seamlessly servicing clients with multi-office teams and referring business back and forth between many offices of the same firm.

One strategy for global growth is to merge with an existing firm in the target international location. For example, in late 2012, SNR Denton announced a three-way tie-up with Canada’s Fraser Milner Casgrain and European firm Salans, and U.S.-based Fulbright & Jaworski and U.K.-based Norton Rose announced a combination effective June 1, 2013. These cross-border combinations were quite significant in size, creating firms with thousands of lawyers worldwide.

Achieving a successful merger between two or more domestic law firms is difficult enough, but the difficulties are magnified in the international arena. There are greater gaps between corporate cultures, pay structures, recruitment and marketing practices, rules regarding conflicts of interest, and styles of doing business in each locality. These issues are exacerbated further where there are differences in language, values, and beliefs.

To circumvent these difficulties, many international law firm combinations utilize a Swiss verein holding structure which is a looser organization than a true merger. In fact, vereins and verein-like firms now hold five of the top 25 spots on the AmLaw Global 100 list. These flexible structures allow for central management while the participating entities maintain their individual legal forms and financial independence. As the global legal market continues to evolve, there likely will be more such combinations.

Another global expansion strategy used by law firms is to follow one or more existing clients doing business in a new international location. While technology enables lawyers and clients to stay connected regardless of geography, opening an office in the various locations where clients do business is more effective because cultural, business, and legal nuances can affect the delivery of legal services. The most common mistakes, however, are to either overestimate the business opportunity or underestimate the costs of establishing an office in the new location.

Despite these challenges, the trend toward globalization continues unabated. This means US-trained lawyers with fluency in a variety of languages and cultural sensitivity are even more valuable in the future legal marketplace. Such skills won’t necessarily trump the requirement for top-notch educational credentials and employment experience, but they enhance a candidate’s chances of being hired by a US-based global law firm either here or abroad. In a 2012 Robert Half Legal survey, more than 42 percent of law firms said they see an increased need for attorneys with foreign language skills; about 88 percent of attorneys interviewed said Spanish is in greatest demand, with Chinese, at 9 percent, ranking second.

In particular demand are foreign-born, US-trained lawyers, who are native speakers of other languages in addition to possessing excellent English skills and cultural competency both here and abroad. Similarly, for a foreign-trained lawyer with an LLM degree from a top US school and admission to the bar in the state in which the lawyer wishes to practice, foreign language skills and understanding of other cultures might be particularly valuable to a firm that has offices in the candidate’s previous country of residence. It’s interesting to note that, in 2012, the ABA voted down a proposal to offer its accreditation to foreign law schools. Nevertheless, whether educated here or abroad, candidates with rudimentary foreign language skills will find it worthwhile to further develop them to broaden their career options.

Valerie Fontaine
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