The US firms currently setting up English law practices are grabbing all the headlines as they invest millions of dollars establishing their businesses and offer million-pound salaries.
But little is heard about the other form of US firm in London – the ones here purely to practise American law for their US clients with no ambitions to barge their way into the English law market. So why are they here and what do they gain from their presence in London?
One such firm is Cravath Swaine & Moore, a big-hitter in New York, but content to quietly beaver away on behalf of their clients in London. Its London office, overlooking London Bridge at 33 King William Street, consists of two partners and eight associates and concentrates on securities and M&A work for US clients. Partner David Brownwood explains its role.
"We are here to service our clients. Because of the time difference and distance involved, we need to be on the scene," he explains. "The substantial majority of our work is for our American investment bank clients. The London office plays an important role in providing the capacity for Cravath to deal with large transactions and provide a continuity of service that would be difficult to provide from New York."
It is more than simply a point of contact for clients. "The London office pretty much has its own book of business, even though 95% of our clients overlap with the New York office," Brownwood says. "The transactions we have are done in London, because many of our clients have set up their own important European offices. Take a typical securities offering – we would handle the papers here, do the meetings here and do the European due diligence here. It would be very difficult to do part of the deal here and part of it in New York."
It was not always so. The London office was established in 1973, but it was not until 1981 that the firm "got serious" about its UK operation. It has expanded from one partner and an associate to the current numbers, and Brownwood expects it to continue to expand, albeit moderately. It is a pattern followed by many other US firms.
"The partner who arrived here in 1986 told me that all the other US firms had one partner here," he says, "but now they might have four, five, six partners or more. We are still relatively small in that respect. But I would be surprised if we didn't have a somewhat larger office by this time next year. Our clients need the help."
Cravath claims it has no ambition to practise English law – its view is that clients are better served by being referred to a full-service English law firm. "They have the depth and breadth to provide the full range of services," Brownwood says. "My impression is that the major English firms have the same attitudes toward their roles and very similar cultures as the major US law firms. They are a very smart, competent and friendly bunch of people.
"It is in the clients' best interests to use the best firm for each transaction – a firm that will have the depth to give them full service in that jurisdiction, whether it's the UK, Germany, France or wherever."
He also does not see that it would benefit Cravath to practise local law, or that the firm is in a position to do so. "It would be difficult for us to build up a full-service English practice of even a dozen English lawyers. The main reason is that Cravath doesn't hire lateral partners or senior associates – it is a tradition of the firm and an important part of our institutional identity.
"For those US firms that do practise English law, I am sure it is the correct decision. There is no right answer, it is all about how you want to run your law firm. I would think that you need a certain economy of scale if you're going to set up in local law. Either a handful of people to provide an important speciality or a great number of people to provide a full-service UK firm. I don't think there is a middle ground."
But do these firms present a threat to firms like Cravath in London? "There are lot of very good American firms practising over here and they are serious competition for American work," Brownwood says, "but I don't know that them having English lawyers threatens us in any way. We operate in a very competitive environment and I think we can continue to hold our position. So far, our US clients are not insisting on one-stop shops. If there is a UK aspect to a deal, they are happy for us to refer them to an English firm. If it were to happen, we would have to react."
Cravath's London office is one of only two international outposts – the other is in Hong Kong. "We don't really have the manpower to go anywhere else," Brownwood admits, "but so far, we have not been disadvantaged by not being in, say, Tokyo. We have lots of friends in every jurisdiction, but we don't have exclusive or affiliated relationships.
"There is less pressure for globalisation for American firms. For example, one-third of our corporate work is international, but less than 10% of our corporate department is overseas."
Cravath is in London to stay. Brownwood is convinced that London will remain the financial capital of Europe. "The infrastructure is here. The lawyers are here because the industrial bankers are here, because the commercial bankers are here, because the lawyers are here! It is a self-supporting infrastructure and that is why London is the financial centre of Europe by such a wide margin. The reason that New York and London have the roles they have is that we are all here together. We can just walk across the street and meet each other."