Banks' in-housers hold the aces as law panel reviews gather pace
21 March 2005
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5 August 2013
When ABN Amro kick-starts a review of its law firm panel later this year, it will be joining an ever-growing list of banks that are overhauling their relationships with external legal advisers
In the past 12 months alone, the likes of Abbey and HSBC have concluded panel reviews, while Barclays, Deutsche Bank and UBS are all examining their relationships with outside counsel.
Although cutting legal spend is an important factor behind panel reviews, to many in-house banking lawyers, policing the use of external legal advisers is just as important, as it is a key part of risk management.
One senior banking partner at a top 10 City firm says that in-house lawyers are increasingly influential. He argues: "[They] have become much more prominent in the appointment of external advisers and in some cases a law firm can't be instructed without the legal department's approval."
Indeed, in the case of Deutsche, the global review of its law firms is being motivated by a desire to cut both its external advisers and its legal spend (The Lawyer, 20 September 2004). The German bank uses more than 20 law firms for US advice, so the impact of the review is likely to be felt most strongly in New York, where the panel system is rarely used. As first revealed by The Lawyer last week (14 March), Deutsche is considering various fee structures as part of its review, with the rebate system currently emerging as themost popular. Deutsche also considered the introduction of a single global fee rate, such as the one understood to be favoured by HSBC when it undertook a panel review last year. However, Deutsche dismissed parity pricing as being too convoluted.
Historically, it is understood that Barclays had a system of rebates, although this system was abandoned when it concluded its last panel review in 2003 as it proved too difficult to police.
Barclays, which has embarked on yet another panel review, will undoubtedly be looking at ways to control its legal spend.
Barclays general counsel Mark Harding declined to comment on the bank's ongoing review, but did say: "We try to provide firms information on what their share of the pie is. But those figures shouldn't be taken too literally because firms submit bills at different rates."
The current review was launched so soon because Barclays was only able to agree to hold fee rates in the 2003 review by reducing the contract from its usual three-year period to two. One banking partner compared Barclays' system to a fixed-rate mortgage, saying no firm would want to be stuck with the same rates for too long.
A source close to Deutsche argues that the balance of power had not shifted in favour of private practice lawyers. "Magic circle firms have to understand there's a chasing pack who are prepared to offer bigger discounts," said the source. "The businesspeople can't be compelled to use [magic circle] firms when they've got US firms doing the work more cheaply and just as well."
To date, private practice lawyers have not resisted the creation of panels, believing that banks are pretty fair in the way they allocate work.
However, one partner at a City firm says he would like to see more transparency in how work is split between the firms and how often banks go off-panel. "Some banks need to be more open about how they operate. There also needs to be greater recognition on the part of the banks that it's a two-way arrangement and that it can't be just one-way traffic," he argued.
For instance, Barclays very rarely instructs firms outside its panel. "There has to be a good reason for us to go off-panel," said Harding.
However, in stark contrast, the Royal Bank of Scotland (RBS), which launched its first ever group panel in 2003, often farms out work to non-panel firms. RBS declined to comment.
Two-way traffic it may be, but competition to be a bank's preferred adviser remains fierce, and even magic circle firms are not so powerful that they can dictate the conditions of a panel place.
ABN Amro (review to be launched later this year)
Allen & Overy (A&O), Ashurst, Clifford Chance, Davis Polk & Wardwell, Denton Wilde Sapte (DWS), Freshfields Bruckhaus Deringer, Linklaters, Norton Rose, Simmons & Simmons, SJ Berwin, Slaughter and May and White & Case.
Abbey (review completed earlier this month)
A&O, Ashurst, Barlow Lyde & Gilbert, Clifford Chance, DLA Piper Rudnick Gray Cary, EMW Law, Eversheds, Freshfields, Lester Aldridge, Lovells, Slaughters and Travers Smith.
Barclays (review ongoing)
Addleshaw Goddard, A&O, Ashurst, Barlow Lyde, Berwin Leighton Paisner, Bond Pearce, Boyes Turner, Clifford Chance, CMS Cameron McKenna, Davenport Lyons, DWS, Dickinson Dees, DLA, Eversheds, Fennemores, Freshfields, Halliwell Landau, Herbert Smith, Linklaters, Lovells, Osborne Clarke, Pinsent Masons, Richards Butler, Rollits, Sidley Austin Brown & Wood, Simmons, SJ Berwin, Slaughters, Taylor Walton, Ward Hadaway, Weil Gotshal & Manges, White & Case, Withers and Wragge & Co.
Deutsche Bank (review ongoing)
A&O, Clifford Chance, Freshfields, Linklaters, Lovells, Simmons and White & Case.
HSBC (review completed December 2004)
Global panel - A&O, Clifford Chance, Freshfields and Norton Rose.
UK national panel - Addleshaws, Camerons, DWS, DLA, Eversheds, Irwin Mitchell, Morgan Cole, Pinsent Masons, Slaughters, Stephenson Harwood and Wragges.
UBS Investment Bank (review ongoing)
A&O, Clifford Chance, Freshfields, Herbert Smith and Linklaters.
Source: The Lawyer