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Dewey, Debevoise, Simpson Thacher move to fixed currency rates for London
New York law firms are competing to shore up their European-based lawyers’ compensation in the face of the weakening dollar, which has sent partner income falling by nearly 20 per cent over three years.
Dewey Ballantine is in the throes of reviewing how to protect its non-US-based partners’ pay packets against the precipitous drop in dollar value against sterling.
The firm, one of many in London currently tackling the issue, pays all of its partners and associates in dollars. But since the end of January 2001, the dollar has weakened from $1.45 against the pound to – at the time of going to press – a staggering $1.81, signalling nearly a 20 per cent decline on its value.
Compared with 12 months ago, the dollar has declined by a further 10 per cent. As well as Dewey, Shearman & Sterling is also believed to be considering a number of options to hedge against partner liabilities.
Many US law firms have already put in place a fixed currency rate to protect non-US associates from losing value on bonuses and pay compared with their transatlantic cousins.
As of 1 January 2004, associates at Dewey and Debevoise & Plimpton will be paid at a conversion rate of $1.65 and $1.64 respectively, although this will be re-examined and potentially reset by 1 July this year.
Fred Gander, managing partner of Dewey’s London office, told The Lawyer: “The problem with all this is that it can swing both ways, but we’re certainly protecting it by fixing it.”
Simpson Thacher & Bartlett’s London office is understood to have addressed the currency fluctuation issue at the beginning of the year. Associates paid in sterling are now protected by a fixed rate, while those fee-earners who receive dollars will be paid at the direct equivalent to New York lawyers.
Skadden Arps Slate Meagher & Flom has already set rates for non-US lawyers on this year’s currency rate, although it pays its lawyers at the top of the scale. Bruce Buck, partner in charge of the European offices at Skadden, said: “We always expect to remain competitive.”