Childs defends US headcount drop as CC posts worst magic circle figures

Matt Byrne and Andrew Pugh report on CC’s dwindling people power

THE NEWS that Clifford Chance’s US partnership has shrunk over the past year may not come as too much of a surprise.
After all, the firm recently embarked on one of the widest headcount-slashing exercises of any of the world’s largest ­international law firms.

But the revelation that it has reduced headcount more than any of its biggest UK competitors over the past five years, a fact flagged up by figures compiled for this year’s Transatlantic Elite, confirms something that, ­anecdotally, rivals have privately been claiming for years. Despite a trailblazing ­merger and years of investment stateside, Clifford Chance is still struggling to make significant headway in building a credible US practice.

Last year the total number of lawyers in Clifford Chance’s US practice fell by 14.7 per cent, from 341 to 291. Following its global ­restructuring, that drop was to
be expected. But over five years any growth in its total number of US lawyers was conspicuous by its absence.

Clifford Chance currently has 291 US lawyers compared with 289 in 2006. That 0.7 per cent drop fails to take into account the reduction between 2005 and 2006, when the total number of lawyers fell by 11 per cent, from 324 to 289, as a result of the firm’s West Coast ­operations being cut adrift.

Arguably more worryingly, ­Clifford Chance is the only magic circle firm where the total number of partners has shrunk over the five-year period, from 75 in 2006 to 59 last year, a fall of 21 per cent. The drop from 2005, when ­Clifford Chance had 82 US ­partners, is 28 per cent.

Allen & Overy (A&O) is the only other UK big four firm to see a drop in partners, with a 12.5 per cent fall on last year. Over the five-year period, however, A&O saw a 34.5 per cent rise in its US partner count.

Clifford Chance managing ­partner David Childs insists that the figures do not reflect a lessening of appetite for the US market at the firm.

“We certainly have a lot of focus on the US and will continue to build up the practice, particularly in the area of cross-border work, which is one of our major strengths,” Childs emphasises. “We’ve worked on some pretty impressive deals in the US, and the litigation side – led from DC – brings in work for the rest of the firm, work that tends to require a lot of lawyers.

“A lot of work comes from the US – it’s a very important part of our global practice.”

It is Clifford Chance’s US ­litigation team in particular that has been in the spotlight over the past 12 months following a series of exits and redundancies.
High-profile departures include those of former global heads of ­litigation Mark Kirsch and Peter Chaffetz.

Earlier this year the firm went some way to rebuilding its US ­disputes practice when it hired trial specialist Bill Wallace, ­formerly a partner at Milbank Tweed Hadley McCloy.
“We went through a partner restructuring and added to that we significantly reduced the scale of the litigation practice in New York,” adds Childs. “But we lost very few partners that we didn’t want to lose and we continue to make lateral hires.”

The headcount statistics also highlight the alternative models that the UK’s four largest firms have employed to try to crack the US. Arguably the most striking ­contrast is between Clifford Chance, where the US platform was originally based on its 1999 merger with Rogers & Wells, and Freshfields Bruckhaus Deringer.

The latter has been a slow grower in the US, but has ­accelerated significantly in recent years. Its growth since last year was the same as Linklaters’, 8 per cent, but over the five-year period Freshfields has outpaced any of its rivals, boosting its US headcount by 74 per cent.

During the past year alone Freshfields has added seven ­litigation partners, giving it a US disputes practice for the first time.

“For years we were in opportunistic mode, but not necessarily in growth mode,” says Freshfields US managing partner Julian Pritchard. “You have to choose the right time to touch your foot on the gas pedal.”

Freshfields’ decision to launch a litigation practice in the US last year appears to have been ­vindicated, with the firm claiming that it is currently advising on over $45bn (£29.66bn) worth of ­disputes.

“The non-US firms that have built successful New York ­practices are those that have built practices that plays to the strengths of the firms elsewhere, and whose growth has been ­driven by specific client demand,” argues Pritchard. “Freshfields is a well-recognised name for ­international arbitration, internal corporate investigations and ­disputes, plus cross-border M&A. So it made sense to add these practices to our US business.

“We haven’t just planted a flag and hoped clients would come; clients have actually asked us to build these practices. You can’t just turn up and say, ’hey, we’re Freshfields’, much as that ought to work.”