There are now nearly 60 US law firms operating in central London, employing among them a total of 439 fee-earners. If you put them all under one roof, they would form the 15th largest firm in the country – larger than Addleshaw Booth & Co and closing in on Nabarro Nathanson.
No one can argue that this does not show a serious commitment, but can US firms do more in London than function as branch offices, picking over the bones of files sent to them from across the Atlantic?
American practices in London tend to follow three basic strategies. First is the route being followed by firms such as Coudert Brothers and White & Case, which are positioning themselves as global practices. Second is the niche strategy being pursued by Brown & Wood, which has built itself up around specialist financial services. Third is the course being taken by Davis Polk & Wardwell, which has chosen only to take on work with a US dimension.
In all three cases, the provision of financial services is key to success, whether as a niche, or as a base to build a wider practice on. This sector once consisted largely of international bank lending and cross-border mergers and acquisitions, but more recently, global fund management has increased in importance, as have global equity, bond issues and financial derivatives, which London banks are as likely to buy in Chicago or New York as in London or Singapore.
“The firms that have done best are in capital markets,” says Bill Morrison, a specialist in international investment funds, previously at Bryan Cave and now a partner with Brown & Wood. In a typical example, a fund established to invest in Eastern Europe will be advised by a consultant in Prague, managed in London, registered in Dublin and marketed among institutional investors in Boston and New Hampshire.
“In a case like that,” says Morrison, “with big portions of the funds coming out of the US, it is only natural that people will come to those firms that can offer US expertise.”
With the large amounts of capital currently flowing out of the US, much of it coming through London on its way to emerging markets, Morrison is in a strong position in his niche. This may explain why he is sceptical about the merits of trying to build global practices.
“What characterises the work we do is that there is always a cross-border element,” Morrison explains. “It is hard to think of any US firms that have been successful competing head to head with English firms.”
One firm that is trying to do this though, is Weil Gotshal & Manges. In what must rank among the most aggressive strokes ever in the legal sector it has embarked on a massive smash and grab of lateral hires. The result is a London practice that has grown in 15 months from four support staff and eight lawyers to 35 support staff and 42 lawyers, including nine partners.
“The firm had no presence here,” says managing partner Maurice Allen. “There was no choice. If it was going to create an English firm it had to hire from other firms.”
Weil Gotshal is unashamed of its declared intention of competing head to head in the premium finance and corporate areas as an English firm on English home territory. “Essentially, this is an English firm with a US capability,” says Allen, who is scornful of firms recruiting English legal teams and then calling themselves “international”.
He claims that clients are often not that enthusiastic about the service they receive from the leading City firms, and adds that both lawyers and clients at Weil Gotshal enjoy the flexibility and the involvement that is possible in a smaller firm, rather than being “put through the mill”. “What we can offer is US levels of service without the US prices,” he says.
On a wider scale, one firm that feels it is succeeding in building up a global practice is White & Case, which has 10 offices in Europe and 28 worldwide. Of the 30 or so fee-earners in London, as many as two-thirds are UK-qualified and about half a dozen are dually-qualified. Of the eight London partners, six are non-US nationals. According to Peter Finlay, one of the coordinating partners for Europe, the “majority” of the firm's total revenue is derived internationally.
White & Case believes its strength lies in providing a consistent, cross-jurisdictional service, and it claims that one of the main aspects of the London practice is advising on English law in connection with transactions taking place elsewhere. “We were one of the first multinational practices,” boasts Finlay, who describes London as the hub of the firm's European, Middle Eastern and African activities.
Providing financial services in the broadest sense remains fundamental. The London office has been particularly involved in global equity offerings, private cross-border debt placements and infrastructure financing.
Corporate and tax law, of course, is almost always a necessary adjunct to financial services, but Finlay is keen to stress that the firm is building up further areas of expertise, such as litigation, arbitration and construction.
In the latter, the firm advised the International Federation of Consulting Engineers on drawing up a standard international contract. “Other firms are just adding on specialisms,” says Finlay, “but ours is much more broadly based.”
If the examples given by Weil Gotshal and White & Case are followed, the US presence in London's legal community will surely become even more competitive. In fact, if the current trend of luring homegrown lawyers continues, UK practices could soon be under pressure in their own market as well as worldwide.
What the Clients Say
Jeremy Willoughby, head of compliance at Gartmore Fund Managers: “Our offshore funds are based in Jersey and Dublin, which can be handled by English firms in London. We have a joint venture with Nations Bank, which means we occasionally need a US lawyer for regulatory or other matters, but we go straight to New York where I've struck up relationships with various people. We get approaches from people in London, but it's a case of the Devil you know.
Andrew Gaulter, head of compliance at Schroders Investment Bank: “We have a large office in New York and use domestic lawyers. I don't have that much to do with US law.”
Peter Bevan, head of legal at British Petroleum: “In most jurisdictions where we operate we have an in-house legal presence. The local teams also typically develop their own contacts. In a major cross-border transaction we would go first to the in-house people. If they don't have the expertise, we follow their advice about using a local firm. If a great deal of secrecy was necessary, that would be when we might use a London firm. It's a matter of horses for courses.”