Rate rises get thumbs-down

Money, money, money… It’s why we’re all in business, but the depth of bad feeling towards law firms’ hourly rates is astonishing.

As it went to press, The Lawyer was hosting its annual in-house summit in Lisbon, and you can bet your last euro that fees were a popular topic.

This issue of The Lawyer is dominated by in-house stories. India’s largest bank ICICI is beefing up its in-house team in Europe. McDonald’s is recruiting lawyers, as is the International Cricket Council and construction group Kier. These represent a diverse range of organisations with one shared goal – reducing the costs of outside counsel.

Eversheds has responded to this dissatisfaction with fixed-fee deals instead of hourly rates. Cynics might say it’s not surprising given that it’s part of a gang whose hourly rates have rocketed an average of 89 per cent. That minor conspiratorial quibble aside, Eversheds has been extremely successful.

After closing its deal with Tyco at the end of 2006, the firm has bagged similar deals with Akzo Nobel, Samsung, Severn Trent, TfL and now Threadneedle, as revealed on the left.

The Lawyer’s YouGov survey first revealed an undercurrent of discontent in March 2006. The C&I Group has since responded to its members’ concerns by commissioning BDO Stoy Hayward to investigate billing methods. The accountants found that an overwhelming 97 per cent of in-housers were billed by the hour in the last 12 months, with only 10 per cent opting for value-based fees.

Despite its success, Eversheds has encountered some resistance to its methods. Eversheds partner Paul Smith notes: “They like the idea of fixed fees but don’t have the resource or ability to judge the value of these deals. At least with hourly rates they can compare apples with apples.”

But other firms have jumped on the bandwagon. DLA Piper won a similar deal with Linde. After narrowly missing out on that deal, Camerons realised it has an international network that could be marketed in a similar way. If dissenting Europeans don’t get in the way (see page 8), it will pursue more of these deals.

The magic circle is unlikely to follow – yet. But the twin forces of globalisation and commoditisation could make some consider their own alternative.