The Insider

City firms seem to be very pleased with themselves at the moment. Far from behaving like 19th century slave owners by whipping a few more chargeable hours out of their subservient associates, partners are now literally showering their lowly assistants with extra ducats.

But while decision makers in private practice are busy splashing around in the milk of human kindness, it is the in-house lawyers who are being forced to pick up the tab for these hefty increases. And lawyers are losing no time in squeezing those few extra pounds out of the in-house profession.

Surely it makes the bile rise when you discover that an eminent City investment bank – the kind that firms desperately want on their client list – was recently forced to pay to have a single sheet of information faxed over from an external lawyer. Basic telephone conversations which were previously free also carry a fee.

It is all very well for firms to argue that they have to compete with the rates that US firms are paying their assistants, but isn't it counter productive in terms of client relationships?

In-house lawyers in charge of the purse strings are now considering introducing flat fees – so where is the added value in that? Meanwhile, other in-house lawyers who have never used a panel system before are now planning to put in place a structure whereby their firms adhere to a strict agreement about what work they provide and at what price.

The market is saying that if firms do not like these changes, it is too bad because they just will not get the work.

Remember, these are not tinpot widget manufacturers making these threats, they are the crème de la crème of City institutions. And let us not forget that some of these private practice lawyers, specifically the partners, earn a very tidy pay packet. Top end profits per partner at magic circle firms Slaughter and May and Allen & Overy have crept over the million pound mark.

While no in-house lawyer begrudges rewarding assistants for the work they do – they work long and hard enough – surely some measure of remuneration could be plucked from the gigantic pot into which top City partners dip?

Admittedly, firms have only begun introducing an upturn in assistants' rates this year. So while some clients are feeling the piranhas bite that little bit harder, others are yet to experience the monetary manoeuvrings of fee-hungry law firms.

However, this does not mean that in-house lawyers who are not being squeezed for extra fees have escaped from the change in the legal market. As UK firms compete with their US counterparts, internal legal departments are preparing themselves to match ever increasing pay packets – but at a cost. Internal lawyers are finding that they have to perform Houdini-like feats with their budgets to justify paying new recruits City equivalent wages.

One in-house lawyer says that he is fighting a losing battle to take on two new recruits at City prices. But now that management are aware of how much decent lawyers are charging for their services, it seems this lawyer will have to make do with just one new helper.

Law firms are doing their damnedest to justify high fees, and while companies will always have to be competitive in what they pay their employees, most are incensed that they are being forced to change by their own service providers.

So before law firms consider charging that extra £100 for a two-minute conversation or for photocopying a piece of paper, they should think on – their clients are not amused.