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Lawyers divided by a common language

Clifford Chance's problems in the US may be why so few law firms want to follow it, says Neil Rose

here remains one corner of the finance world where the Brits go head to head with the Yanks and do pretty well: the arcane domain of m'learned friends.

But news this week that Peter Cornell, global managing partner of the world's largest law firm, Clifford Chance, is relocating from London to New York - the two main international legal centres - has shone the spotlight on whether British and American lawyers can merge successfully.

They dominate the market. Four of the world's 10 largest law firms are based in London. The rest are from America, the one market the City has struggled to crack.

Clifford Chance, with turnover exceeding £1bn and employing nearly 3,300 lawyers in 19 countries, is determined to do so. It was the first major firm from either side of the Atlantic to bridge the gap when it merged with the mid-tier New York practice Rogers & Wells in 2000. Few have followed. A proposed merger between City blue bloods Ashursts and US firm Fried Frank failed to go ahead two years ago, although just before Christmas the fast-growing British firm DLA agreed to merge with New York's Piper Rudnick.

Clifford Chance's merger with Rogers & Wells has been beset with problems. Partners in the United States have left, the West Coast offices closed last year and a leaked memo from junior lawyers to management in 2002 exposed serious questions about how the New York office was run. It warned that the emphasis on billable hours was "dehumanising", and could encourage lawyers to "pad" their timesheets.

Critics see Mr Cornell's move, unprecedented for the head of such a major firm, as an effort to get a grip on an ailing part of the empire. But for Tony Williams, a former Clifford Chance managing partner who left shortly before the merger, there are positive spins too.

"There's an important message about avoiding a head office/satellite office culture," he says. Clifford Chance bills itself as a truly international firm and wants to prove it. "One shouldn't ever underestimate their determination to get it right."

Giles Rubens of the professional services consultancy Hildebrandt says changing corporate mindsets in this way is the single greatest challenge of such a merger. He adds that in their day-to-day work, lawyers' involvement usually ends when a deal is signed. "What they have to realise [with a merger] is that the work starts when the deal is signed."

Though he acknowledges past problems, Clifford Chance senior partner Stuart Popham, who is staying put in London in its massive new Canary Wharf office, says Mr Cornell's main role is to share his knowledge of the firm and its clients as part of a push to grow the US practice.

Mr Popham says the firm's core strategy is to serve clients in multiple jurisdictions. There was initially little "commonality of client base" with Rogers & Wells; now more than half of clients in the US use other offices too.

A few years ago, massive UK/US mergers were all the talk. Historically, Wall Street giants, sated by their massive domestic market, were slow to globalise. A link-up with a London firm already established in all the key markets of Europe, the Middle East and Asia would be a short cut to a global practice that matched the needs of big merchant bank clients.

From the UK point of view, such mergers promised lucrative access to those clients. Building up a US practice organically is slow and expensive.

But there are problems, explains Mr Williams, founder of the legal management consultancy Jomati. New York firms are generally more profitable than their London counterparts, and keep a tighter control on overheads. The sheer size of London firms makes them nervous.

Crucially, US partners' pay is determined by individual performance - "eat what you kill". In many UK firms, pay is based on length of service.

Since 2000, there have been some small deals and lots of failed negotiations. It was only late last year that two sizeable mergers took place.

Mr Williams is confident more will follow with globalisation and clients demanding international reach from lawyers. As for his old firm, he points out that Clifford Chance is now near the top of league tables for advising on US mergers and acquisitions, and streets ahead of UK competitors with similar ambitions. "If that's failing, I wouldn't mind a bit of failure."