The deal will not only create a group with a turnover of more than one billion dollars (pounds 625m) but will put pressure on other leading British law firms to push salaries into the million-pound bracket.
Firms who have global ambitions will want to follow the example of Clifford Chance in its merger with the American attorneys Rogers & Wells. But American firms have so far held back from full-blown merger strategies with their cousins in the UK because of the gap in top earnings between American and British firms.
In the United States lawyers are allowed to rake off salaries from the work they personally bring in to the firm, whereas British firms stick to a rigid system of dividing the profits among their lawyers on the basis of how many years they have been partners, making them less attractive to New York lawyers.
Top earners at Clifford Chance are believed to have been earning pounds 550,000 a year. This is expected to rise to pounds 650,000 when the firm posts its latest fee-earning figures at the end of the summer. But the highest-paid lawyers at two of the City's top five firms, Slaughter and May and Allen & Overy, are on pounds 900,000 and pounds 800,000 respectively, according to Legal Business, the commercial lawyers' magazine. To make themselves more attractive to the American market they could offer earnings approaching pounds 1m.
Maurice Allen, senior partner of Weil Gotshal & Manges, an American law firm in London, said he believed that partners' drawings (or earnings) would have to be raised to attract American law firm suitors. Mr Allen, a former Clifford Chance partner, said he expected the drawings of the top Clifford Chance partners to go up while they kept back the earnings of those who were not performing so well.
A spokesman for Clifford Chance admitted the profitab-ility of a firm such as Rogers & Wells, ranked number 22 in the US with a similar earning power to Clifford Chance, would mean that pay in the combined firm was more likely to go up than down, but added there would be a two-year transition period.
Earlier this year an American law firm placed the first advertisement for a one-million-pound lawyer. This has led to a rash of recruitment moves from British firms to American ones.
Ronnie Fox, chairman of the Association of Partnership Practitioners and a former chairman of the City of London Law Society, said that competition was now very tough. "I expect the profit margins among the top firms to even out now."
The Clifford Chance deal, which will also involve the German company Punder, Volhard, Weber & Axster, will result in a firm with more than 2,700 lawyers and 30 offices worldwide.
Keith Clark, managing partner, confirmed the deal in a recorded telephone message to staff that was released yesterday. "Good news," he said. "We are making legal history.
"I am delighted to let you know that with the outcome of the partners' meeting this weekend we have taken a major step towards our goal of becoming the world's premier law firm.
"Partners have voted by 96 per cent to merge with the US law firm Rogers & Wells on 1 January 2000 and partners at Rogers & Wells also voted overwhelmingly in favour.
"Subject to a vote in September on some remaining details, we will also merge with Punder, Volhard, Weber & Axster on the same date. This merger will mean the first top-tier global law firm with 2,700 lawyers and 30 offices worldwide and the leader in terms of turnover, which will be well over one billion dollars."