Globalised law and best friends networks

Feb 26, 2019

Written By Alex May

Law firms have responded to globalisation in different ways: some have expanded internationally, either through organic growth or via mergers. Others have increased their global reach by forging strong relationships with firms in other jurisdictions.

In 2017, UK-based software company Micro Focus acquired Attachmate, another software company operating out of the US and Germany. As well as passing UK regulations, the deal required the approval of merger-control authorities in the US, Germany and Austria. To advise on this deal, London-based firm Travers Smith worked with firms in Australia, Canada, Germany, India, Ireland, China and Czechoslovakia.

Firms have adapted to client needs by changing how they work internationally to ensure they can advise clients on cross-jurisdictional matters. Whereas previously a client might have hired firms in each of the different jurisdictions they needed advice in, now they are able to hire one law firm to lead on the work and coordinate the advice from different jurisdictions, whether through their own global offices or via networks with other firms.

This is preferable to clients: it makes sense for a law firm to manage the multiple different jurisdictions, and it can be faster and more efficient, avoiding duplication of work in each jurisdiction. It’s also more likely to produce higher-quality legal advice—and ultimately, providing clients with a better service is good for business.

There are different ways in which firms undertake international work. At one end is the international network model, in which law firms strong in one jurisdiction join together in a network. At the other end is the global law firm, with one law firm aiming for global coverage by having offices in key jurisdictions. However, there are a variety of options between these. The Best Friends Network falls somewhere in the middle; a tight-knit network that seeks to work like a global law firm.

International law networks first arose in the 1980s, but the role they play in the global law market has continued to evolve. Interlaw is an example of such a network. First created in 1982, it describes itself as “a long-established elite global network of pre-eminent independent law firms”. Interlaw boasts of 7,000+ lawyers based in over 140 cities around the world. This allows a client working in one jurisdiction to instruct their local firm, and that firm will then work with another Interlaw firm.

But although international networks are a type, they vary significantly. There’s no superior model; instead, firms will find that different models best suit their needs.

Some networks are restricted to one firm per country or jurisdiction, whereas others allow for multiple firms. Another consideration is whether a member firm must prioritise working with another member firm, or whether the network just serves as a non-binding option. TerraLex describes itself as a “voluntary association of independent law firms” in which “each TerraLex member retains the right to work with any law firm or client”.

Networks also vary in how much their members integrate with each other. Loose networks can just be a set of firms who will refer work to each other, hoping that work will be referred back to them. Some networks go far beyond this, with shared training events and visits between firms.

Multilaw runs the Multilaw Academy, a six-day residential programme designed to cover all aspects of being a cross-border lawyer, while TerraLex has a programme where member firms’ senior team members visit other member firms and clients—there were 35 visits in 2017. This sort of integration allows medium-sized firms to share expertise in the way that otherwise only global law firms are able to.

The opposite model is the global law firm. Clifford Chance is an example of such a firm, with the ability to “support clients across all the major markets globally”. The firm has 17 European offices in 13 countries, impressive coverage of the Asia Pacific region with eight offices in five countries, as well as offices in North America, South America and the Middle East. Global law firms typically expand through a mixture of organic growth and mergers, sending senior lawyers to open new offices and hiring local lawyers or merging with an existing firm in a particular jurisdiction.

On the spectrum between loose international referral network and fully-integrated global law firm are two other models: Vereins and Best Friends Networks.

The Verein is a Swiss model in which firms associate within a network, while still remaining independent legal entities within their own rights. There’s no shared liability, commercially or professionally, nor profit-sharing between them.

Norton Rose Fulbright is organised as a Verein. The international association includes Norton Rose Fulbright US LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa. The Verein model helped the firm to expand and merge with existing firms in each of these countries and more, in order to grow rapidly at the start of this decade.

A Verein could have centralised governance and an integrated culture between offices, just as it could be more decentralised. Being decentralised allows more flexibility as each firm adapts to its particular market and clients, but this could also make it more fractured between each member.

This brings us to the other middle-model of Best Friends Networks. These are a particularly tight form of international network, typically made up of market-leading firms that have decided not to expand into a global firm, even in Verein form.

Slaughter and May is a leading example of this, with its European Best Friends group made up of leading firms in Germany, France, Spain, Portugal, Italy and the Netherlands. This makes it something of an anomaly among the magic circle firms, which otherwise responded to increasing globalisation by opening new offices abroad and expanding through mergers. Slaughter and May was criticised for this lack of international expansion, but instead of falling behind the firm has remained strong.

Travers Smith is another example of a firm that uses a network of ‘best friends’ relationships as their way of working with globalised clients. The firm chose to play to its strengths and specialism, sticking on high quality and cultivating its international network instead of trying to expand. This is the typical distinction between Best Friends Networks and international networks: firms join forces with similarly positioned firms instead of joining a broader existing network.

Some firms grow by combining a variety of different models into one. Linklaters, for example, took a hybrid approach to international growth. In 1998, it created Linklaters & Alliance, which was a partnership with a number of leading European firms. Over the next five years, they merged with four of these firms, as well as handful of others, to cement their presence in Brussels, Luxembourg, Sweden and Germany. They have continued to use this “alliance” model recently, including a partnership with Australian firm Allens to open joint ventures in Asia.

Dentons is another example of this mixed approach. Dentons has expanded hugely this decade, merging with firms all over the world to achieve a wide global reach. It also launched the ‘NextLaw Global Referral Network’. Unlike a Best Friends Network, it’s a broad platform for member firms to cross-refer using a modern software platform. The Global Referral Network doesn’t have territorial monopolies or charge membership fees, focusing instead on high-quality local firms that are well-rooted in their region’s culture and customs.

There’s no single best model. Some international networks have lower operating costs and provide easy access to cross-border advice, but less integrated networks might not provide that much back in return or might come with less consistency or quality. But the networks are an undoubtable phenomenon; firms of a smaller size, or firms unwilling to risk merger or investment, can decide to either join an international network or make their own.

Commercial Insights