"The situation is rather difficult," says one corporate partner, with considerable understatement. The situation, in the broadest sense, is the current turmoil in the global credit markets, which is fast turning lawyer/client dynamics on their head.

In short, the notion of modern City law firms that you do not ever sue banks is about to face its first major test because those same banks, driven by paranoia and liquidity fears, are currently squaring up to litigate against each other.

This is unprecedented in a modern business age in which banks hardly ever resort to litigation against each other. And it may yet turn out to be a storm in a tea cup once the liquidity returns, but litigators and finance lawyers are agreed that, in the current climate, even minor misunderstandings and technical hitches are resulting in a call to counsel.

The two main areas of focus are, unsurprisingly, in leveraged finance and structured finance. In leveraged buy-outs, banks are poring over deal terms, either to find ways to renegotiate easy debt (as seen in Home Depot) or even walk from deals entirely (the current dust-up over Harman International). In areas of structured finance, it is almost harder to find areas in which litigation doesn't look likely.

It is hard to overstate the potential chaos such trends would cause if playground shoving turns into actual claims. Having assumed that banks will not sue each other, City firms have usually completely avoided suing institutions for fear of being sidelined, as has happened to Slaughter and May and Freshfields Bruckhaus Deringer in the past. This has typically meant that litigators have come under intense pressure to turn away work. There will be a great deal of pressure from litigators tired of being dictated to by transactional teams to pursue such claims.

And even sizeable law firms that have no compunction about squaring up to banks will, of course, have limited room to move considering the proliferation of sprawling banking panels. The situation gets even more complex for legal advisers when you consider that differing classes of institutions like banks, buy-out houses and hedge funds that once appeared to have common interest, are now coming into conflict with each other. Managing that could prove a headache-and-a-half for City firms. And all this before you consider that renewed spectre of mortgage fraud generating fresh negligence claims against law firms (see pages 5 and 8). The jargon of a sponsor-facing lawyer could be about to get a whole new meaning.