Practice makes perfect
18 September 2008
It is important to start thinking about the areas of law you want to focus on as early as possible because it is likely to influence which firms, or indeed chambers, you apply to. Saying that, we suggest you keep an open mind because you will not know whether a particular practice area suits you best until you have tried it out. That is why you get to spend time in different departments during your training contract.
Within the commercial arena there is an endless number of practice areas. Indeed, there are so many there is not enough room in this guide to include every single specialism. We have therefore decided to focus on the larger practice areas: banking and finance; charity; competition; corporate; crime; dispute resolution; employment; family; insolvency; litigation; media and sport; personal injury; private client; property; public sector; shipping; and technology, media and telecoms (TMT). We have asked lawyers who specialise in these fields to give you the lowdown on their practice areas.
Incidentally, if you are wondering why we have included crime in a guide focusing on commercial law, it is because there are two types of work handled by criminal lawyers general crime and fraud/white-collar crime. Those in the former category work in high street firms or the Crown Prosecution Service and handle anything from petty motoring offences to murder. By contrast, those in the latter group act for individuals mostly professionals such as lawyers, bankers, accountants and company directors charged with fraud-related offences.
Practice areas are typically split into contentious (a situation involving a dispute) and non-contentious. The former includes litigation and other forms of dispute resolution, such as arbitration and mediation, while the latter covers everything else. Non-contentious can be divided further into transactional (deals such as the sale of a property or a merger between two companies) or non-transactional. An example of non-transactional work sometimes referred to as advisory includes the advice a family lawyer gives to their client who is seeking a divorce.
Unfortunately, these categories often become blurred. For instance, some employment lawyers will handle contentious work and act for a company that is in a dispute with its workforce, as well as non-contentious matters such as advising an employer on work permits for its overseas staff or its staff handbook. By a similar token, a competition lawyer will advise on transactions such as whether a
merger will be blocked by the EU, as well as on non-
transactional matters such as cartel activity or state aid.
Other areas where the work handled by lawyers potentially overlaps is TMT, sport, private client and family law. Although some specialists in this field might boast A-list celebrities or indeed royalty as clients, their work essentially focuses on principles of contract law. Consequently, some firms may put them all in the same category under the commercial law banner.
Find your match
One of the advantages of splitting practice areas into these subgroups is that they will help you identify those that best match your skills set. For instance, transactional and contentious work will generally have stricter deadlines, so you may have to work longer and more unpredictable hours. This will suit those people who get a buzz from watching a deal or case unfold. The other advantage of specialising in transactional work is that if you advise on a sizeable deal or case then you are likely to be part of a large team. In contrast, if you focus on non-transactional matters you may have to spend more time working alone or in much smaller teams and at a slower pace.
The amount of law you will have to deal with as a lawyer will differ depending on your area of expertise. Again, transactional lawyers will spend less time researching the law, while those who focus on areas such as employment, environment and tax will have to spend a lot of time keeping up to date with changes in the law. For instance, new employment laws come into force every April and October, while the tax specialists will have to get their heads around any changes brought in by the Chancellor during the annual budget.
The economic cycle will inevitably have a dramatic impact on some practice areas. For instance, until the credit crunch hit the headlines, corporate departments benefited significantly from the boom in M&A deals. This had a knock-on effect on practice areas that worked closely with the corporate department, most notably banking and finance.
Another practice area that was until recently constantly in the headlines was private equity. Although a number of the larger City firms do have dedicated private equity teams, is it worth noting that many of these sit within the corporate department. Indeed, although the personalities involved in a private equity deal may differ from those on a public M&A transaction, the pressures are very similar as both will be document-heavy and move at a pretty fast pace.
Today, thanks to the credit crunch, the picture is very different, and as corporate departments batten down the hatches insolvency lawyers are crawling out of hibernation in preparation for a rise in failing businesses. That is because insolvency lawyers specialise in advising companies that run into financial difficulty. That said, it is not all bad news for corporate lawyers, thanks to a number of banks, including Bradford & Bingley, HBOS and Royal Bank of Scotland, announcing rights issues earlier this year. A rights issue is a way in which companies can raise cash by selling more shares to existing shareholders or new investors.
But while insolvency is experiencing a renaissance, other departments that are suffering from the credit crunch are property and some areas of banking and finance. Indeed, in recent months The Lawyer has run a number of stories about law firms making cutbacks in their property departments because of a massive slowdown in the number of deals being completed.
So what is the credit crunch and what caused it in the first place? By now you will probably have heard the throwaway phrase the US subprime mortgage crisis. Subprime mortgages are those sold to customers with patchy credit histories and those who could not get mortgages on traditional terms from a big bank or lender. These mortgages became more popular as lenders sought to benefit from the US housing boom.
Just like assets and equity, debt can be bought and sold. So effectively what customers owed on these high-risk mortgages was packaged up and sold on by lenders as bonds to be traded by investors. These are called mortgage-backed securities. When the US housing boom slowed in late 2006 and interest rates rose, repossessions of homes bought with high-risk mortgages increased. Homeowners found it increasingly difficult to pay back mortgages, particularly because some of them had attractive initial rates that then ballooned a couple of years into the mortgage.
Although lenders were obviously hit by non-repayments, investors such as pension funds and investment banks that had bought these mortgage-backed securities also suffered. They could not predict the flow of money they would ultimately be getting from mortgage repayments, so the value of these securities declined. They could only sell on these bundles of debt very cheaply, and so made losses.
Liquidity is driven by confidence, and once one obstacle blocks the pipeline of money the whole system risks being clogged. After their recent bad experiences with mortgage-backed securities, banks became wary of lending to each other and money was harder and more expensive to come by. This, in essence, is the credit crunch.
We would be lying if we said the work handled by lawyers was simple it is indeed very complex. But that is exactly why so many students want to join the profession. Firms will not expect applicants to know absolutely everything about the type of work they handle. However, it will help your job hunt if you are able to demonstrate a basic understanding. You can do this by reading the business pages and the legal press.
Both The Lawyer and Lawyer 2B publish regular articles on which firms are advising on the deals that are making the national headlines. Additionally, Lawyer 2B often runs case studies, written by lawyers, on recent deals and cases they have advised on. These articles should help you to keep up to date with the comings and goings in the City, thereby giving you a better understanding of what lawyers actually do and making you more commercially aware.