While law firms are struggling, many barristers are enjoying a boom. Katy Dowell reveals some of the winners in the turbulent economic climate
At UK law firms large and small, last year was characterised by tumbling revenues and mass job cuts. In contrast, the bar has quietly got on with business as usual.
Total revenue generated by the bar top 30 jumped by a whopping 13.6 per cent last year, from £661m at the 2007-08 year-end to a record £750.59m. Many expect that to accelerate further this year as the big-ticket claims start to roll in.
Nevertheless, competition for work is reaching boiling point and sets are doing everything they can to differentiate themselves and capture those vital instructions.
At the lower end of the revenue table in particular, an understated evolution is gathering pace as chambers gear up to capitalise on what is set to become the busiest year at the bar in decades.
The fees squeeze
The most notable impact of the recession on the bar has been pressure on fees. “We’ve noticed an increase in requests for price capping for work on particular cases before any work is actually undertaken,” points out 4 New Square senior clerk Lizzie Wiseman, “as well as a rise in fixed hourly rates, often at a reduced rate.”
Kings Chambers practice director Debbie Andres agrees. “There’s been a noticeable downward pressure on fees generally,” she says, adding that property-related work has been hit the hardest.
As well as the impact on pricing, the current turbulence is affecting the management and structures of the leading chambers. Many of the sets at the top of the hierarchy, for example, remain keen to defend the role of the clerk. Litigators at law firms also recognise their value.
Yet the mid-tier sets are striving to differentiate themselves from the big hitters, and one way appears to be by adding management teams over and above the clerks.
While barristers are busier than ever, many sets have decided to allow the lawyers to concentrate on what they do best and have installed separate management teams to promote their litigation credentials. The same management teams are also responsible for devising strategies aimed at pushing forward the growth of sets.
Traditionally chambers could rely upon their star barristers to bring in the big-name cases. The likes of One Essex Court’s Lord Anthony Grabiner and Brick Court Chambers’ Jonathan Sumption can command their own huge fees and there will always be corporate clients willing to pay for the best.
Increasingly, however, chambers are having to demonstrate that they are willing to go the extra mile for clients.
Take Quadrant Chambers. The set reported a 38.6 per cent rise in turnover to £21.9m from £15.8m a year earlier, the biggest growth of the year in the top 30. Revenue per barrister (RPB) also climbed by a significant 38.9 per cent to £510,000 from £367,000 a year earlier.
In June Quadrant appointed former Jersey trust manager Tim Gerrard as chief executive. His mission is to grow revenue by changing outside perceptions of the set’s profile.
“We’re seen as a wet [shipping] set,” admits Gerrard. “That pigeonholes us in an unreasonable way. We’re also pre-eminent in aviation and have significant capabilities in insurance and reinsurance.”
While Gerrard points out that he joined the set after the 2008-09 year-end and that the growth stemmed somewhat from an upturn in insurance-related work, his strategic appointment comes as Quadrant’s barristers seek to capitalise on their recent success.
“It would be very easy to damage that pre-eminence,” Gerrard says. “It has to be fostered and nurtured. But we do want to change market perceptions.
Gerrard asserts that, as an outsider with decades of experience in management, he is better placed than most to grow the set.
“Why would you give a barrister responsibility for HR or IT?” he queries. He suggests that barristers should be getting on with what they do best and leaving management to others.
Gerrard plans to improve the set’s profile while also growing barrister numbers and bringing about greater synergies between the teams so that work is referred internally where possible. In addition, he will introduce a set of values for barristers to adhere to and appraisals for all staff and lawyers.
Moving with the times
This is in line with how Eversheds head of litigation Ian Gray wants the bar to modernise. Gray is enthusiastic about the firm’s relationship with chambers, but believes “clients need to be extremely satisfied with the expertise”.
Eversheds believes it must be able to demonstrate, beyond pricing concerns, why it has opted to use the counsel. This is likely to come down to service standards.
Eversheds, a firm with its own advocacy unit, aims to reduce the number of chambers its litigation and employment partners instruct from 90 to 15.
“We’re interested in much closer relationships with the bar,” Gray explains. “We’re going to run it [bar procurement] more like a business.”
This means regular meetings with chambers’ management to exchange feedback, discuss fee levels and the amount of work flowing through. There will be secondments as well as joint working and training programmes.
“Chambers’ chief executives want to do it,” says Gray. “They know if they can lift fee income [from Eversheds] by 100 per cent, their barristers will be very happy.”
“It’s no surprise that a law firm’s going down that road,” one practice director adds. “It’s all about sharing the risk and responsibility. Local authorities have chambers panels, they have benchmarks on admin standards and corporate social responsibility. We expect more firms to follow suit.”
Meanwhile, traditionalists argue that chief executives from non-legal backgrounds will be of little help to top-tier chambers. “Those sets that are most successful are the ones that don’t have chief executives,” claims One Essex Court senior clerk Darren Burrows.
One Essex Court climbed the ranks at the 2008-09 year-end to come third in the top 30 with a 16 per cent revenue increase, from £33.2m at the 2007-08 year-end to £38.5m. That is marginally behind Essex Court Chambers, where turnover stood at £38.8m, but above Fountain Court, which reported a 5 per cent rise at the year-end to reach £36.8m.
“Ultimately it comes down to the barristers and the quality of service,” states Burrows. He highlights the fact that none of Fountain Court, Essex Court and Brick Court have created chief executive positions, relying instead on clerks to deliver the management function.
Another senior source suggests the move is a public relations gimmick employed by the second tier of chambers.
“They change titles to make it sound pacey and more businesslike,” the source says. “Partners have sophisticated knowledge of the bar and to suggest that someone coming in from the cold from another industry with less knowledge than them is dangerous.”
Mayer Brown London litigation chief David Allen agrees that clerks are often the best placed to handle relationships.
“Senior clerks [such as Brick Court’s] Ian Moyler are superb,” he says. “They know their QCs back to front, how to manage them and the relationship with law firms.
“Why would you need a chief executive there? The best relationships are the ones where you know the people.”
The debate will continue, but what looks certain is that next year should see growth as chambers reach a new level. Those who invest in innovative ways of working with their legal clients are most likely to win out in the long term.
Are you expecting litigation to increase/decrease or stay the same in the next year?
Darren Burrows, senior clerk, One Essex Court:“Increase or at least stay the same. Plus, despite political rhetoric about an improving economy, companies continue to haemorrhage people and go under at alarming rates, and disputes will flow from the rise in companies unable to meet their obligations or perform as they may have contracted to do.”
Ian Moyler, senior clerk, Brick Court Chambers:“Increase. The fourth quarter of 2008 and first quarter of 2009 were very depressed in terms of new business. The litigation market appears to have sparked into life, which, in part, is brought about by financial services litigation becoming very active.”
Debbie Andres, practice director, Kings Chambers: “If the current recession remains a constant over the next 12 months, we anticipate a decrease in our chancery commercial litigation work. We would anticipate an increase in mediation as litigants seek to minimise their legal outlay. Property litigation will in all probability fall significantly given that much of the initial surge of work will have been disposed of. We anticipate personal injury litigation will remain at a similar level.”
The recession has had a major impact on law firms, but what effect has it had on the bar?
Ian Moyler, senior clerk, Brick Court Chambers:“If the question had been posed in the first quarter of 2009, it would have been a very steep decline in the number of new instructions. To ask the question now, it’s keeping up with the very fast pace of new instructions. There’ll also inevitably be some costs pressure exerted on all branches of the legal profession.”
David Grief, senior clerk, Essex Court Chambers: “The recession has certainly had an effect on the bar, but mainly because of the impact on our clients. But like our solicitor clients, we’re seeing more activity in areas such as shipping, insurance and employment.”
Lizzie Wiseman, senior clerk, 4 New Square:“We’re conscious that far more of our instructing solicitors are under greater pressure, particularly from their insurer clients, to manage and control the cost of litigation up to and including trial. Therefore, we’ve noticed an increase in requests for price capping for work on particular cases before any work is actually undertaken, as well as a rise in fixed hourly rates, often at a reduced rate. More cases are settling.”
Debbie Andres, practice director, Kings Chambers: “There’s been a noticeable downward pressure on fees. Naturally, planning development and property-related work has shown a downturn. However, all areas of litigation, including property litigation, have seen a significant rise.”
Robert Graham-Campbell, chief executive, Maitland Chambers: “For commercial litigation, the recession has, if anything, increased the volume of disputes, with certain areas becoming more prevalent, for example commercial disputes, particularly in the financial services sector, fraud, insolvency, company law and professional negligence and discipline.”
Should alternative funding arrangements such as third-party funding and contingency fees be made available to litigants?
Nicholas Luckman (left), senior practice manager, XXIV Old Buildings: “XXIV believes flexibility is key to ensuring that clients achieve their objectives.
That flexibility extends to litigation cost. XXIV has investigated the alternative funding market, speaking to all the funders and noting their particular and very different business plans, as well as developing relationships.”
David Grief, senior clerk, Essex Court Chambers: “At Essex Court Chambers, we take a flexible approach on fees and are always happy to discuss accepting cases on an ‘alternative fee structure’. We’ve become more creative in our approach to litigation funding by agreeing to accept instructions on cases that involve after-the-event [ATE] insurance, third-party funding and conditional fee agreements [CFAs]. The reason why is that they can successfully be used to manage and reduce the impact of legal costs and increase the financial certainty in dispute resolution.”
Philip Monham, senior clerk, 11KBW: “I’m in favour of third-party funding as it would enable some litigants to pursue claims that they might not be able to pursue without this assistance. I’m not in favour of contingency fees as I feel that the proper balance of pursuing a claim weighted against the costs associated with this is removed. This could lead to some frivolous claims being pursued that would be a waste of the court’s time and money.”
Michael Kaplan, senior clerk, 4-5 Gray’s Inn Square: “Yes, really to help address the problem of high litigation costs. There are far too many litigants who have very good cases that just can’t afford to litigate without any assistance, especially as funding by the Legal Services Commission is now much more difficult to obtain.”
David Barnes, director of clerking, 39 Essex Street: “Yes, broadening the base of availability is a good thing, but full explanation is needed.”
Lizzie Wiseman, senior clerk, 4 New Square:“It’s inevitable that alternative funding arrangements such as ATE insurance, third-party funding and CFAs will become far more frequently used as these are three obvious ways to manage and essentially reduce the impact of legal costs, as well as increase the financial certainty in dispute resolution.”
Funding options: the choice is yours
The downturn has been a catalyst for all manner of things, mostly negative. But it has also provided an impetus for change at the bar as clients increasingly look to cut their legal spend and pile pressure on their lawyers to be more flexible. While Lord Justice Jackson carries out his review of civil litigation costs in England and Wales, many chambers (and law firms) are offering alternatives to the billable hour. They are also examining new ways of helping clients fund access to the courts.
Most chambers perceive barrister services as good value, arguing that it is the frontloading of fees built up by instructing lawyers that results in huge bills.
“The cost of litigation is high, but the cost of the barristers involved, compared with the solicitors, is modest,” observes Carolyn McCombe, chief executive at 4 Pump Court. “The bar remains excellent value.”
Yet sets are becoming more flexible and some are embracing alternative funding options.
Michael Kaplan, senior clerk at 4-5 Gray’s Inn Square, speaks for the top 30 sets when he argues: “There are far too many litigants who have very good cases but who just can’t afford to litigate without any assistance, especially as funding by the Legal Services Commission is now much more difficult to obtain.”
The use of after-the-event (ATE) insurance in cases that operate on a conditional fee arrangement (CFA) basis has been commonplace in personal injury work. Gradually this is starting to become more common in mid-tier commercial instructions.
Lizzie Wiseman, senior clerk at 4 New Square, says the use of alternative funding models “will become far more frequently used, as these are obvious ways to manage and essentially reduce the impact of legal costs, as well as increase the financial certainty in dispute resolution.”
“The barristers are slowly learning the funding options available to their clients and more are using partial CFAs,” adds Bob Gordon, founder of funder 1st Class Legal.
Third-party funding (TPF) is also creeping into mainstream commercial cases. “I’m in favour of TPF as it would enable some litigants to pursue claims that they might not be able to pursue without assistance,” says 11 KBW senior clerk Philip Monham.
The TPF market is not without its own impact on the bar. Organising funding arrangements is largely the responsibility of the client and the lawyer. Increasingly, however, barristers are assessing the merits of the case and the probability of its success to enable instructing lawyers to organise funding.
The use of alternative billing is likely to become common as clients squeeze legal spend. Those alive to those economic pressures will win in the long term.
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The Legal Services Act: what the bar can expect
When it comes into effect in 2011, the Legal Services Act will allow for different types of professionals, including barristers and non-lawyers, to form businesses together. There has been a great deal of hype surrounding the impact this legislation could have on the bar, with speculation that it could result in barristers walking away from chambers to join partnerships.
What is certain is that the act will bring about a monumental regulatory shake-up of the legal sector, a development aimed at putting the consumer at the heart of all legal services and improving access to justice.
The Bar Standards Board has consulted on the regulatory measures needed to accommodate the act. After consulting on the possible implications of the legislation, the regulator is taking legal advice on how it might formulate regulations. It will finalise a formal response in October. In the meantime, the UK’s top 30 chambers have generally shown little interest in the reforms, believing they are more relevant to firms.
“If we were to become a partnership it would cause all sorts of problems,” says one practice director. “The conflicts issue would be insurmountable. It would mean that our barristers, who often appear against each other, would find themselves conflicted out of a lot of work.”
That said, others argue that a partnership model could lend itself to sets that have criminal law components.
“Sets such as No5 Chambers and St Phillips, which have barristers doing criminal work, might benefit,” says one source. “You could see them becoming criminal claims factories and sharing the financials.”
Wilberforce Chambers senior clerk Danny Smillie believes sets with burdensome overheads could be forced to go into partnership with firms. “That’s a long-term view,” he hastens to add.
It is unlikely, however, that firms will suddenly grow fully functioning advocacy units and use in-house barristers to conduct High Court litigation.
“We may be a big practice, but if [Brick Court’s Jonathan] Sumption was a partner here, we wouldn’t have the diversity of work to have him in the office full-time,” says Lovells global head of litigation Patrick Sherrington.
The act does offer sets the opportunity to re-evaluate how chambers are being managed, however. While it may not spark an instant revolution at the bar, the legislation will widen options for barristers. That means sets will have to compete more fiercely to be the best.
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