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US organisations to increase legal spend in Asia, Western Europe and South America

IP, litigation and employment law advice in most demand

26 June 2012

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By Manju Manglani, Editor (@ManjuManglani)

US corporate counsel are increasing their legal spend in Asia, Western Europe and South America in 2012, a new study has found.

Nearly 40 per cent of respondents plan to increase their legal spend in Asia, while nearly a third will spend more in Latin America and the Caribbean. Just under a quarter plan to increase their expenditure on legal services in Western Europe.

However, Western Europe is still the most important market for respondents. It attracts the largest share of American corporate legal budgets, with more than 15 per cent planning to spend about a third of their legal budget in that region.

Asia follows close behind, with nearly ten per cent of respondents planning to spend more than 30 per cent of their legal budget in that region. Africa, the Middle East and Eastern Europe attract the lowest share of legal spend.

The findings are based on responses from 157 corporate counsel across a range of industry sectors. The majority of respondents are in the US and hold the position of general counsel or head of legal. On average, respondents spend about $10m a year on external legal services. The majority have budgeted to spend up to $2m a year on legal advice abroad.

Intellectual property work is outsourced most regularly, with 40 per cent of respondents using foreign firms for at least one fifth of IP work. Litigation and employment law also attract a considerable share of legal spend abroad – around a third use foreign law firms for at least a fifth of their litigation and employment work.

Full-service foreign law firms are the most preferred legal advisers, particularly for non-recurring high-profile/complex matters and for recurring complex matters. Boutique firms are also instructed for these types of work, but get a much smaller share of the pie. Full-service and niche firms are called upon in equal measures for routine and commodity work.

Identification and selection process

US corporate counsel rely heavily upon peer recommendations when creating a shortlist of foreign law firms to instruct in an international jurisdiction. Eighty-seven per cent of respondents said they ask corporate counsel in other organisations to recommend foreign law firms when they are unfamiliar with firms in that jurisdiction.

Interestingly, only 31 per cent of respondents approach general counsel at other offices within their organisation for referrals. Rather, corporate counsel are more likely to ask trusted law firms for recommendations – nearly half of respondents said they ask their principal external lawyers to find counsel abroad.

In three quarters of cases, respondents said they ask two to three law firms to pitch for work. In 14 per cent of cases, just one law firm is approached.

Several criteria feature highly when deciding which foreign law firm to instruct. The ability to get the job done is a top priority for 85 per cent of respondents, followed by client service and communication (68 per cent). For just under half of respondents, individual lawyer expertise is considered equally important to understanding the client’s business needs and objectives.

Forty-six per cent of corporate counsel retain foreign law firms on an ad-hoc basis. Panels are only used in around a third of cases and past instructions are not guarantees of future work. Half of respondents said they prefer to instruct law firms in foreign jurisdictions on an hourly rate or project-by-project basis.

Possibly because the majority of firms are appointed on an ad-hoc basis for specific projects, just over half of such relationships have been terminated. In cases where this has happened, it tends to be a result of poor service standards (64 per cent) or, occasionally, billing issues (15 per cent), rather than legal capabilities.

Well over half of respondents noted that they instruct 11 or more law firms on a regular basis. Interestingly, 16 per cent said they currently instruct more than 50 law firms.

The full findings of the research, which was conducted by LexisNexis Martindale-Hubbell, are published in The Selection and Retention of International Law Firms.

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