Specialist networks of boutiques, local outfits and global firms give better access to expertise, says Tim Frazer

Many UK law firms were early adopters of international expansion strategies and have often been among the strongest advocates of a robust global presence. US firms – which have a much bigger home market than their UK counterparts – have been traditionally more cautious about international growth, although there are some significant exceptions to this. 

However, in the past 10 years most US firms have decided to expand their network of European offices. This has been driven in part by clients, who see greater business opportunities for themselves outside the US, but it's also been encouraged by an increasing perception – or conventional wisdom – that all consumers of services now prefer 'one-stop shopping'.

But where exactly is this expansionist trend among our US colleagues being played out? And is it always the best informed, or most appropriate, strategic move for a big law firm? 

I believe the importance of a London presence to today's global companies cannot be argued with or understated, and Brussels has long been seen as a necessary European location for firms offering competition law and trade advice. US clients, in particular, place great importance on Brussels as a base and firms may experience difficulties marketing pan-European legal services to clients without a Brussels presence. Although Germany also continues to attract international firms, it can be argued that – beyond London and Brussels – not all firms really need an office in every European jurisdiction.

The trend towards one-stop shop offerings in the legal profession has been driven by concerns that the economics of legal services are only feasible with international scale. But client perceptions are in fact much more complex. Recent research conducted by the principal legal market directories and other sources has failed to throw up a demonstrable link between a broad international presence and the perceived quality of a law firm. The desire to offer high-quality legal services cannot, therefore, be made the main argument for an international expansion strategy. 

Exposing the myths

In the current market context of falling legal budgets, it is true that panel redesigns by international clients, and other changes to their methods of law firm selection, have led to a perceived advantage for firms offering a one-stop shop. The received wisdom is that the squeeze on the number of law firms servicing large corporations is an inevitable move to improve efficiency by demanding the simplification of legal services. This perception creates fear among law firms that if they don't provide coverage in places where their clients do business, they risk losing them to rivals with greater international reach. 

However, it is misguided to assume that most international clients buy legal services on the basis of the one-stop shop model. Global companies – particularly those with decentralised legal departments – in fact favour a network of providers that they have carefully selected in each jurisdiction. Such networks typically combine local boutique practices, the leading national firms and international firms known to be particularly strong in the jurisdiction in question. 

Of course, it is complicated for general counsel to maintain such relationships, but many choose to do so because they believe they gain greater experience and expertise from their chosen spread of firms.

'Best friends allergy'

Using this multi-dimensional or practice-specific model does not necessarily mean that companies will be forced to spend more. Tenders, auctions and other intelligent purchase models can in fact put downward pressure on legal budgets. There is also the flexibility within the model to combine elements of a law firm's network of offices and the client's network of preferred providers in each jurisdiction.

Clients also often have an allergic reaction to being presented with 'best friends' arrangements, believing these may be more advantageous to the friends than the clients. Client antipathy has been one cause of the disintegration of some of these arrangements. 

Clients often in fact prefer to be offered law firm-constructed networks that are practice-specific, non-exclusive and multi-lateral.

Such practice-specific networks allow firms to maintain close relations with others who excel in a particular practice area, whether or not those firms have full-service offerings, irrespective of whether they may be competitors in other areas, and without considering whether such firms offer the prospect of inward referrals. A law firm that offers truly international legal services will find it beneficial to maintain a number of such networks in different practice areas. If the same partner firm crops up in several practice areas, clients will understand that this is by coincidence, not design.

The multi-lateral nature of practice-specific networks demands the encouragement of strong relationships between all firms within the network – the network should not merely be a series of bilateral relationships with the 'lead' firm. Setting up a non-exclusive nature with no, or low, expectations of mutually exclusive referrals makes it easier to recruit and to evolve networks as needs change or talent drains from member firms.

At my firm, Arnold & Porter, our European presence consists of a London and a Brussels office, and out of these bases we maintain and support quite capable practice-specific networks that are far-ranging. Certainly, we feel they enable a well-informed and rapid response to everything from multi-jurisdictional merger filing projects to complex cross-border commercial litigation. We find that far from diluting client loyalties, it enhances them by providing a high level of service in specialised areas without compromising on quality or increasing costs.

Tim Frazer is head of Arnold & Porter's London office.