The international practice of most law firms generally falls into one of a combination of four segments:
. Provision of domestic legal services in the home jurisdiction to foreign-based clients (inbound).
. Provision of foreign legal services to domestic (home country) clients (outbound).
. Provision of foreign legal services to foreign clients.
. Provision of both foreign and domestic legal services to foreign or domestic clients engaged in cross-border transactions or investment.
The author's experience on the issue of globalization suggests a scenario in which the international legal services marketplace over the next decade will segment into four tiers or categories, each with different players and characteristics, economics and potential for growth.
Global Capital Markets Law Firms
This category will consist of elite law firms selected to handle major trans-national, cross-border engagements in significant areas relating to corporate and project finance, mergers and acquisitions, privatization and infrastructure finance. These firms will operate in major capital markets throughout the world, in most cases through branch offices situated in those capital markets with lawyers capable of handling these significant transactions. The apparent strategies of firms which are well-positioned in this segment of the global market indicates that the major players will have significant capabilities in New York, London and in Asia (most likely either Hong Kong or Singapore), generally conceded to be the three major world financial and capital marketplaces for the foreseeable future.
These firms are most likely to be US- or London-based, rather than Asian, with significant numbers of lawyers qualified in each jurisdiction, since most of the major transactions falling into this category are negotiated, executed and interpreted under the laws of either England or of one of the states of the US (primarily New York). These firms may have offices in other cities or locations as well. Most of the US firms will be New York-based, although some (e.g., Baker & McKenzie) may be headquartered elsewhere.
Despite their focus on major trans-national and cross-border transactions and investments, the offices of these firms in capital markets will likely require a domestic corporate and transactional practice, for cash flow, work allocation and related reasons. Within ten years, we expect an elite group of one to two dozen firms to dominate this marketplace, and that group may include the legal operations of some of the major international accounting firms, all of which, of course, now refer to themselves as "professional services" firms. First-tier/category firms will tend to be highly profitable, due to the ability to charge premium fees for these high-value transactions. Examples of first-tier firms would include (among others) Skadden, Arps, Slate, Meagher & Flom LLP; White & Case LLP; Shearman & Sterling; Baker & McKenzie and the top London "City" firms. Others could emerge in this category, including Jones Day; Coudert Brothers and even the legal practice of "Big Five" firms (Andersen; Ernst & Young; Deloitte & Touche; PricewaterhouseCoopers and KPMG).
Global Corporate and Commercial Law Firms
A second tier or category of firms will serve domestic and international clients in negotiation, execution and implementation/interpretation of cross-border transactions in the corporate and commercial area, which do not assume the stature of the major transactions sustaining the top tier. Included would be the offering of domestic and foreign legal advice to international clients, general representation of banks and other financial institutions internationally, and the like.
These firms are likely to be leaders in their domestic market, and are likely to have branch offices and/or affiliations both in foreign capital markets and in other foreign financial centres. For the foreseeable future, they are likely to be US, UK, Canadian or Australian-based. They are unlikely to experience the premium fees and profits inherent in the major capital market work of the first tier of firms, but should be successful, financially, provided they are organized and managed to provide their international legal services cost-effectively and profitably. Successful firms in this category will grow internationally in relation to the international growth of their clients. It is apparent that the legal MDPs of the Big Five (multidisciplinary partnerships-e.g., legal operations of international accounting firms) are targeting this segment to provide a solid base for their continuing incursion into the marketplace. Examples include Paul, Weiss, Rifkind, Wharton & Garrison; Bryan Cave LLP; Stikeman Elliott (Toronto); Landwell (PricewaterhouseCoopers), the second tier of London City firms and some of the large Australian firms.
International Transactional Law Firms
Firms in this tier/category are likely to be smaller than second-tier/category firms, have only a few foreign branches, and could be headquartered anywhere-currently in the US, Canada, Australia or the UK (most likely in London). They also will arise in other EU countries such as France or Spain, in Latin America and in Asia. They will provide both inbound and outbound legal services, and on-the-ground domestic services to clients in host countries.
In some cases these firms will market to foreign clients, directly, through relationships with lawyers, accountants, bankers and other professionals in foreign countries, and with in-house counsel in those countries. Over 100 law firms in both developing and developed countries will position themselves in this tier. Their growth potential in international practice will be influenced primarily by the effectiveness of their international marketing efforts. Profit and potential from international work will be generally the same as that of work they perform for domestic clients, as the services will be essentially the same. Examples might include Holland & Knight LLP (US/Latin America); Nabarro Nathanson (London); Blake, Cassels & Graydon LLP (Toronto); and dozens of other similarly positioned firms.
Domestic Importers
Thousands of firms fit this category, all over the world. They do not have foreign branches, but they provide domestic legal services to foreign clients-inbound investors and international businesses. They market their services directly to foreign clients and potential referral sources-in-house and outside lawyers, accountants, etc. They may be affiliated or allied strategically with one or more foreign firms, and may be members of an international network of law firms-e.g., Lex Mundi, Commercial Law Affiliates (CLA), TerraLex Inco. Service to foreign clients is a significant area of growth for these law firms as their foreign clients' needs grow.
Conclusion
Legal globalization is a contemporary reality. Successful law firms and law departments will employ international or global strategies in their plans for the millennium. The structure of the emerging international legal services marketplace provides opportunity for most US law firms. However, as this marketplace matures, the ability of firms to move from one category to the next will become increasingly difficult. Prescient firms will conceive and implement their international strategies sooner, rather than later, in order to avail themselves of the best possible international positioning, no matter what their current size or location(s).
Ward Bower is a principal of Altman Weil, Inc., an international legal management consulting firm headquartered in Newtown Square, Pennsylvania.