02:37, August 09 153 0

2017-08-09 02:37:08
HSF hires team of pricing professionals to woo litigation clients

Herbert Smith Freehills (HSF) has recruited a team of pricing professionals for its dispute resolution matters, data submitted to The Lawyer shows.

In data submitted for The Lawyer’s Litigation Top 50 report, HSF said it was the first global law firm to have introduced such a scheme into its dispute resolution practice.

Legal pricing has gradually picked up pace in the UK and is commonplace in the US, however, it is mostly employed with regard to non-contentious matters. HSF’s announcement means it is the first firm to recast legal pricing as a solution for the contentious market.

The firm said: “We believe we are one of the only, if not the only, global law firm to have a dedicated dispute resolution pricing team. This enables us to take a bespoke approach to pricing each matter, working with the client to understand their key drivers in order to tailor a pricing mechanism that works for them.”

It continued: “We have also worked with a specialist insurance broker to build an insurance product that will increase the use of damages based agreements and contingency fees in the global dispute resolution market. This product will enable us to offer a wider choice of pricing mechanisms to our clients.”

HSF would not comment on how many people it had employed or at what cost, but the employment of a team suggest the firm is investing significantly in an area of the market that may help to increase its profit margin.

Pricing professionals’ presence in the legal market can be traced back to the financial crisis of 2008, when clients started to become more frugal in spending. Since that year, the legal market has become more competitive and firms have had to demonstrate that they can deliver value for money for clients.

Other firms that employ pricing professionals include Baker McKenzie, which hired Linklaters’ former global head of pricing Stuart Dodds as director of global pricing and legal project management in 2011, and Baker Botts, which hired John Strange as director of pricing and project management in 2014.

Other tactics employed by firms to reduce costs include the operation of low cost centres. Linklaters has long sung the praises of its back office in Colchester, and has recently opened a similar outfit in Lecce, Italy, provide paralegal support for work being done in Milan.

HSF recognised the cost efficiency of operating in the regions when it opened an office in Belfast in 2011, along with Allen & Overy. They were joined by Baker McKenzie in 2015.

Legal pricing has been touted as way for mid-tier firms to increase their profit margins, including profit per equity partner (PEP).

Indeed, HSF posted a 2.5 per cent drop in PEP last year from £779,000 to £760,000. However, CEO Mark Rigotti highlighted that the dispute resolution practice had performed well in revenue and profit growth, thanks to many complex and landmark cases the firm has acted on.

In 2015, The Lawyer reported that pricing was one way for smaller, independent firms to compete with their global counterparts and survive; and with factors such as third-party funders and cost-efficient technology placing the spotlight on costs, it may not come as a surprise that some firms are moving towards building a more coherent strategy.

HSF’s decision could mean that UK law firms are finally catching on to the fact that pricing could allow them to compete with their US rivals, who are well known for their expensive hourly rates, as clients demand greater transparency from their lawyers.

Litigation funding has also placed an emphasis on costs, as clients looks to third party funders to achieve the best deal and fund cases that may not have otherwise reached the courts.

Technology, too, has made legal processes cheaper. AI software is able to sift through documents as part of the expensive disclosure process, meaning clients expect not to have to employ teams of paralegals at their cost.

In recent months, HSF has faced significant judiciary scrutiny over the legal fees it has racked up, especially in cases where it has appeared in defence of RBS.

In the colossal £12bn rights issue between 9,000 investors and the bank, Mr Justice Hildyard rebuked RBS and HSF for their “unsettling” and “unfocused” approach to litigation which raked up costs of £100m. The value of the claim stood at about £800m.  Hildyard J said accumulating costs had “prejudiced” the claimants “in the very fact of further delay, including that costs rise inexorably with every day that passes before trial”.

UK and US head of dispute resolution Mark Shilito said the recruitment of the team was not a response to criticism of high fees, but a “recognition of the competitiveness of the market and part of our continued desire to lead in the disputes area”.

He added: “We are always looking to the future and the way we see the disputes market developing – we never stand still.”