Who's Afraid of U.S. Litigation? (Almost Everyone)
By David Hechler
August 13, 2010
Are U.S. law firms losing international business opportunities because a surprising number of in-house lawyers prefer to seek counsel in other countries?
That's the conclusion of a survey that suggests global companies would rather be advised by British firms. Which is especially bad news for their U.S. counterparts because this is an area of explosive growth.
According to an advance copy of a summary that will be released next week, 88 percent of the companies surveyed now require international legal advice — up from 70 percent in 2009. They seek it in an average of six countries outside their home jurisdictions, and they're spending more to get it.
The growth of their legal bills for international matters is about five times the growth of their domestic expenses — much of it attributable to the so-called BRIC countries (Brazil, Russia, India, and China).
But the Brits seem to have the edge over the Yanks.
About 53 percent of the companies use English law for international work, while only 34 percent use U.S. law. When asked to name law firms they would consider for multijurisdictional deals or litigation involving three or more countries, only 30 percent named U.S. firms compared to 70 percent who preferred firms in the U.K.
So, what's going on? Is it all a function of the well-established fear and loathing of U.S. litigation? Could be.
In essence, the companies are pointing to their choice of jurisdiction for the contracts they sign. And the prospect of litigation is certainly on their minds. But that's only one of the likely factors, according to Acritas, the U.K.-based research and advisory firm that conducted the survey.
"I think it's a mix of factors," said Lisa Hart, the firm's CEO. "There's definitely an image that the U.S. is a litigious society," she noted. But the U.K. firms' marketing savvy and geographic proximity to key international markets may also play roles, she said.
"And there's a perception that U.S. firms are very expensive," Hart added. "But when you compare the rates, they're actually less expensive than the U.K. firms."
Acritas conducted telephone interviews with 1,000 respondents at large companies around the world. They represented a range of industries, and 92 percent of the interviewees occupied in-house legal roles — more than half were their company's chief legal officer. About 41 percent of the companies were based in the Americas (36 percent in the U.S.); 35 percent were based in Europe; and the remaining 24 percent in Asia Pacific.
The company sells the results to law firms. Companies that participated get the data for free. In-house lawyers are often particularly interested in comparing law firms' hourly rates, Hart said.
They sometimes sell the data to companies, Hart added, but are often willing to provide it for free to in-house lawyers who are willing to submit to an interview.