Over here – in partnership

Rivalry between US and UK law firms is giving way to co-operation and the formation of MNPs, says Richard Tyler.

“There are some real awkward Americans out there,” remarks one senior partner of a UK firm. But with US firms like Cadwalader Wickersham & Taft and Weil Gotshal & Manges pioneering cross-cultural fertilisation as they hire English lawyers, times and attitudes are changing.

After all, if Tony Blair and Bill Clinton can get along then there is no reason why law firms cannot work together. Is there?

Two US firms – Faegre & Benson and Dechert Price & Rhoads – have joined forces with English firms in Multi-National Partnerships (MNPs).

Minneapolis-based Faegre & Benson ( 290 lawyers), merged its London operations in July last year with Hobson Audley Hopkins & Wood, a 35-lawyer City practice with a leaning towards servicing US clients.

The deal was driven by Faegre & Benson which had set up in London in 1985, but wanted to offer its clients an English law capability. After the relaxation in Law Society rules regarding MNPs in 1992 it went on the search for a suitable partner.

Initially, it attached itself to London practice Blakes, but after two of Blakes partners were questioned by police over allegations of money laundering in May 1995 the MNP ceased, though no charges were ever brought against the partners.

US resident partner Scott James then drew up a short list of firms with consultants ZMB. The list included firms both bigger and smaller than the final choice, Hobson Audley Hopkins & Wood.

James says he thought the small city practice would be the best fit in terms of practice areas and he also knew Gerald Hobson and Max Audley well.

The MNP is marketed to existing and potential clients from Faegre & Benson's traditional client base of the American mid-west and is presented as the gateway to Europe.

The MNP is made up of three Faegre & Benson partners and three partners from Hobson Audley and run by two managing partners – Hobson and Faegre & Benson US-based partner Gail Mellun.

Hobson says that the US-based Faegre & Benson partners would be consulted if he planned any changes to the London set up.

The two firms are still learning how to work together. Hobson says that it took six months to convince the US side that the MNP was performing as exp-ected. And he adds: “We have only just begun to explore the potential of this arrangement.”

But the Hobson Audley side of the MNP may feel it still has something to prove to its US “Big Brother”.

For his part, Audley insists that he picked up instruction from one in-house counsel who said Faegre & Benson would not have been his first choice without Hobson Audley's capabilities in London.

Philadelphia's largest law firm Dechert Price & Rhoads decided on a similar strategy to Faegre & Benson, when in June 1994 it merged its existing London office with the City practice Titmuss Sainer & Webb to form Titmuss Sainer Dechert.

The two firms do not have a work referral or commission system, but there is a transfer payment arrangement. If one firm has a financially successful year, then using a “complex and confidential formula” that firm makes a payment to the other.

This year it is Titmuss Sainer Dechert's turn to pay up. Managing partner Steven Fogel revealed for the first time the firm's annual accounts.

“The two firms have together averaged 18 per cent growth in turnover and increase in profits of 22 per cent and we put part of this down to the benefits flowing from our uniquely close relationship,” he says.

He added the London firm saw an increase in turnover of 14 per cent and profit growth of 24 per cent, hence the payment to Dechert Price & Rhoads.

Meanwhile, Peter Astleford, one of three dual partners at the London office, is quick to emphasise that the motivation is not one of short term financial gain. He says new “premium billing” clients have been attracted to the London firm now that it has expanded its cross-border practice groups, like his financial services department, which can offer a seamless service in both the UK and the US.

For both Titmuss Sainer Dechert, Faegre & Benson and Hobson Audley flexibility is at the heart of the arrangement with the US firms. However, Dechert Price & Rhoads or Faegre & Benson could pull out tomorrow leaving their English partners to pick up the pieces of their former practice.

Looking at the time and resource commitment made this outcome seems unlikely. Neither firm rules out the possibility of merger in the medium term – it is just a matter of seeing how well they get along.