Rushing to stake a claim?

The Brits are shy, reserved and cautious. The Americans are loud, brash and ambitious. The stereotypes are well rehearsed and, aside from politics, nowhere more so than in the law. But in the case of UK firms in the US, the stereotype is strangely accurate.

The focus in recent months has been either on US-UK mergers or on the influx of US firms into Europe, but since the mid Seventies, UK firms have been quietly setting up shop over the water. But this is not a beachhead invasion; it looks far more like dipping a toe in the water.

Lovell White Durrant, for instance, has taken 22 years to progress from opening a New York office in 1977 to opening in a small office in Washington DC last week. Freshfields too opened up in New York in 1977 and only expanded to the capital in August 1998.

UK law firms have been like nomads only moving when the amount of work justifies it. Such caution is curious bearing in mind the well known international aspirations of the UK's big hitters. In just the last two years, for example, Freshfields has opened offices in Poland, the Netherlands, Austria, Spain, Germany, Russia and Italy.

Law firms are not nervous businesses at heart. There is something about the US. Stephen Revell, US managing partner at Freshfields sums it up: “The US is a hard market to crack. You have to do it in the right way. It depends on your business plan.”

At the moment only Clifford Chance seems to be attempting to dispel the staid image of UK law firms abroad with its well-documented on-off relationship with US giant Rogers & Wells (The Lawyer, 26 April).

Apart from the usual constraints UK lawyers find in practising US law the most basic of which are restrictions on practising US domestic law there is the basic problem that the US already has more than enough lawyers. The only way English firms have made a space for themselves in the US is by edging their way in by setting up niche practices.

Lovells, in setting up its Chicago office four years ago, did exactly that by establishing an insurance and reinsurance practice but this strategy grew out of the experience of setting up a more traditionally focused practice.

Russell Sleigh, partner responsible for North America at Lovells, says that like most UK law firms setting up in the US, his firm originally concentrated on providing EU and English law advice. The firm then progressed to offering financial service advice from its New York office.

But after appointing reinsurance partner Joe McCullough and partner in financial services George Platz from Sidley & Austin to head up its Chicago office, the firm was able to cash in on a “large area with plenty of work”.

“We identified the niche areas suitable for the services we offer. Our transatlantic reinsurance capability started by taking on McCullough, to develop the right team,” Russell says.

Cameron McKenna has also been keen to build a business based on niche areas, specifically energy, a market which allowed it to become the only UK firm so far to set up on the West Coast, in San Francisco.

Fiona Woolf, head of energy and projects at Cameron McKenna says it is the progress of electricity deregulation in the US which gave Camerons the edge. In 1997, the firm won a major contract from the US Federal Energy Regulatory Commission to advise on deregulation of the Californian electricity industry.

“This was something new to the US but we had already had 10 years of working on this in the UK,” says Woolf.

Such experience stood the firm in good stead but, Woolf admits, competing in the US is no simple matter. “The US legal system is very well put together, and when you take on American law firms, you take them on at your peril,” she says.

Some UK firms have already learnt this lesson. Wilde Sapte pulled out of the US in September last year at the height of its alliance talks with accountancy giant Arthur Andersen. Denton Hall, too, withdrew from New York in early March.

Denton Hall had attempted to establish its own niche, similar to Lovells, by concentrating on insurance and re-insurance. It had also followed the same path by taking on New York-based partners from a competitor's firm in this case Dibb Lupton Alsop to head up the move.

But its intentions soon fell flat the office closed just one year later. Both Denton Hall's UK managing partner Virginia Glastonbury and international managing partner David Moroney insist the office was simply too small and the firm could offer US services more efficiently and effectively from London.

The question obviously is “Why open in the first place?” For a firm which positions itself as a leader in the energy sector, surely the US, as Camerons has proved, is ripe for the picking.

Moroney says: “In running the international practice I can hardly ignore the US. But we cannot be everywhere all of the time.” He is reluctant to comment further on the firm's plans.

Geographically, law firms have cautiously headed mainly for New York and increasingly to Washington. The move towards setting up in the nation's capital was also started by Camerons which made the first move in 1996.

Rodney Short, partner and head of worldwide projects at Clifford Chance says Washington is very similar to London in that it is both the financial and political centre of the US. It houses many multilateral agency clients including the World Bank and the Overseas Private Investment Corporation. Short says: “In many parts of our work the projects are different in New York and Washington.”

Lovells' recent expansion into Washington is partly due to one of their clients, the Federal Trade Commission, being based in the capital. The firm recently moved Anne Fortney from its Chicago office to Washington to oversee work with the FTC, of which she used to be a director.

Sleigh argues that New York and Washington are very different markets. “For US securities work, New York was the obvious place to go. In Washington a lot of work is funded out of institutions [such as the FTC].

“Washington was a natural step. We have the experience to develop the work and to take advantage of our contacts in the area.”

This use of US offices as a base for networking may explain why some firms are taking such a long time to establish their US presence, preferring to build solid bases, contacts and leads over time.

But is setting up a UK presence in the US simply that a ruse to make lots of contacts and complete the work back at the head office in London?

A source close to the World Bank says that on the one hand UK law firms have been very active in securing work with the large political and financial agencies. But he argues: “Most of the contracts to date have been handled out of the London offices rather than in America.”

He believes there is a logic to this, arguing that there has to be an initial point of contact in the US: “In London they would have the critical mass to be able to work on these deals.”

There may also be concrete legal reasons why UK lawyers have not been aggressively securing contracts in the US, he argues, in that there may also be legal constraints on the US government using UK lawyers to advise in certain areas of work.

UK firms have tried to work around this by actively recruiting US lawyers to their practices. Freshfields for instance appointed Sean Pierce, a US finance specialist, in February. Some, like Slaughter and May in New York, have built up strong links to firms like Sullivan & Cromwell for referral work.

But there still seems to be something holding them back. UK firms seem to believe that you “take on US firms at your peril” and this stops them from expanding as aggressively as US firms have in London. This seems particularly true in rapidly expanding markets such as the new media and internet sectors.

Why, it could be asked, haven't they exploited the huge growth areas in the US like California's Silicon Valley?

When asked why there has been no rush to stake a claim on the West Coast, the firms seem almost blase. Lovells' Sleigh says: “Silicon Valley has not presented itself so far.” Short says: “It is still a very domestic area. You need to be a full service firm to do the type of work these clients would require. In terms of doing commercial domestic work it is a big challenge coming over here.”

They also admit that, by comparison, US firms have aggressively conquered the much smaller UK market.

“In New York we do get some work but proportionally not as much work as US firms get in the UK,” Short admits.

Sleigh says: “US firms coming to the UK have a ready-made client base in that they already have good relations with US investment banks.”

UK firms are trying to expand, albeit at a snail's pace. As Short says: “Aggressive is not one of the adjectives I would use to describe our focus.”

He adds: “I don't think you'll see us walking down Wall Street in front of a brass band.”