This week were all talking about.the credit crunch (again)

Credit crunch, credit crunch, credit crunch. Its the issue thats on everyones lips. Be it the withdrawal of mortgage offers, the increase cost of consumer goods or, of course, how lawyers are being affected.

The expected rise in post-credit crunch litigation has definitely impacted on the legal arena. As was revealed in Lawyer2Bs sister publication The Lawyer, litigation is on the rise due to the sub-prime fallout, leaving banks struggling to man their in-house teams (see story).

Its not that the banks cant recruit lawyers, its because theres now a tradition of expertise from law firms being seconded on to in-house teams when needed. At the moment its the dispute lawyers that are desperately needed.

Barclays Capital, Credit Suisse and Goldman Sachs have been the first casualties in relation to secondment recruitment but it is expected that more will follow.

One huge problem is the top-tier law firms the banks will ordinarily turn to are being conflicted out of inter-bank disputes. In a normal scenario a law firm has no problem having multiple banks on their client roster as they wont be fighting with each other.

The sub-prime crisis, however, which deals with financial institutions selling on debt to each other, means that a firm that acts for two banks on a certain case wont be able to act for either if they are in dispute with each other as there will be a conflict of interest.

This is leading to banks having to go out of their comfort zone and to law firms that perhaps they have never used to solve the problem.

So thats issue one. The second big issue is that even where law firms may be able to second or act for a bank, the current climate of increased litigations means its difficult to find lawyers of the appropriate level of qualification to hand over to the financial institutions.

Understandably, the law firms need to keep some lawyers in private practice. Huge cases are just starting like Buncefield, where more than 20 solicitors and barristers are acting, so it means many lawyers are already tied-up. There will be a lot more high profile cases to come as a result of the credit crunch.

The climate is perfect to qualify into litigation.