The ABA's Section Of International Law 2006 Spring Meeting: A Look At The Practice Of Law In 2025

Among the most interesting presentations at the 2006 Spring Meeting of the American Bar Association's Section of International Law held in New York from April 5th through the 7th was a panel discussion concerning the evolution of the profession and the practice of law over the next two decades. The driving force of globalization, predictably, provided the context of the discussion. The program chair was Soraya E. Bosi of Fraser Milner Casgrain LLP, New York, and Associate Director of the Association of Corporate Counsel - Greater New York. Michel A. Brunet, Chairman of Fraser Milner Casgrain LLP, Montral, acted as moderator, and the panelists were George R. Krouse, Jr., Simpson Thacher & Bartlett LLP, New York; Christine Lagarde, French Minister for Foreign Trade (and former Chair of Baker & McKenzie), Paris; Tower C. Snow, Jr. of Clifford Chance LLP, Silicon Valley, California; and Peter Zeughauser, Zeughauser Group, Newport Beach, California.

In introducing the panel, Mr. Brunet noted that about half of his practice was conducted in French, and he went on to state that, in his view, that would not be possible in 25 years. "Ten years ago," he said, "Henry Kissinger predicted that in 2025 there would be three languages utilized in the international business arena: English, Spanish and Chinese." As for French, he said, "I recently interviewed an associate joining Fraser Milner Casgrain from Clifford Chance's Paris office who, to my astonishment, spoke no French. He was able to practice law in France without being able to speak the language."

Mr. Brunet went on to pose several questions to the panel: What is going to happen to legal education over the next 25 years? And to law firms around the world over that period? What will the practice of law look like from the law firm perspective and from that of corporate counsel? Will the DuPont model be adopted by an increasing number of in-house counsel? Will there be a convergence of the various legal systems that govern how business is conducted in the international arena?

Tower Snow noted that a number of industries had experienced restructurings over the preceding century, including the railways, oil, steel, automobiles and airlines, and that their experiences might indicate the ways in which the legal business would evolve. "Law firms are part of the professional services industry. In the 1960s there were literally hundreds of accounting firms which handled major accounts. In time, that number decreased to what was called the Big Eight, then the Big Five and now the Big Four. In investment banking the same scenario has taken place: today the top five investment banks handle half - 50 percent - of the deals that once involved hundreds of firms."

Consolidation, Mr. Snow stated, has been underway for the past ten years, and there is no reason to believe that this development has stopped. He pointed out that a number of factors contributed to this trend, including the consolidation of clients (leading to a desire to work with increasingly fewer outside law firms), the increasing dependence on expensive and ever-changing technology and on access to top legal talent (requiring continuous capital infusions) and an intense competition that permitted only the strongest firms to survive. He went on to indicate four types of law firm likely to exist 20 years from now:

1. The global elite firms, handling the most important work for the world's principal companies. These firms, in Mr. Snow's estimation, would be highly profitable and have a substantial number of equity partners.

2. The global mid-market firms, doing some of the important work, particularly mid-market work, for important global clients and defined by less favorable economics.

3. Law firm boutiques, focused on specialized high-end work. These firms, he indicated, would be extremely profitable as a consequence of their expertise and low infrastructure expenses. They would also be characterized by a small number of equity partners.

4. Regional firms, practicing in specific geographical markets - California, France, Germany - and focused on mid-market transactions.

Mr. Snow was so bold as to make a number of predictions concerning what would occur to law firms over the next two decades or so:

Law firms will continue to grow.

Law firm mergers will continue, and many will be upstream.

The need for capital will lead to an increase in the number of firms either going under or merging.

The trend toward new branch offices will decrease, and the closure of unprofitable branch offices will increase.

The ratio of non-equity to equity partners will increase.

The strong will get stronger.

The rich will get richer.

Client pressure on fees will increase.

By 2025 the largest firms will have over 10,000 lawyers, and it is possible that they will have as many of 20,000.

As a consequence of the need for capital, law firms will go public.

Mr. Snow concluded his remarks by stating, "If law firms and their management wish to understand where the profession is going, they should look to their clients. Unlike law firms, they operate with a view to the future."

Peter Zeughauser, a former Chairman of the Association of Corporate Counsel, stated that he believed the law firms of the future would be shaped by geopolitical and economic forces, the principal one being the spread of free markets, appropriately regulated, across the globe. That meant, he said, the continuation of globalization and the internationalization of business. "As a result of continuing consolidation, very large companies will dominate the markets on every continent. Global success will depend on attaining sufficient profitability to finance acquisition and the building of global brands and that, in turn, will mean increased pressure on holding costs down, including legal costs. As law departments are forced to become more cost conscious than they are today, we are likely to see the outsourcing of more legal work and a variety of innovative pricing models and approaches to work. The commodity work that is price sensitive will be awarded on a flat fee basis rather than on the basis of time charges, and the law firms that wish to attract this work are going to have to do it more efficiently than at present. There will be greater pressure to build a structure that includes fewer expensive partners and more inexpensive associates. At the high end of the business, it is going to be increasingly difficult for firms to attract the talent they need - and the difficulty of balancing personal and professional demands in this environment is both cause and symptom of this development - which will lead to fewer equity partnerships being available."

Mr. Zeughauser said that he agreed with Mr. Snow on the explosion in the size of firms over the next two decades, and he pointed out that the decreasing number of global companies meant that individual client relationships would become increasingly significant. "An annual 50 million dollar relationship is not out of the question." He went on to indicate that during the past year the revenues of The Lawyer Global 100, the largest law firms in the world in terms of revenues, approximated $54 billion, of which four firms each earned $1.5 billion and ten firms 25 percent of the total. He contrasted this with the fact that just a few years ago no single firm of this group accounted for more than one percent of the total. "This evidences, as nothing else, the consolidation underway in the global legal market."

"London and New York will remain great financial centers over the next 25 years," Mr. Zeughauser said. "But we are witnessing the emergence of China as the most important market in Asia today, and that means that Shanghai is emerging as the economic and financial center of the region. Within the next few years I believe Shanghai will take its place next to London and New York as the third great financial center in the world. If you travel in China, people who are engaged in this market will tell you that this development is well underway."

George Krouse noted that, if one looked back 20 years, many of the predictions then advanced had not come to fruition, which made him think that going forward the one predictable certainty was unpredictability. While the increased complexity of legal practice, the importance of specialization and the enhanced role of technology appeared to be as important, if not more important, than anticipated, he pointed to the bursting of the technology bubble, the Enron, WorldCom and other scandals that ensued, Sarbanes-Oxley and the enormous changes in corporate culture and the ways in which American corporations now govern themselves as totally unpredictable. He went on to say that he thought the practice of law was going to become increasingly relentless over the next 20 years, as a consequence of technology and the ever increasing pace of competition, a development that would make it ever more difficult to recruit and then retain legal talent. "The brighter people are, the more likely it is that they are going to have a number of choices other than law firm practice," he said. "That will be a significant challenge for the firms."

Christine Lagarde stated her belief that the legal profession would remain strong over the next 20 years. "There is a huge shortage of confidence around the world today, and there are a variety of difficult problems which can only be addressed, if they can be addressed at all, through the implementation of new laws. An increase in laws entails an increase in attorneys."

Mme Lagarde noted that in 50 years the planet would be host to nine billion people and that discussions concerning access to healthcare and to food, water and other natural resources would be intense. "Access to information is also going to be crucial over the next 20 years," she said, "and the ways in which rising consumption and the utilization of technology converge will serve to accelerate the emergence of China and India as global leaders." She went on to consider global warming and the ways in which we deal with non-renewable resources, which, she said, would lead to the development of new legal disciplines and practice areas.

Mme Lagarde concluded her remarks with a challenge to the profession: "In most parts of the world the legal profession still occupies a special place. We are members of a profession that is driven by the profit motive, but we also have a responsibility to build the legal system and the rule of law and to assist in making justice available to everyone. We have an ethical duty to society, in addition to the duty we owe our clients, and it is that duty that must remain foremost as we work to make our professional lives as profitable as possible. We are not entitled to consider ourselves guardians of justice if we fail to meet this responsibility."

Published May 1, 2006.