LEGAL EXCELLENCE, INTERNATIONALLY RENOWNED

Transcription

1 LEGAL EXCELLENCE, INTERNATIONALLY RENOWNED UK LEGAL SERVICES November

2 UK legal services 2017 About TheCityUK TheCityUK is the industry-led body representing UK-based financial and related professional services. In the UK, across Europe and globally, we promote policies that drive competitiveness, support job creation and ensure long-term economic growth. The industry contributes nearly 11% of the UK s total economic output and employs over 2.2 million people, with two-thirds of these jobs outside London. It is the largest tax payer, the biggest exporting industry and generates a trade surplus greater than all other net exporting industries combined. 2

3 contents Foreword Key findings Legal services in the UK The UK s position internationally English law and UK legal services post-brexit TheCityUK and legal services Legal services in the UK UK legal activities revenue UK law firm fee revenue and key market trends International practice of barristers and advocates International legal services firms in London Legal services across the UK Dispute resolution in London and the UK Courts-based dispute resolution International work in the Business and Property Courts Alternative dispute resolution Contribution to the UK economy The UK s position internationally Sources of information

4 UK legal services 2017 LEGAL EXCELLENCE, INTERNATIONALLY RENOWNED UK legal services 2017 Legal services contributed Legal services employ 311,000 people, 2/3 outside London 25,872 disputes were resolved by alternative dispute resolution in the UK 24.1bn to UK economy in 2015 There are over 200 foreign law FIRMS with offices in The UK THE revenue of the UK s largest 100 law FIRMS grew by 7% * to 22bn English law is used in 40% of all global corporate arbitrations *(2016/17) The UK is second Legal services trade surplus nearly doubled over the past 10 years to 4 70% of cases in the Admiralty and Commercial Court were international in nature globally for legal services fee revenue 4bn

5 Foreword The UK s world-class legal services sector is a vital national asset, and this report underscores the important contribution that it makes. It generates 1.5% of UK gross value added (GVA) and employs over 311,000 people across the country, two-thirds of whom are based outside of London. For the first time, this report sets out the scale of the contribution made by the sector in the nations, regions and cities of the UK. The UK-based legal services sector forms an integral and crucial part of the wider financial and related professional services ecosystem which makes the UK a truly globally-leading international financial centre. It is the most international legal sector in the world, with a trade surplus worth nearly 4bn in This is driven by the primacy of English law which is the leading choice of governing law for, and resolving disputes in, cross-border trade and investment. Some 27% of the world s 320 legal jurisdictions use English common law. When disputes arise, international parties know that they can rely on world-leading dispute resolution services, whether through litigation, arbitration or mediation. Indeed, some 70% of cases in the Admiralty and Commercial Courts, part of the newly launched Business and Property Courts, were international in nature in the year ending July However, this primacy, and the ability of UK-based practitioners to provide best-in-class legal and advisory guidance for global clients, could be impacted by Brexit. The mutual recognition and enforcement of court judgments is critical to the international use of English law. The UK government has given a strong signal of its intention to maintain close judicial cooperation with the EU on civil matters. It should put these commitments into action as soon as possible by mapping out the process of accession to the Hague and Lugano Conventions, and consulting on draft legislative texts. There should also be a commitment to progress the incorporation into domestic law of the Rome I and II instruments on choice of law and applicable law in contractual and non-contractual matters. A key part of TheCityUK s Brexit work has focused on delivering continued mutual access to skills and talent for both the UK and EU-27. This includes practice and establishment rights of UK-qualified legal practitioners. It is essential that the government places a high priority on this, together with a rapid agreement of transitional arrangements and a bespoke future relationship that delivers mutual market access based on mutual regulatory recognition and cooperation. As we look beyond Brexit, as a country we must determine the shape of our national economy. We need a vigorous debate on how we play to our strengths as a country. TheCityUK has made a start to this process with our publication of a Vision for a transformed, world-leading industry in July Underpinning this vision is the UK s internationally trusted legal system and rule of law, which must be maintained and enhanced. More broadly, our industry and the UK s long-term economic prospects are closely linked to the ability of the legal services sector to offer a full range of enabling legal services to clients from across the world. Aligned to this, as the UK develops its own independent trade and investment policy, there is a unique opportunity to pursue new market access arrangements and to ensure that services including legal services are part of the next generation trade and investment agreements concluded with partners from around the world. TheCityUK s Legal Services Group, chaired by James Palmer of Herbert Smith Freehills, provides a senior strategic reference point for TheCityUK-wide legal related activities. It is critical that the world-leading expertise of UK-based legal practitioners can be harnessed working in partnership with government and regulators to address the challenges and opportunities that our industry and Britain as a whole faces as it moves to leave the EU and shape its destiny in the years ahead. Miles Celic Chief Executive Officer, TheCityUK 5

6 UK legal services 2017 Key Findings Legal services in the UK The UK has a strong reputation as the leading global centre for the provision of international legal services and dispute resolution. It is also an important centre for legal education and training. In addition to firms and other practitioners based in London, there are high-quality providers offering choice and value in cities such as Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle. Revenue generated by legal activities in the UK was 31.5bn in The top 100 UK law firms generated over 22bn in 2016/17. The majority of large firms saw an increase in revenue during this period, with growth less consistent among midtier firms. However, the depth and breadth of the sector was evidenced by the fact that many niche and boutique firms for example, those focused on insurance and shipping recorded growth. The business of law remains a significant contributor to the overall UK economy. The sector employs around 311,000 people, two thirds of whom are located outside London. Major centres of legal services employment include Manchester (with 12,000 in employment), Birmingham and Leeds (8,000 each), and Bristol (7,000). These jobs are highly skilled with clusters of expertise which attract investment and drive growth. The sector s trade surplus has nearly doubled over the past decade to 4bn in 2016, helping to partially offset the UK s trade in goods deficit. Legal services contribution to the UK economy was 24.1bn in 2015, equivalent to 1.5% of GVA. The legal services sector is becoming more complex as law firms, alternative legal services providers (ALSP) and technology firms both compete and collaborate. This ongoing evolution is a response to client-led demand and the increasing disaggregation of service delivery across the spectrum of legal services providers. In-house legal functions are looking across legal, advisory, professional and technology services providers to source integrated cross-border advisory expertise. This, coupled with continued fee pressure and the prevailing view of legal services as a buyers market, has intensified the need for law firms to differentiate their offering. Technology is increasingly viewed as a strategic enabler to proactively offer clientcentric solutions. Firms are analysing key practice areas, for example financial regulation and derivatives transactions, to identify potential technologies that can deliver scalable and cost-effective solutions and improved client outcomes. Collaboration and joint ventures (including through equity investment) between legal and technology firms continue to grow and are an increasingly important driver of technology utilisation across the sector. 6

7 The UK s position internationally The UK accounts for around 7% of global legal services fee revenue, which totalled between $580bn and $640bn in It is by far the largest market for legal services in Europe and second globally only to the US, which accounted for around 45% of total legal services fee revenue. The UK is very open in allowing virtually unrestricted access for foreign law firms. Over 200 foreign law firms from around 40 jurisdictions employing in excess of 10,000 people operate in London and other cities across the UK. The popularity of English law is an important factor contributing to the UK s strong global position and attractiveness to foreign law firms. Some 27% of the world s 320 legal jurisdictions use English common law. The choice of English law for global commercial contracts is in part driven by the UK s reputation as the leading centre for international dispute resolution whether through litigation, arbitration or mediation. The leading global position of international law firms based in the UK is underlined by the following facts: Five of the largest 15 Global 100 law firms, based on number of lawyers in 2016/2017, have their main base of operations in the UK. In terms of revenue, UKbased firms held three of the top ten places. The largest international law firms in London have between 45% and 65% of their lawyers based outside the UK, and many other London-based firms have between 10% and 20% of lawyers overseas. Nearly 7,000 practising solicitors from the UK were located abroad in 2016, according to the Law Society of England and Wales. The strength of the UK as an international centre for dispute resolution is reinforced by the expertise of barristers and advocates involved in international practice. Over 1,600 members of the Bar of England and Wales, including around 1,500 members of the Commercial Bar Association (COMBAR), now receive instructions from abroad. A significant component of their practice is in the field of international commercial law, with many international cases heard in the Business and Property Courts, which encompass the specialist civil courts and lists of the High Court including the Commercial Court, the Technology and Construction Court and the courts of the Chancery Division. London s reputation as a leading global centre for international dispute resolution through the courts is underlined by the fact that in 2016, over 1,100 claims were issued in the Admiralty and Commercial Court, of which 70% involved at least one party whose address is outside England and Wales and 45% were cases where all parties involved were international. In the year end to July 2017 there were over 700 claims, with 71% being international in nature and over 49% of those being cases where all parties were international. UK-based law firms continue to grow and develop their presence in both developed and emerging markets. This is in response to client demand and a focus on ensuring multi-jurisdiction trade and investment transactions and dispute resolution can be supported by firms regardless of location and time zone. Law and legal services are a cornerstone of the broader financial and related professional services cluster that makes the UK the leading international business hub. Major global firms come to the UK to access this unrivalled breadth of services, seek advice from world-class legal and advisory firms, raise finance, and insure their businesses helping to create jobs throughout the UK. A strong, competitive and well-regulated legal services sector is essential for sustainable economic growth. 7

8 UK legal services 2017 English Law and UK legal services post-brexit TheCityUK believes it is critical to ensure that international parties understand the ongoing benefits of using English law and UK legal services practitioners following the UK s exit from the European Union. It is also essential that the UK remains the jurisdiction of choice for international legal services and dispute resolution. The efficient and cost-effective resolution of disputes is critical to that goal and to the ongoing development of English law. This is at the core of the international attractiveness of the UK and of our world-leading legal services sector. The Lord Chief Justice and the Chancellor of the High Court developed the below points to underscore the unique strengths of English law and the high quality of dispute resolution services in the UK. 1 The UK has a totally independent judiciary and compliance with the rule of law. These factors inspire business confidence and underpin international trade and investment. The substantive English common law is clear, fair and predictable, and based on precedent. The English common law, together with the UK legal system, is, and has always been, flexible. It adapts to meet the challenges of an everchanging commercial world. UK court and arbitral procedures are practical and innovative, delivering speedy and efficient resolution of business and financial disputes. Litigation and arbitration in the UK is cost effective. The UK will remain a global Arbitration and Alternative Dispute Resolution (ADR) centre post-brexit. Brexit will have no impact on the New York Convention on Arbitral Awards. The mutual recognition and enforcement of UK judgments abroad will largely continue as before, whether under long-standing bilateral treaties or under common law principles of comity. A UK exclusive jurisdiction clause will continue to be given effect after Brexit. London and the UK will continue to provide unrivalled access to highquality legal services. London will remain one of the leading financial, insurance and commercial centres in the world. 1 Legal UK, The strength of English law and the UK jurisdiction, (2017), available at: uploads/2017/08/legaluk-strength-of-english-law-draft-4-final.pdf 8

9 TheCityUK and Legal Services TheCityUK is focused on ensuring the continued international competitiveness of the UK legal services sector. This involves assessing and responding to events which have the potential to impact on the sector, with a particular focus on Brexit-related issues. In December 2016, TheCityUK submitted a paper to HM government (HMG) entitled The impact of Brexit on the UK-based legal services sector. It discussed and identified the key Brexit-related issues which have the potential to impact on the competitiveness of the UK s legal sector, as well as identifying possible opportunities. The paper underscored the sector s contribution to the UK economy, stressing that the UK s long-term economic prospects are closely linked to the ability of the legal services sector to offer a full range of enabling legal services to clients from across the world. It defined the sector s priorities with the aim of informing HMG s Brexit negotiations. This was followed by submission of both written and oral evidence to the Justice Select Committee implications of Brexit for the justice system inquiry. A core component of our ongoing work is to make clear that for the UK-based legal services sector, the right Brexit deal will be bespoke, underpinned by mutual market access and based on mutual regulatory recognition and cooperation. We have also argued strongly that the UK should seek to ensure continued crossborder recognition and enforcement of judgments from UK jurisdictions in the EU after Brexit. This is clearly in the interests of parties to contracts in the UK, EU and globally, as well as to the ongoing primacy of English law and dispute settlement. TheCityUK is a member of the Professional Business Services Council (PBSC), which comprises organisations from across the Professional Business Services (PBS) industry, including the legal services sector. We have been heavily engaged in its Mutual Market Access Working Group, whose objective is to put the government in the best position to negotiate market access deals in the interests of the PBS industry. For the legal services sector, this includes a specific focus on post-brexit establishment and practice rights. TheCityUK is contributing to the legal sector-specific work as well as offering broader analysis and insight on the key issues facing the wider PBS industry. This work seeks to articulate clearly the needs of the PBS industry and identify effective outcomes and solutions that maximise the benefits to the UK. It also aligns with our broader trade and investment policy work. The Justice Select Committee s final report noted and endorsed our calls and recommendations, quoting TheCityUK s characterisation of the role of the legal sector in the business ecosystem: 2 It is one of the jewels in the crown. Indeed, it is part of the reason why London, and the UK, is the leading global financial centre. It is also a reason why people come to London and the UK. They come here to access the law. They come here to deal with a situation where the courts provide certainty and fairness, and where the judiciary have a very strong reputation for impartiality. We believe very strongly that this is not just about the legal services industry itself but about the underpinning that English law gives the wider economy and business relations. It is a very important part of the UK offering. The UK is the largest specialist centre for the resolution of financial, business and property disputes anywhere in the world. We therefore continue to work closely with the senior judiciary on a range of activity to ensure the UK remains the jurisdiction of choice for international business and dispute resolution. 9

10 UK legal services 2017 TheCityUK supported the launch of the Business and Property Courts in July We believe this is a forward-looking decision, indicative of the judiciary s determination to ensure that the UK remains at the forefront of dispute resolution globally. It also gives greater clarity to users about the focus and coverage of legal services available at the Courts. Other examples of TheCityUK s domestic agenda include submissions to: Financial Conduct Authority (FCA) consultation on overall responsibility for the legal function under the Senior Managers Regime. The Ministry of Justice (MoJ) Corporate Liability for Economic Crime call for evidence. HMG consultation on the UK s future legal framework for imposing and implementing sanctions. TheCityUK plays an active role in promoting the use of UK legal services on the international stage. This includes identifying opportunities for TheCityUK members in initiatives including the following: TheCityUK co-signed a Memorandum of Understanding with the Astana International Financial Centre and the European Bank for Reconstruction and Development which identifies dispute resolution and the development of an English law based court system as key themes for ongoing cooperation. Capital market and financial sector development: the demand for assessing and implementing international standards to build emerging market capacity is a key area of interest for members. TheCityUK has undertaken a variety of activities including member-led masterclasses, seminars and workshops in a range of jurisdictions. 10

11 Legal Services in the UK The UK has a strong reputation as the leading global centre for the provision of international legal services and dispute resolution. It is also an important centre for legal education and training. In addition to law firms and other legal practitioners based in London, there are high-quality providers offering choice and value in cities such as Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle. The economic contribution of legal services should be seen in its broadest context of facilitating the administration of justice and a wide range of transactions and business activities. Legal services have both a multiplying and an enabling effect for business growth and stability. The sector also offers bespoke expertise to support other parts of the economy. UK legal activities revenue In line with a global economic recovery, revenue generated by legal activities in the UK has generally trended upwards in recent years, although it declined by 2% year-on-year in 2016, to 31.5bn. (Figure 1). 2 Figure 1: UK legal activities revenue Source: Office for National Statistics bn Office for National Statistics, TOPSI: Turnover of Legal Activities for GB, January 2010 to December 2016, (10 February 2017), available at: 11

12 UK legal services 2017 UK law firm fee revenue and key market trends Overall, the revenue of the largest 100 law firms in the UK grew by 7% in 2016/17 to 22.1bn and has grown from 12.3bn over the last decade. The majority of large firms saw an increase in revenue during this period, with growth less consistent amongst midtier firms. However, the depth and breadth of the sector was evidenced by the fact that many niche and boutique firms for example, those focused on insurance and shipping recorded growth. Figure 2: Revenue and profit of the largest 100 law firms in the UK Source: Legal Business bn / / / / / / / / / / /17 Revenue of largest 100 law firms in the UK, bn Profit of largest 100 law firms in the UK, bn This growth has been achieved against a backdrop of political and economic uncertainty. Firms continue to focus on cost reduction and improving headcount utilisation in response to ongoing pressure on fees and structural changes in how clients procure legal services. For example, the PwC Law Firms Survey 2016 illustrates that 43% of fees are either fixed or contingent/performance-based for UK law firms ranked , compared with only 18% in As a result, these firms are increasingly focused on developing the most efficient delivery model for each project. The continued growth of in-house legal teams particularly across highly-regulated sectors such as financial services, pharmaceuticals and telecoms continues to impact the extent to which external firms are utilised, how they are procured and the structure of fee arrangements. This includes a drive by many corporate clients to reduce the number of firms on their legal panels, typically resulting in fewer, but larger and more complex opportunities for law firms. The nature of these opportunities means they are increasingly the preserve of larger firms who continue to focus on winning work from global clients and building their international presence and key practice offerings to best support them. 3 PwC, Annual Law Firms Survey 2016, (2016), available at: 12

13 Figure 3: Geographical distribution of lawyers in largest 100 UK law firms (% share), 2016/17 Source: Legal Business 7% 3% 7% UK Europe (excluding UK) Asia US Other Americas Middle East/Africa 10% 56% 18% In contrast, the fortunes of mid-tier firms rely on a combination of factors, including agility, flexibility, improving utilisation and a focused strategy through which they can differentiate their offering from both peers and larger firms. The breadth and diversity of UK-based law firms is evidenced by niche and boutique firms who in turn focus on specific sectors or specialisms. These firms can be subject to potentially greater economic shocks if their key client sector suffers a slowdown. Their growth strategies must therefore consider how best to mitigate the possible risks of over-reliance on a particular sector or specialism. While traditional legal panels may be shrinking, there is also a greater willingness among corporate clients to disaggregate aspects of their legal needs and to allocate responsibilities for different aspects of a single matter to a range of service providers. For some high-value global clients, this has given rise to law firms taking on a broader management function to ensure that all elements of client delivery meet their needs. Both mid-tier and niche firms, as well as ALSP and technology providers, are developing strategic alliances with leading law firms to position themselves as part of this increasingly complex supply chain. This has increased the need for many law firms to further develop their project and resource management capabilities, whilst at the same time clearly articulating the core value of services that only lawyers can provide. It is therefore essential that law firms and other practitioners invest in building strong and effective relationships with key clients. There is an increasing need to engage at senior levels outside of the legal function to demonstrate a clear understanding of clients challenges and commercial objectives. ALSP are an increasingly important component of the legal services landscape. According to a 2017 study by Thomson Reuters, the value of the global ALSP market is around $8.4bn. The research found that around 50% of law firms and 60% of corporate legal departments are using ALSP for at least one type of service. 4 The most common of these is low-risk or standardised high-volume tasks. 4 Thomson Reuters, 2017 ALSP Study: Understanding the growth and benefits of these new legal providers, (February 2017), available at: 13

14 UK legal services 2017 Law firms typically use ALSP for standardised high-volume tasks to reduce costs and improve efficiency; for example, document review and electronic discovery services. However, there is a strong drive for law firms to undertake tasks involving legal interpretation in-house. The study also provided an insight into where law firms may invest in the future, by noting that while 46% of corporations plan to use an ALSP for specialised legal services in next five years, only 15% of law firms have created or plan to create an affiliate. In addition, 56% of corporations will be looking to an ALSP for help with regulatory risk and compliance, and only 5% of law firms plan to have such an affiliate up and running in the next five years. The introduction of Alternative Business Structures (ABS) through the Legal Services Act 2007 has enabled areas of the legal services sector to secure external funding and has contributed to the growth of ALSP in the UK. An analysis published in 2016 identified 510m of external investment in the legal sector. This investment had been made in the residential conveyancing, corporate structuring and finance, injury, and other market segments. 5 A June 2017 report by the Legal Services Board noted there were 892 active ABS licenses as of the end of March Of all ABS, 47% deliver services in the wills, trusts and probate segment, and more than a quarter in the conveyancing market segments both residential and commercial. Prior to gaining their ABS licence, 63% offered legal services 56% regulated and 7% unregulated. The remaining 37% did not offer any form of legal services before being granted an ABS licence. While many of the ABS entities don t currently compete with commercial law firms, there is increasing competition from other market entrants. Accountancy firms are broadening the scope of their legal offerings and continuing to gain traction in the market. For example, PwC Legal, prior to its full integration into PwC LLP, reported a 23.5% rise in revenue in 2015/2016. In headline terms, its total revenue of 59.9m placed it just outside the UK s top 50 law firms by revenue. In addition, RSM, the UK s seventh largest provider of audit, tax and consulting, launched a legal practice in January There has been a marked rise in the number of legal start-ups, some of whom are licensed ABS. According to a Knight Frank report, there were 15 legal start-ups recorded on AngelList s investment platform in 2009 and 1479 in early As these market entrants evolve and penetration of ALSP grows, pressure on law firms will continue to increase. This is evidenced by the continued growth of law firm combinations, which firms use to build scale, deepen specific practice experience and enter new geographical markets. According to Jomati MergerLine UK, there have been 133 publicly-reported mergers involving UKbased law firms in the Lawyer 100 rankings since Of these, 54 involved a UK firm merging with a firm in another jurisdiction, further reinforcing the desire of firms to better service international and global clients. 5 Arden Partners, Analysis of external and corporate investment in UK law firms: sustainable momentum established, (2016), available at: 6 Legal Services Board, Evaluation: ABS and investment in legal services 2011/ /17 Main report, An analysis of investment in legal services since the introduction of ABS licensing, (June 2017), p.14., available at: 7 Knight Frank, Your Future, Now, (2017), p.6/7., available at: 8 TheCityUK calculations based on Jomati Consultants LLP, UK Law Firm Mergers, ( ), available at: 14

15 Figure 4: Total fee-earning headcount of the largest 100 UK-based law firms Source: Legal Business 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Number of fee-earning (LHS) The total number of deals involving the largest UK law firms increased by 5.5% in 2016 (Figure 5). The average value of deals has, however, declined slightly during this period, resulting in modest growth of 4% in the total value of deals. Figure 5: Top 50 UK City law firms deals Source: The Law Society of England and Wales, City Legal Index Number of deals / / / / / / / / / /17 Number of fee-earning, % change year on year (RHS) STRUCTURE OF THE LEGAL PROFESSION IN THE UK The legal systems in England and Wales, Scotland and Northern Ireland each have separate laws, judiciaries and legal professions. There are differences between Scots law, English law and Northern Irish law in areas such as property law, criminal law, trusts law, inheritance law, evidence law and family law, while there are greater similarities in areas such as commercial law, consumer rights, contract law, taxation, employment law, and health and safety regulations. Scots law offers the advantages of a common law system that also has affinities with the civil systems of Continental Europe. There are also differences in the terminology used between the jurisdictions. For example, in Scotland there are no Magistrates Courts or Crown Court but there are Sheriff Courts and the Court of Session. The Procurator Fiscal Service provides the independent public prosecution service for Scotland like the Crown Prosecution Service in England and Wales and the Public Prosecution Service in Northern Ireland Q Q2 Number of deals (index 2009=100) Value of deals (index 2009=100) A key purchaser of legal services is the financial services sector, and the attractiveness of the UK as a place to set up and grow a financial services business has contributed to the strength of the UK s legal services sector. 15

16 UK legal services 2017 Data from the Law Society of England and Wales shows that between 2013 and the first half of 2017, the financial services industry accounted for 40.9% of the total value of deals on which the top 50 UK City law firms advised. Energy and utilities accounted for 11.5%, technology, media and telecommunications 9%, real estate and construction 5.1% and manufacturing 3.3% (Figure 6). 9 Figure 6: Number of deals made by the top 50 UK City law firms by industry (% share, *) Source: The Law Society of England and Wales, City Legal Index *2017 refers to the first half of the year only Finance and banking Fund/investment management Technology, media and telecoms Energy and utilities Real estate and construction 30% 30% Manufacturing Other 3% 5% 11% 11% 9% The Legal Services Board is an organisation created by the Legal Services Act The Board came into being on 1 January 2009 and became fully operational on 1 January Its overriding mandate is to ensure that regulation in the legal services sector is carried out in the public interest; and that the interests of consumers are placed at the heart of the system. The Board itself is responsible for overseeing legal regulators in England and Wales. It is independent of Government and of the legal profession. It oversees 11 separate bodies, the Approved Regulators. The Board also oversees the organisation established to handle consumer complaints about lawyers, the Office for Legal Complaints. Different regulatory arrangements apply in Scotland and Northern Ireland. The legal profession in the UK is distinctive from many other countries in being divided into two branches, solicitors and barristers (advocates in Scotland). The judiciary is drawn from both branches of the profession. Solicitors provide the great bulk of first line legal advice, undertaking detailed advisory work on behalf of their clients. While solicitors serving the local community, solving the legal problems of the public are often in a general practice, solicitors serving business customers tend to be specialists in a particular area of law. Barristers (advocates in Scotland) provide specialist legal advice, with particular expertise in advisory, drafting and advocacy work. They include individuals with expertise in all areas of the law. Many are also qualified in other jurisdictions, have knowledge of other systems of law and are able to advise on complex international matters. The regulatory differences between solicitors and barristers/advocates have been diminishing, but the 9 TheCityUK calculation based on The Law Society of England and Wales, City Legal Index, Data up to end Jun 2017, (2017), p

17 main distinction remains that solicitors typically provide a continuous service to clients, while barristers/advocates are a source of specialist legal advice on particular points of law or strategy, and present cases orally before courts, arbitrations or other tribunals. In England and Wales, barristers, who are independent sole practitioners, typically join together with other barristers and share premises in what are called sets of chambers, which tend to specialise in one or more legal fields. There are approximately 1,600 senior barristers known as Queen s Counsel (QCs), which is a world-wide recognised kitemark for excellence in advocacy. Lawyers and clients from other jurisdictions can instruct barristers directly, without using a domestic law firm, in a range of international transactions and disputes. Many barristers are members of specialist bar associations, which provide further education for their members and represent their interests. The Bar Council is the representative body for all barristers in England and Wales and is responsible for maintaining the independent regulator of barristers, the Bar Standards Board. In Scotland, an advocate performs the same function as a barrister in England and Wales. All advocates are members of the Faculty of Advocates based in Parliament House in Edinburgh, where the supreme courts are located. The Faculty is responsible for the admission of advocates and their professional conduct. It also provides library facilities, including the renowned Advocates Library. In Northern Ireland, over 650 barristers and a further 94 QCs operate as an independent referral bar from an iconic modern building The Bar Library in central Belfast. It is also the home of the Inn of Court of Northern Ireland. The governing body of the profession is the Bar Council of the Bar of Northern Ireland. Barristers in this jurisdiction provide a comprehensive range of advanced legal services in advocacy and representation both at home and abroad. Specialisations offered from the members of the Bar Library include advanced advocacy, arbitration and mediation. The proximity of the Bar Library in Belfast to other European jurisdictions such as Ireland and the very close ties with the US makes legal representation from the Bar Library an attractive option for the many foreign entities and corporations who avail themselves of both referral and also Direct Professional Access. 17

18 UK legal services 2017 International practice of barristers and advocates The importance of the UK as the leading global centre for international financial and related professional services has created significant demand for specialist legal advice in a wide range of areas. The Bar Council of England and Wales and its International Committee undertake many initiatives to help barristers develop an international practice. The Bar Council plays an active part in the work of the most important multi-national lawyers organisations and has built strong relationships with foreign lawyers associations and Bars, both in legal business development and rule of law advancement. The Commercial Bar Association (COMBAR) was formed in 1989 to bring together barristers who practice in the field of international and commercial law. The principal fields of practice for over 1,500 members of COMBAR cover international trade, shipping and aviation, banking and financial services, insurance, commodity transactions, international arbitration, insolvency, oil and gas/energy law and EU law. According to COMBAR, its members have been instructed to appear as advocates or experts in 40 international arbitration centres and courts in 25 jurisdictions globally. In addition to COMBAR, there are other specialist bar associations, many of whose members include barristers practising in aspects of international and commercial law. The Chancery Bar Association encompasses practitioners with specialised knowledge of international trusts, taxation, pensions, financial services, insolvency, patents and corporate law. The Technology and Construction Bar Association (TECBAR) represents barristers specialising in disputes arising from the technology and construction sectors. The Criminal Bar Association is the focal point of contact for those concerned with commercial and business fraud. The Intellectual Property Bar Association is the specialist bar association for barristers practising in all areas of intellectual property law. A concentration on court work has enabled barristers to develop specialist expertise, particularly as representatives in courts where common law is practised. Barristers also provide advice and opinions on contentious and non-contentious legal matters across a broad spectrum of industries. They are involved in arbitrations, either as legal representatives or as arbitrators, in the UK and other major arbitration centres around the world. The main services offered by barristers include: Advocacy and litigation. Barristers can receive instructions to appear in a wide range of international, foreign and UK courts, including, for example, the International Court of Justice, the International Criminal Court and the European Court of Justice. Legal advice and expert evidence. Barristers may be instructed to give advice, orally or in writing, on any matter of the laws of the UK, as well as European or international law arising anywhere in the world. They can also appear as expert witnesses on such laws for overseas courts and arbitration proceedings. Arbitration. London is a major centre for international and commercial arbitration. As a result, many QCs and other barristers, as well as some law firms in the UK, have developed considerable expertise in the field of arbitration. This includes undertaking arbitration using the rules of the International Chamber of Commerce and the London Court of International Arbitration. 18

19 Advocates in Scotland. Advocates are available to be instructed in a wide range of courts and tribunals in Scotland and elsewhere, including the UK Supreme Court, the European Court of Justice and the European Court of Human Rights. They may also be instructed in arbitrations and other forms of alternative dispute resolution. Advocates may be instructed to give advice, orally or in writing, on any matter of Scots or European law. International legal services firms in London London is the leading global centre for international financial services. The co-location and clustering effect of banking, insurance, fund management and other financial services help to underpin its position as a major centre for international legal services. London s reputation as a leading global centre for the provision of international dispute resolution is underlined by the fact that over 70% of claims issued in the Admiralty and Commercial Court involve at least one party from outside England and Wales. Furthermore, the UK capital is viewed as the leading preferred centre for arbitration (Figure 13). The UK is very open in allowing virtually unrestricted access for foreign law firms. There are over 200 foreign law firms in the UK from over 40 jurisdictions, whose presence adds to the sector s contribution to the UK economy. US firms in particular have a long-standing presence in the UK, with more than 100 based in London and the wider UK. According to Altman Weil Inc, between 2007 and 2016, 21% of all US cross-border combinations involved UK-based firms, and the trend continues with two US-UK deals announced in May Around 40 50% of foreign firms offer a full service English law capability in addition to their home jurisdiction offering. Law firms from other jurisdictions in the UK typically provide services to UK-based international corporations undertaking business in the country from which they originate, and to domestic clients looking to invest in the UK and Europe. Many of these firms derive a large proportion of their overall revenue and employ a large amount of staff to support business conducted in London. The largest firms ranked by London fee-earners on this list include White & Case, Baker McKenzie, Dentons and Reed Smith (Figure 7). 11 Figure 7: The largest offices of non-uk law firms in London, 2016/17 Source: Legal Business Of which London fee-earners English qualified Other qualified White & Case Baker McKenzie Dentons Reed Smith Latham & Watkins Mayer Brown Jones Day Shearman & Sterling Kirkland & Ellis Weil, Gotshal & Manges Dechert Squire Patton Boggs Skadden, Arps, Slate, Meagher & Flom Ropes & Gray Sidley Austin Altman Weil, Inc., US Law Firm Merger Market Continues to Accelerate, (2017), available at: cfm/fa/r.resource_detail/oid/a73f1bdd-46de-42b9-9b3c-ba1bd93145db/resource/us_law_firm_merger_market_continues_to_ Accelerate.cfm 11 Legal Business, Global London 2017 Main table, (07 April 2017), available at: analysis/255-global-london-2017/9519-global-london-main-table 19

20 UK legal services 2017 The headcount of the largest 50 foreign law firms in London reached a record 6,033 fee earners in This was up from 5,953 in the previous year (Figure 8). The total number of partners also grew to a new high of 1,680. It is notable that the number of non-uk lawyers primarily US-qualified employed by these firms rose by 29% to 1,286 in This increase has been driven in part by a growing number of UK and European corporates accessing US capital markets and a convergence in leveraged finance terms between the US and European markets. Figure 8: Total headcount of fee-earners and countries of qualification (50 largest overseas law firms in London) Source: Legal Business 7,000 6,000 5,000 4,000 3,000 2,000 1, % UK qualified lawyers % UK non-qualified lawyers 2016 Large international law firms remain at the core of London s leading reputation as an international legal services provider. TheCityUK identifies firms as international if more than a third of their lawyers are working outside their home jurisdiction. Some firms, however, may have few lawyers working abroad but remain very global in their work and outlook. International law firms in London feature prominently in rankings of the largest global firms (Figure 25). The largest UK law firms typically have 45 65% of lawyers outside the UK. US firms have traditionally been more orientated towards their domestic market. However, the increasing level of cross-border combinations and ongoing international expansion has resulted in many leading US firms having 25 40% of their lawyers outside the US. International law firms in London have become leading advisers in deals taking place in international capital markets. They also offer a substantial range of services, including advising on mergers & acquisitions (M&A), project finance, tax and intellectual property around the world. Other smaller firms are world leaders in their own niche practices, providing deep sector-specific experience. For example, the UK is the world s leading centre for the provision of legal services to the international maritime community, with over 40 law firms active in the sector. 12 TheCityUK calculations based on Legal Business, Global London 2017 Main table, (07 April 2017), available at: legalbusiness.co.uk/index.php/analysis/255-global-london-2017/9519-global-london-main-table 20

21 RANGE OF INTERNATIONAL LEGAL SERVICES The biggest areas of practice of law firms in the UK include corporate work, banking and capital markets. Property and dispute resolution have gained in importance in recent years, although the extent of each law firm s involvement in the various areas of practice will vary. The main areas of international work undertaken by law firms in the UK include: Corporate finance - joint ventures, M&A, equity issues, corporate re-organisations, management buyouts, company law. Other corporate and commercial law - aviation, shipping, commodities, competition, IT and digital media, telecoms, media and entertainment. Banking/project finance - bank lending, debt rescheduling, project finance, public private partnerships, securitisation, aircraft and ship finance, World Bank and EBRD projects work. International capital markets - equity issues, asset securitisation, privatisation, derivative products, eurobonds. Tax - corporate tax (and personal tax planning where there is no private client department), stamp duty, VAT. Trade law - The World Trade Organization, international commercial law on trade in goods and services, trade and intellectual property, cross-border transactions, and trade disputes. Dispute resolution - arbitration, mediation and litigation. Insurance and reinsurance - advising on claims and related litigation and arbitration. Property - sales and leasing of commercial property, property finance, property development, construction, environmental law, town and country planning. Intellectual property - patents, trademarks, copyrights, confidentiality. Product liability - liability along the chain of manufacture of any product for damage caused by that product. Employment/pensions - implications of M&A, establishment and maintenance of pension schemes, contracts of employment, immigration advice. Public international law - relates to the handling of legal issues affected by international jurisdictions such as the International Court of Justice. Private clients - family law, probate, tax planning, trusts. Competition - anti-trust law, monopolies, mergers, cartels and abuse of a dominant position. EU Law. 21

22 UK legal services 2017 Legal services across the UK The UK is the major global hub for international legal, financial and other related professional services. Within the UK, the importance of London is core to its position, but other cities such as Edinburgh and Glasgow in Scotland; Birmingham, Bristol, Leeds, Manchester and Newcastle in England; Cardiff in Wales; and Belfast in Northern Ireland are also important centres for the industry. The UK legal services sector directly employs around 311,000 people and offers education, training and apprenticeships to develop the skills of its employees. These jobs are highly skilled and distributed across the whole country, with clusters of expertise which attract investment and drive growth. Around two thirds of those employed by the sector are located outside London (Figure 11). This deep pool of labour and skills has seen the legal services sector respond to the needs of key sectors throughout the UK. For example, with more than 2,000 companies operating in the energy sector, the Scottish legal profession has a highly-developed expertise in the oil, gas and renewable energy sectors. Figure 9: Largest UK law firms in the UK, by revenue, 2016/17 Source: Legal Business Firm name Headquarters location Revenue, m 1 DLA Piper International 1,675 2 Clifford Chance International 1,540 3 Allen & Overy International 1,519 4 Linklaters International 1,438 5 Hogan Lovells International 1,420 6 Freshfields Bruckhaus Deringer International 1,330 7 Norton Rose Fulbright International 1,243 8 Herbert Smith Freehills International CMS International Ashurst International Slaughter and May London Clyde & Co London Eversheds Sutherland National Pinsent Masons National Gowling WLG International Simmons & Simmons London Bird & Bird London Berwin Leighton Paisner London Taylor Wessing London Irwin Mitchell National Osborne Clarke Bristol DAC Beachcroft National DWF National Addleshaw Goddard National Stephenson Harwood London Withers International Macfarlanes London Holman Fenwick Willan London Fieldfisher London Watson Farley & Williams London Mishcon de Reya London