Change of climate

Rumours that the Bar is in crisis are spreading like wildfire. Matheu Swallow looks beyond the gloomy forecasts. By Matheu Swallow

Crisis, what crisis? That, at least, is the public response of many barristers practising at the commercial bar.

However, statistics from the Commercial Court, gloomy prophecies from the solicitor's side of the profession and a mass of anecdotal evidence tells a different story.

On 26 April, The Lawyer reported on the dearth of work available for silks. At the time, one chambers director cited the example of a well-known silk who last year earned u600,000, but was recently forced to tell his clerks: "I'm going home, ring me when you need me."

"I'm really glad we don't have more than a couple of leaders to feed. In the present climate, it would be untold pressure," said the chambers director.

David Grief, Essex Court's senior clerk, says: "There are simply too many silks out there. Clients don't want to instruct silks because they are worried about cost."

Another reason, he says, for the growing competition for work at the top end is that there is an increasing number of settlements. "Current practice is moving towards avoiding litigation. If a case doesn't settle, it will go to arbitration. An example would be if a firm outsourced u10m to the Bar last year, this year it might be looking to keep half of that in-house," says Christopher Symons QC, head of chambers at 3 Verulam Buildings.

On further investigation, it seems the junior bar is also struggling to maintain the levels of previous years. "I have friends doing nothing. They are relying on a couple of winders (winding up petitions), getting u50 or u75 if they're lucky," says a junior tenant at one of the "magic circle" sets.

Evidence of lack of work can be seen in the number of sets which have not taken on new people this year. Solicitors' firms claim to be stealing a major portion of the work traditionally farmed out to junior barristers. "Solicitors are now doing their own advocacy and pleadings," says Symons.

"It is now very rare for firms like Linklaters to instruct the junior bar. The amount we outsource is minuscule," says Mark Humphries, a litigation partner at Linklaters and chairman-elect of the Solicitor-Advocates Association.

"This was always foreseeable," he says, "it clearly makes economic and practical sense for one lawyer to conduct both the litigation and the advocacy."

However, the Bar is adamant it is winning the battle against solicitor-advocates. "It is a scare that, so far at least, never really happened. I have only participated in two or three cases in the last five years when I have been against a solicitor-advocate," says Jonathan Nash, of 3 Verulam Buildings.

The cost of instructing solicitor-advocates, claim barristers, is prohibitive. "On Monday, the other side used a partner. His charge out rates, no doubt, cost a fortune. Whereas I, on the other hand, am eminently reasonable and, I hope, the client gets a good service," says David Scorey, a junior tenant at Essex Court Chambers.

They also claim it is impossible for solicitors to gain the necessary experience to be able to compete in court.

The big solicitor firms vehemently deny this: "The reality is that it's completely the other way round. They are reliant on us for their instructions and we outsource next to zero instructions to the junior bar. They are certainly not getting their experience from the major City firms because we're not giving them the work," Humphries says. He believes the battle is now moving up into the top-end work.

"The effect has already been seen. Our juniors are competing with junior barristers and so the first half of the plan is already complete. The only question now is how silks will compete," he says.

The response of one leading silk is emphatic: "A large part of the City firms public image consists of them telling the world that they are one-stop shops. Ask them who they instruct when they get into trouble? Privately, a lot of partners will tell you that they instruct the Bar."

The increased competition from solicitors is compounded by evidence from the Commercial and Admiralty Court that illustrates a significant downturn in the volume of work available (see figure 2). Figures from 1998 show a 21 per cent drop from the previous year. And if they continue to be issued at the current rate this year, there will have been a 44 per cent drop since the high in 1997.

"The Bar has steadily increased in size, year on year, and work has also increased in the last 10 years. But there has been a sudden jolt, a sudden contraction at the commercial bar, which gave no time for chambers to adjust," says Neil Palmer, 20 Essex Street's senior clerk.

Palmer concedes that the market is in "turmoil" but denies a crisis. He argues that there are simply too many barristers competing for a shrinking amount of commercial work.

Symons agrees: "There is simply not the work around to service the increased number of barristers at the Bar. Since 1990 the Bar has grown approximately 45 per cent. In 1990 there were 6,645 barristers compared to 9,698 in 1998."

Symons says that the period between 1991 and 1996 was exceptionally profitable for the Bar, producing a lot of commercial litigation in such major disputes as the Lloyd's litigation and BCCI.

Palmer explains how a shrinking market is being squeezed by an influx of new barristers attempting to break into the commercial sphere.

"Money is tightest in legal aid and, predominantly, crime," says Palmer. "To survive, those practitioners are having to expand their specialisation. I have never seen so many sets advertising commercial expertise. They are all desperate to have that handle attached to them."

Not all chambers, however, are feeling the squeeze. The commercial elite – Essex Court, One Essex Court, Fountain Court and Brick Court Chambers – already have an established brand name and it is proving a massive advantage in the marketplace.

"The 'big four' are running away with it. It's common knowledge that that's exactly what's happening. It's happened already with solicitors and is now happening at the Bar," confirms one leading commercial silk.

This can be illustrated in the growth of the "big four" in the last 10 years, all of which outstrip the rise in the total number of barristers over the same period.

One of the reasons for this, the silk explains, is laziness, or "economy of effort" on the part of solicitors. "Why make 10 calls when you can make one?" he asks simply.

This becomes a vicious circle for the smaller chambers. "If you are not in one of the leading sets as a commercial practitioner, it is difficult to get your practice off the ground," says Essex Court's senior clerk David Grief.

Symons argues that it is not just the magic circle of four who are squeezing out smaller and less specialised chambers: "We are now getting a greater portion of work from non-City firms than we used to."

"Those barristers who traditionally lived off work from provincial solicitors now find that work has gone. Those provincial solicitors are also getting more work from bigger clients because City firms charge too much. This is an entirely different source of work for us," says one silk from a set outside the magic circle.

The trickle-down effect means that it is individuals in smaller or less established commercial chambers who are being hit hardest by the drop-off in work.

"We are still busy, but busy at the expense of people further down the chain," says Symons.

Chambers are constantly looking to alternative sources of work, nurturing existing clients, developing in-house and international relationships and marketing the services they offer. Even the leading sets are finding they are having to work much harder to maintain their market position.

"Solicitors are becoming increasingly demanding – they want to speak to you now, they want work returned now. You really have to expect that," says Scorey.

Pressure is also coming from the corporate clients. "Direct competition between barristers is much keener because clients are more sophisticated and selective. I have had to do two or three beauty parades recently," says Jonathan Nash, a tenant at 3 Verulam Buildings.

As the explosion of 5 Bell Yard illustrates, the end result has been the gravitation of commercial practitioners from smaller to bigger sets.

"Two principal fee earners disappear and the set implodes. There must be a number of other sets in a similar situation," comments a leading silk.

Of course, wider changes in the legal world are having an effect on the traditional relationships and business of the commercial bar. The debate on the impact of legal reform, of Woolf and Access to Justice, rages on. Many argue that work will increasingly be concentrated in-house and in the litigation departments of solicitors' firms.

"The Woolf reforms play into the hands of solicitor advocates because those who attend the milestone hearings and case management meetings are to have responsibility for the whole of the litigation," says Humphries.

"It [Access to Justice] will be a panacea, changing things irrevocably. Once the hurdle of unreasonable restraints on rights of audience has been removed, there'll be no stopping us," he adds. However, David Grief argues that Woolf will help the Bar. Many leading members of the commercial bar are in no doubt that the cost and amount of litigation will rocket. This is exactly the opposite of the Government's desire, but is great for barristers and solicitors.

"There is a need for leaders to become involved earlier. In the past few weeks some senior silks have been involved in the case management meeting. This was unheard of before [Woolf]," says Grief.

Scorey believes the junior bar will also profit from Woolf and continues to argue that cost will be a driving force.

"There is an intense amount of drafting. It is not cost-effective to have it done in-house or by solicitors when you can outsource to the Bar at a fraction of the cost," he says.

Nicholas Luckman, senior clerk at 24 Old Buildings, agrees: "The reality is that the Bar is a lot cheaper than solicitors. Clients are starting to wake up to that," he says.

But Humphries does not believe the costs advantage will remain once barristers begin conducting the litigation as well as the advocacy.

The commercial bar is changing. Barristers and solicitors agree on that much. The question is who will benefit. Ian Glick, the Commercial Bar Association's chairman, remains confident: "I am extremely optimistic about the future of the commercial bar. Our principal selling point remains our high level of expertise. You only need to hire us when you need us. We are not an overhead you have to maintain," he says.

But, from the other side, the big City firms are bullish. "In three to five years' time, we will be competing directly with silks for the same work, in the same way as we now look at Herbert Smith as competition," Humphries says ominously.