Barclays trialled the use of guaranteed minimum spend levels for a selection of its preferred legal suppliers ahead of its latest panel review in July, Legal Week has learned.

It is understood that a pilot scheme for litigation work for the bank, known as the Alternative Billing Model (ABM), was originally intended to run for between 18 months and two years, but was called off after just 12 months when Barclays found the arrangement would not be cost effective.

The details of the plan have emerged at a time when banking partners have expressed renewed concerns over the terms and conditions to which they must adhere to win places on bank panels.

The trial, which applied to a small group of firms rather than the bank's whole panel, automatically came up for review at the end of its first twelve months, at which point the bank axed the radical plan.

Under the scheme, firms were asked to submit pitches to Barclays based on work volumes rather than spend, after which the bank would discuss a base level of expenditure with them.

But people familiar with the matter said that the bank was concerned about overpaying firms during quieter periods because of the lack of certainty around litigation workflow.

"The issue was simply that the nature of litigation work is unpredictable," said one banking partner at a City firm. "It was too difficult to get the balance of funds right between the firms. Some had too much and some had too little. The ones with too little were winning because they were getting more than they should have been paid."

Some firms were also concerned that Barclays asked for more concessions in return for the minimum spend guarantee, such as a commitment to more time from partners or more fee earners dedicated to particular briefs. With the extra volume of work handled and extra staff time, some firms would have been renumerated better under a more traditional panel arrangement. 

"A guaranteed minimum would add a bit of respect to the amount some received, but they could approach us for things they would never have asked for previously," added the banking partner. "Some of the firms would have been happy to see it go, in all honesty. Being inundated with work would have been great under the traditional model, but it ended up just being stretching.

"You could overheat an already tight margin with just a modest increase in work."

A source at Barclays said that elements of the ABM were included in the structure of its latest panel, but it is understood that this only extended to fringe elements concerning efficiencies in case handling processes.

"Either they have an arrangement that commits to a minimum spend or they don't," said the banking partner. "If that's gone then I don't see how they could say it's been transported through in any meaningful way."

Barclays is thought to be the first bank to pilot a guaranteed spend arrangement for its panel firms, though it is thought that other major banks are considering similar moves in light of an increasingly strained relationship between financial institutions and their legal suppliers.

According to another banking partner at a different City firm, firms are also becoming concerned about secondees being poached by banks' in-house teams. In response, the partner's firm is now writing into secondment contracts an amnesty period of six months to a year following a placement, during when a bank cannot hire the secondee.