Lawyers Must Prepare to Go Global

I have the opportunity to write for and interact with members of the Canadian Bar Association. Canadians regularly tell me that they deal with foreign legal issues far more often than their American counterparts. Even medium-sized Canadian law firms regularly deal with the European Union, international tribunals and foreign trade regulations well beyond what the typical U.S. firm might.

American law firms, of course, are not completely oblivious to the wider world of the law. Such influences include outsourcing of legal work offshore and regulatory changes in the United Kingdom and Australia that allow non-lawyers to take an ownership stake in firms.

But beyond that, experts discuss elements of a future law firm world with much broader impact on American lawyers.

The first of those elements is the growing role and economic power of China, suggesting that there will be a supply problem for legal services. The contention here is that the future will be pan-Pacific and that the current demand problems for law firms will be seen in retrospect as a mere blip.

That scenario further suggests that there will be little pressure on fees; that is, that law firms may well return to the annual fee increases of 3 to 5 percent or more in some cases, thanks to demand for services from the Asia-Pacific powerhouse.

The second element centers on Europe and the opposite suggestion that there will be an abundance of lawyers in the profession. Because of the surplus, clients will succeed in their efforts to force legal costs downward and non-lawyers will be allowed into equity positions.

Many firms in the U.K. already use only the fixed-fee billing model; there is no focus on the billable hour. They emphasize improving their technology infrastructure through such tools as knowledge management databases. With fixed fees, any improvement in efficiency will go directly to the bottom line.

Such an arrangement stands in contrast to the existing American law firm model, in which profit is increased by raising the hourly billing rate. Clients have already revolted against annual price increases, so alternate fee arrangements and increased use of technology are increasing here.

Whatever the direct impact on American lawyers from the English law approach, globalization will affect all attorneys. Chinese investment expansion will require local attorneys.

Thus, even a lawyer in a small community may now be representing a foreign investor; a family law practitioner may have clients subject to an international treaty and have to take depositions outside the U.S., or even be subject to the decisions of a foreign arbitration tribunal; and mergers between U.S. and non-U.S. firms will become more frequent. And, of course, outsourcing is the genie that likely will never return to the bottle.

We may be seeing the development of two or more separate worlds of law. There are the large firms representing global clients, and then there are the rest, which may have global clients and global issues, but their real focus is on domestic small to mid-size businesses and individuals.

That may not be the only scenario, but it suggests the change that is coming.