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The Legal 500: Germany's Challenging Legal Market for Law Firms, Exams of Abnormal Psychology

Abraham Baldwin Agricultural College (ABAC)Abnormal Psychology

An overview of the german legal market, highlighting current trends and issues for both companies and law firms. It discusses the challenges of operating in germany, including increasing competition and the shift towards in-house legal teams. The document also emphasizes the importance of adding value and transparent billing for law firms.

What you will learn

  • What is the demand from in-house legal departments in Germany, and how are law firms responding to this demand?
  • How are German corporates becoming more sophisticated, and what impact does this have on law firms?
  • What are the current trends and issues facing law firms in Germany's legal market?

Typology: Exams

2014/2015

Uploaded on 04/08/2015

jchurnit7
jchurnit7 🇺🇸

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4/8/2015 TheLegal500TheClientsGuidetothebestLawfirms,topLawyers,Attorneys,Advocates,SolicitorsandBarristers.
http://www.legal500.com/assets/pages/cc100/2014/decomment.html 1/2
QUICKLINKS
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UmdieseSeiteinDeutschzulesen,klickenSiebittehier
COMMENT:GERMANYAMARKETOVERVIEW
WhileGermanyremainsEurope'slargesteconomy,operatingtherecan
bechallengingforlawfirms.TheLegal500Deutschlandeditor,Andrea
Leber,highlightssomeofthecurrenttrendsandissuesfacingboth
companiesandlawfirms.
TheGermaneconomy,larg elybasedon manufacturing,hashe ldup
remarkablywe llinligh toftherecentfinancialturmoil inthemarket.However,
it’snotaseasyasonewou ldthinktooperatethere successfully.Thepasttwo
yearshaveseen SidleyAustinLLPclo singdown itsGermanoperations,
whileShe arman&SterlingLL Pdramaticallycon solidated itsoffering,closing
twooutofthreeofficesinthecountry.
USlawfirmssuchasLatham&WatkinsLLPorCl earyGottliebSteen&Hamil tonLLPderiveasub stantial
partoftheirworkfromUSorUKbasedcli entsandlookel sewheretoreal isefeesthataremoreinlin ewith
whatisbeing chargedin,say,NewYorkfeesthatsmalle r,morelocalfirmscanonlydre amofaskingfor.
Lawyersneve rtiretopointtotherootofthistrend:Germancorporatesaregetting moreandmore
sophisticated ,whichinturnlead stoevermorecompetitiveprici ng.Somefirmsarenowstartingtoworkfree
ofchargetogainacce sstoaprestigiousclie nt.
Thebiggestintern alissuethatGermanlaw firmsfaceistheinaccessibil ityofattractivepartnerpositions.
International firmshaveparticularl ypracticedrestraintwhe nappoin tingpartners,yield ingtoincrease d
profitabili typressureontheirGermanop erations.High lyqualifie dpartnercandi datesarethereforelo oking
elsewhe reforworkandaremorereg ularlychoo singtoworking inhouse.Inrecentyears,compa nieshave
thereforenotonlybe enabletoboo sttheirinhousele galexpertise ,butalsogained enormousinsi ghtinto
lawfirms’feeandpri cingstructures,placin gtheminastrongpositio nwhenneg otiatingfeecapsan dflat
fees.
Manyseniorla wyersdescribe theGermanlegalmarke tassignificantlyoverl awyeredbu tthelegal
professionrema insattractiveforgraduatesno netheless,withsome firmsofferingstartingsalarie sthat
amounttosixdigiteuro figures.
Fromcountlessintervie wswithcorporatecou nsel,theprevail ingtenorisuna mbiguou s:companiesareno
longerwi llingtofootbill sthatlisteitherworktheyhaveneve raskedtobecarriedou t,orfeeearnersthey
haveneversee norheardof.Buttransparentbil lingisn’ teverything.Inanagewhe reinhouse lawyersare
assophisticated andwelli nformedasneverbe fore,lawfirmsreallyhave toprovehowtheycanadd
significan tvalue.Thegeneral viewisthatjuniorstaffareunab letodothis,andtherecurrin gdemandisfor
lawfirmstorefrainfrombilli ngforthetrainingan ddevelop mentofassociates.Mostgeneral mattersare
nowbein ghandle dinhouse ,andlegalde partmentswon’taccep tjuniorlawye rsworkingonthefew
selectedand highlytechni calcasesthatareoutsource d.
Similarly,inh ousedepa rtmentshavenotimeforriskaversepa rtners.Whatinhouselaw yerswantare
clearopin ions,notjustcasemodera tionandmana gement,andcommerci alratherthanacad emicadvice
thatcanbeappli eddirectly.Thereisnoroo mforlengthydisclai mersandexpla nations;inho uselawyers
wanttobeabletoforward documentsinterna llywithoutfirsthaving toclarifyandamendthem.
Thebiggestcompl imentalawyercan receive?“Itfeelslikethepartne risamemberofourinhou se
department”.High lychallen gingtimesahe adforlawfirmsthatwanttosuccessfullyope rateinGermany.
CORPORATECOUNSEL100>DEUTSCHLAND
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COMMENT
Germany:Amarket
overview
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THECORPORATE
COUNSEL100:
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4/8/2015 The Legal 500 The Clients Guide to the best Law firms, top Lawyers, Attorneys, Advocates, Solicitors and Barristers.

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COMMENT: GERMANY A MARKET OVERVIEW

While Germany remains Europe's largest economy, operating there can be challenging for law firms. The Legal 500 Deutschland editor, Andrea Leber, highlights some of the current trends and issues facing both companies and law firms.

The German economy, largely based on manufacturing, has held up remarkably well in light of the recent financial turmoil in the market. However, it’s not as easy as one would think to operate there successfully. The past two years have seen Sidley Austin LLP closing down its German operations, while Shearman & Sterling LLP dramatically consolidated its offering, closing two out of three offices in the country.

US law firms such as Latham & Watkins LLP or Cleary Gottlieb Steen & Hamilton LLP derive a substantial part of their work from US or UK based clients and look elsewhere to realise fees that are more in line with what is being charged in, say, New York fees that smaller, more local firms can only dream of asking for.

Lawyers never tire to point to the root of this trend: German corporates are getting more and more sophisticated, which in turn leads to ever more competitive pricing. Some firms are now starting to work free of charge to gain access to a prestigious client.

The biggest internal issue that German law firms face is the inaccessibility of attractive partner positions. International firms have particularly practiced restraint when appointing partners, yielding to increased profitability pressure on their German operations. Highly qualified partner candidates are therefore looking elsewhere for work and are more regularly choosing to working in house. In recent years, companies have therefore not only been able to boost their in house legal expertise, but also gained enormous insight into law firms’ fee and pricing structures, placing them in a strong position when negotiating fee caps and flat fees.

Many senior lawyers describe the German legal market as significantly over lawyered but the legal profession remains attractive for graduates nonetheless, with some firms offering starting salaries that amount to six digit euro figures.

From countless interviews with corporate counsel, the prevailing tenor is unambiguous: companies are no longer willing to foot bills that list either work they have never asked to be carried out, or fee earners they have never seen or heard of. But transparent billing isn’t everything. In an age where in house lawyers are as sophisticated and well informed as never before, law firms really have to prove how they can add significant value. The general view is that junior staff are unable to do this, and the recurring demand is for law firms to refrain from billing for the training and development of associates. Most general matters are now being handled in house, and legal departments won’t accept junior lawyers working on the few selected and highly technical cases that are outsourced.

Similarly, in house departments have no time for risk averse partners. What in house lawyers want are clear opinions, not just case moderation and management, and commercial rather than academic advice that can be applied directly. There is no room for lengthy disclaimers and explanations; in house lawyers want to be able to forward documents internally without first having to clarify and amend them.

The biggest compliment a lawyer can receive? “It feels like the partner is a member of our in house department”. Highly challenging times ahead for law firms that want to successfully operate in Germany.

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