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The Law Market and U.S. law firms

According to an article in Corporate Counsel (HT Law Blog), a recent survey suggests U.S. law firms are losing international business to the Brits:

About 53 percent of the companies use English law for international work, while only 34 percent use U.S. law. When asked to name law firms they would consider for multijurisdictional deals or litigation involving three or more countries, only 30 percent named U.S. firms compared to 70 percent who preferred firms in the U.K.

One significant factor is “the well-established fear and loathing of U.S. litigation”:

In essence, the companies are pointing to their choice of jurisdiction for the contracts they sign. And the prospect of litigation is certainly on their minds. But that’s only one of the likely factors, according to Acritas, the U.K.-based research and advisory firm that conducted the survey. “I think it’s a mix of factors,” said Lisa Hart, the firm’s CEO. “There’s definitely an image that the U.S. is a litigious society,” she noted.

The loss of business is happening despite the fact that U.S. law firms charge lower rates than U.K. firms.

I have long argued, particularly in my book with Erin O’Hara, The Law Market, that international jurisdictional competition ultimately will be the great leveler when it comes to tax, regulation and litigation.

One way this works is that when firms choose to avoid a country because of its legal environment, interest groups in the avoided country suffer. These interest groups then have an incentive to try to change the laws that are driving their business away. This process translates “exit” via jurisdictional choice into “voice,” or political action.

The beauty of the law firm example is that the lawyers themselves who are instrumental in creating the laws that are driving up legal costs are also suffering the effects in the international law market.

I do think that other forces are at work. In particular, British law firms have always done a better job competing internationally than the more insular U.S. legal profession. Expect this to accelerate as the U.K. removes constraints on the organization of law firms. In other words, international competition is helping directly to deregulate the legal profession itself, as I discuss in my Death of Big Law.

At some point the U.S. and its lawyers are going to have to face up to the fact that there are other places in the world to do business.

Filed under: Jurisdictional competition, lawyers

Full post as published by Truth on the Market on August 13, 2010 (boomark / email).