Flat fees and lower fees: study reveals trends among Spain’s in-house lawyers

Spanish in-house counsel are rejecting hourly rates in favour of tough negotiation over fixed fees, an academic study has found.

The study, carried out by ESADE Law School in Barcelona, found a gap between the perceptions of in-house and private practice lawyers over fees and the selection of advisers.

It found that price and experience were the major factors for in-house counsel when choosing external lawyers. But private practice lawyers felt that their clients were looking more for technical skills, experience and the reputation of the firm.

An overwhelming majority of 95 per cent of the in-house lawyers interviewed for the study said they ­preferred flat fees to be negotiated for a piece of work over the use of hourly rates.

This preference was not reflected by external counsel. Almost three-quarters (73 per cent) said they ­preferred hourly fees, with just 21 per cent preferring flat rates.

The ESADE study also found that in-house lawyers in Spain wanted to cut fees by between 10 and 20 per cent.

Report co-author Eugenia Navarro, a lecturer in marketing and management for lawyers at ESADE, said the economic crisis had forced in-house lawyers to adopt a more managerial style.

“Because of the recession they have to control their own budgets,” she said.

As a result, Spanish ­general counsel were now more inclined to launch competitive tenders for work than previously.

In turn, law firms were ­pitching with lower fees.

“It’s very competitive at the moment and the prices are going down to catch new clients,” said Navarro.

The study found that large firms were more often competing with mid-sized practices in Spain, although Spanish firms and ­international firms were still not seen as being on a level ­playing field.

Navarro said another interesting trend thrown up by the study was that ­general counsel were more loyal to individual lawyers than law firms, and would happily move firm with their relationship partner if they thought they would ­continue receiving a similar service at the new firm.

There was also a perception gap between external and in-house lawyers over client satisfaction. While both sides said lawyers and their clients had trust in each other, private practice lawyers thought their clients were very happy with the technical quality of the ­service, but general counsel identified this as an area they were not particularly satisfied in.

In contrast, in-house lawyers were happier with the personal treatment they received from their advisers than private practice lawyers thought they were.

Personal recommendations and individualised ­visits were the best way of marketing to prospective clients, despite the increasing use of seminars, websites and similar marketing efforts, the study found.

Navarro explained that ESADE carried out the study as there was a lack of data about the sector and the way in-house counsel selected external advisers.

The research process consisted of 500 questionnaires completed by lawyers, 15 focus group sessions and 55 in-depth interviews with general counsel of Spain’s largest companies and law firm managing partners.

Navarro co-authored the study with Sandra Enzler, a lecturer and corporate relations director at ESADE.