Well, it’s true that a lot of Deutsche Bank’s legal work will be performed by the world’s leading global and regional law firms, particularly regarding complex, cross border transactional work, serious regulatory investigations, government-counter-party litigation and contentious regulatory matters. Those matters which have global impact, and so require global reach to properly manage and handle, are likely to go to a top global law firm with the commensurate resources and platform.
But, Joe queries, whether 5-10 years from now there will be so much of this type of work still. For the time being, there does not seem to be any slowdown in the large matters that have a global or regional impact. However, the market should be prepared for the possibility that large scale contentious regulatory work will at some stage begin to abate and the question then arises what is going to replace that work. I’m not saying this work will dry up but it does seem unrealistic to think that it will continue indefinitely.
For the next five years it does seem that complex regulatory work, particularly with respect to financial services, will continued to be a growth area. Moreover, on the transactional side, we should expect attempts to standardize documentation to continue and this will in turn affect demand for bespoke external legal services.
The ”sliver”
However, as a general proposition, the volume of complex, bespoke work that top law firms are geared up to do, and are fantastic at doing, is not growing as fast as the capacity of the firms to service this work. There is a ”sliver” of work that is truly complex and commands high fees. Every top law firm wants to work on highly complex, high-value, cross-border matters. Complexity of the matter and significance to the corporation justify substantial legal fees. But many of the Joe’s of the world are thinking that this type of work isn’t growing. “There are a lot of good lawyers out there and they’re not all in the top 20 law firms.” What will differentiate firms and how they price legal services is going to continue to evolve.
GDP vs. legal spend
Joe suspects no one has collected data on this, but he strongly suspects that the correlation between domestic GDP and the size of the market for legal services of the kind offered by top international law firms is overstated.
Rather, Joe would propose that total country legal spend depends far more on something akin to a “rule of law” quotient in the given country. A strong institutional environment, where policy and rule makers are active, and there is a culture of judicial or quasi judicial enforcement through strong administration and regulation, promotes an environment where lawyers have a vital and practical role to play. Clients are far more likely to require, and be prepared to pay for, sophisticated legal services in such an environment.
In countries like this, the legal profession is expected to be a key player, as systems based on the rule of law generate a lot of work for lawyers. However, the “wallet” for international law firms is not likely to be as large in those countries which do not have a vibrant rule of law.
Moreover, the legal profession itself is at various stages of development and maturity.
Every country in APAC takes a very different approach to practicing law, to documentation, to providing legal support.
Make no mistake: Clearly there are major opportunities, but the way people think about legal services depends so much on culture, the tradition of the rule of law within the country, and the attitude towards lawyers. In places like China there’s a respect for lawyers but that doesn’t mean clients in China are willing to pay the kinds of fees clients will in the US or the UK.
Indigenous talent
