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News - 26 June 2012

Expertise advising companies in targeted region is the most important factor when American corporates instruct firms abroad

One of the leading provider of content and technology solutions, LexisNexis® Legal & Professional, today announced results from the latest LexisNexis® Martindale-Hubbell® study on what American (both North and Latin American) corporations want from international law firms.

The findings of the report revealed American corporations spend a sizeable proportion of their legal budget (20-30%) on foreign law firms outside their “domestic” market. International firms in Western Europe, with strengths in intellectual property, that can “get the job done” and have been recommended by other in-house lawyers are attracting the most work from the Americas.

The report is based on responses received to a confidential, online, quantitative survey, carried out between January and February 2012. The survey of 157 in-house counsel in Canada, the U.S. and Latin America shows that Western Europe is still the most important market for them; it attracts the largest share of American corporate legal budgets—more than 15% spend more than 30% of their legal budget in the region—closely followed by Asia, with nearly 10% spending more than 30% there. As more companies expand into Asia, their legal spend also looks set to grow, with 40% planning to increase spend there, and 20% planning to increase spend in Western Europe too.

The most important reason given for selecting foreign firms was that they have expertise local firms do not (74% rate as very important). This is also the winning factor for local firms to get hired - 51% rate market knowledge and experience as very important.

Intellectual Property (IP) is outsourced most regularly to foreign firms as companies endeavour to protect their IP rights in foreign markets, with 40% using foreign firms for at least one fifth of IP work. Litigation and employment law also attract a considerable share of the legal spend—around a third use foreign firms for at least one fifth of their litigation and employment work.

The best way to get instructed is through a recommendation from other companies, as 87% of in-house lawyers firstly approached peers in other organisations. Alternatively, international law firms should also try to form relations with a company’s principal law firm, as respondents in 56% of cases approached existing advisers to help identify and instruct foreign law firms.

Derek Benton, director of International Operations at Martindale-Hubbell, commented: “Interestingly, websites, seminars, conferences, internet searches and legal directories were equally important in the selection process, with a third of those surveyed using them as sources in the initial selection of a lawyer or law firm in an unfamiliar jurisdiction.”

As in previous surveys by Martindale-Hubbell, “The Selection and Retention of Law Firms in Western Europe”, the same key selection factors feature at the top of the list: understanding business needs (56%), individual expertise, communication (68%) and industry knowledge (50%). The Americas differ slightly in that their primary emphasis is to choose a firm that can “get the job done” (rated very important by 85% of respondents).

Corporates allocate high profile non-recurring matters to both foreign and international firms in 59% cases and in a quarter of cases to just international firms, which sees them winning more of this type of work. In contrast, local law firms are more likely to be given routine and commodity matters (59%). For complex matters, the two types of firm are used interchangeably winning equal amounts.

Many clients hire foreign law firms on an ad-hoc basis (46%). Law firm panels are only used in around one third of cases, and past instructions are not guaranteed to result in future work. Consequently, half of the in-house counsel surveyed prefer instructing clients in foreign jurisdictions on an hourly rate or project-by-project basis.

Possibly because the majority of firms are appointed on an ad-hoc basis for specific projects, few have seen their relationship terminated (55%). In cases where this has happened, it tends to be as a result of poor service standards (64%), rather than legal capabilities.