The Leader Column

The Clifford Chance New York associates at the centre of Paddinggate are probably horrified at the way their memo has been played across the world's media. But by God, it's a great discussion point. In fact, as a snapshot of the systemic problems of current law firm management, it's unparalleled.

The problem of how to integrate US and UK billing cultures has been a constant headache for transatlantic law firms. There is no such thing as a globalised billing culture; most international firms operate differently in different jurisdictions.

UK firms have long regarded US firms' billing practices as some sort of weird alchemy, although the UK has tended to ape the US in recent times. For years now, people have been arguing that time-charged billing encourages inefficiency. You'd have thought that by now clients would have ditched it entirely, except that time is about the only unit of currency that works across jurisdictions – and for all its drawbacks, it's relatively transparent. No one likes it very much, but there's actually little external pressure for things to change.

Yet amid all the furore around the CC billing story, no one seems to have made the point that time recorded is not the same as hours charged to the client. Associates are required to record time, but it's the partner who's going to make the decision as to what's a fair job. Which in a litigation-heavy practice such as CC in New York means lots of hours racked up but plenty of discounts afterwards.

Of course, if CC's New York practice was more corporate-led (which is its strategic aim), this may not have happened in the first place. Look at M&A boutique Wachtell Lipton Rosen & Katz, which sits at the apex of transactional America. It operates an almost entirely value-based system of billing, often between a quarter of 1 per cent and 1 per cent of the amount of the transaction.

So it's not the hours actually charged that's really at issue. Indeed, given the stature and sophistication of CC's clients – major multinationals and financial institutions – you'd be surprised that they'd be having the wool pulled over their eyes. No, it's all about the time recorded, which has internal morale implications – hence the pivotal meeting in New York on 8 October.

Because, in the end, those US associates just wanted to be loved. Bless.

catrin.griffiths@thelawyer.com