A View from Germany
27 March 2000
European Finance Litigation Review — February 2014: litigation concerning banks’ disclosure requirements and more
20 February 2014
24 October 2013
25 March 2014
13 February 2014
30 October 2013
Ambition and aggression are not qualities normally associated with German lawyers, at least not until recently. The regions were full of lawyers happy to go home at 5.15pm (probably a couple of hours after their secretaries). And while this was a sign of just how protected the German market was, the manner in which this attitude has prevailed demonstrates something else.
Expats living in Germany drone on about how important the Mittelstand is, without expecting that anybody back home (apart from Will Hutton) believes them.
But the backbone of these law firms' practice has been this sector of the economy and lawyers have been able to bill almost what they like.
Two true stories from the south west of the country serve as an illustration. The first involves a family which owned a large Mittelstand industrial company. The family decided to sell because of the acrimony between siblings.
One side was represented by a small boutique, the other by a large well-known firm. Both managed a successful sale, structuring it so that all sides of the family saved hundreds of millions in tax.
The larger (and now very well-known) law firm billed on an hourly basis - some Dm60,000 (£18,820). The other on the official Law Society fee-rates of the BRAGO: for Dm17m (£5.3m).
Case two involved a small administrative firm which advised a residents' group protesting against the widening of one of the major A-roads in the state. After 30 years the authorities finally offered an out of court deal, which meant that they were obliged to pick up the opposing sides' legal costs. The authorities forgot to put a cap on the costs in the settlement and were promptly presented the following week with a bill of Dm20m (£6.3m).
The result of this embarrassment of riches is a relaxed attitude to the developments in the legal market in the rest of the country. It has been said many times, but is worth repeating - international firms have not even begun to penetrate the Mittelstand.
But the Mittelstand is not only the real engine room of the German economy, it is also what is driving export-oriented growth. The mid-sized law firms they instruct do not seem to need to do anything.
And yet there is still an itch which cannot be scratched. Being regarded as a well-paid member of one of the most respected professions is not enough anymore. Being a leading firm in the provinces is not either.
For all the local patriotism there is a degree of frustration at the provincialism of the German regions, even though it is probably precisely that characteristic which has allowed the firms to enjoy the protected and highly lucrative market.
Ambition is a nebulous thing. As the above examples show, it is not just about money - you can get that in the provinces as well. But quite why this shift is taking place is puzzling. Clearly it helps that lawyers can now read about what is happening with their colleagues elsewhere. But in the end the reasons probably lie in the tectonic shift in the German market over the past few years.
German lawyers used to focus on giving opinions on legal problems. Since they were advising on matters of law, it made little difference who or how big their clients were. Recognition among colleagues for any opinion or commentary on the problem was the basis of a reputation.
Clients' problems are now transactional - the effects of credit differentiation in Germany being particularly swift and far-reaching. Or rather the clients want transactions to be seen through without problems. A sophisticated commentary on the legal issues of the deal is not the basis for fame anymore - it is what deals you did for which clients.
Ambition is shifting from the law in principle to the client in practice. And the provinces want a part of it.
Aled Griffiths is editor of the German legal news magazine, JUVE Rechtsmarkt. He can be contacted at firstname.lastname@example.org