Sharing his expectations for the legal sector in 2017
With the election of Donald Trump and the Brexit vote, I had decided to give up on making predictions for the future, I’m prepared to dust off my crystal ball and look forward to what the legal market can expect in 2017……..
First, the impact of Brexit. Whilst lawyers are caught up with the niceties of the crown prerogative being played out at the Supreme Court, businesses are trying to make decisions about their future. There was an obvious slow-down in corporate activity in the run-up to and following the referendum. Although things seem to have picked up after the summer, progress will inevitably be “lumpy” as the negotiations play out and confidence rises and falls with every announcement. Whilst I think attempts by Paris and Frankfurt to attract banks and other financial institutions over the channel will ultimately fail for the most part, the uncertainty over the UK’s relationship with Europe will make it much easier for businesses to put off taking decisions if they can. That makes for a very uncertain legal market.
For litigators, the effect of Brexit will only be seen in a few years’ time, when it will be apparent whether today’s deal makers are choosing litigation in England as their dispute resolution mechanism of choice. Even leaving aside the challenge from arbitration, there are a number of jurisdictions vying for London’s title as the centre of the litigation world. As long as the government is able to reach a sensible agreement with the EU to deal with key issues, such as enforceability of judgments between the UK and Europe, Brexit should not have a significant impact on the litigation market in the long term. That these types of issues are unlikely to make the front page of the news is probably a good thing. It will avoid them becoming a political football and enable steps to be taken to secure London’s pre-eminent position in the litigation world.
Secondly, one thing that is bound to play an increasingly important role in London’s battle to remain an attractive place to litigate is costs. London is not a cheap place to litigate, and attempts so far by the judiciary to reduce those costs dramatically have proved, on the whole, to be unsuccessful. The judiciary will no doubt continue their focus on this area and in particular Lord Justice Jackson is advocating the introduction of fixed costs for all claims with a value of less than £250,000. For larger cases, without much more far-reaching changes to procedure – particularly surrounding disclosure – it is difficult to see how the Courts will be able to effectively control costs.
That creates an opportunity for commercial third party funders to play an increasing role in funding litigation. The funding market is becoming much more sophisticated and competitive. It is likely that 2017 will see more funded cases where other options existed, but third party funding is the preferred option to remove risk or improve balance sheets. The deal between Burford and BT will not be the only one of its kind. Third party funders – whether professional or not – will have to keep their wits about them following the Excalibur v Keystone Petroleum and Therium v Guy Brooke cases.
Thirdly, 2017 will continue to see movement in the legal market. As I write this, there are signs that King & Wood Mallesons in Europe are in financial difficulty, and there are almost daily rumours and confirmations of mergers. The combining of large firms like CMS, Olswang and Nabarro creates incentives for lawyers who do not want to work in very large firms to strike-out on their own or join one of the small niche firms which have come into their own in recent years. In 2017, we are likely to see firms seek to expand or specialise in an attempt to distinguish themselves in the market.
Finally, on a connected note, law firms will have to find more and better ways to attract, motivate and retain their associates and other staff. Pay is obviously an important factor, and some firms choose to compete on salary alone, but firms will need to increasingly look at the overall package that working with them entails. In particular, ensuring that associates and junior lawyers are entrusted with high levels of responsibility on interesting cases, and an opportunity to develop their own careers, will be an important way in which firms compete for the best lawyers.