This is what happens when partnership disputes get messy, plus the ongoing need for physical offices and where Brits still beat Americans.

 

I'm Paul Hodkinson, Editor-In-Chief of Law.com International, bringing you this week's edition of The Global Lawyer—our weekly summary of the major news and trends affecting the global legal industry.

Disputes Too Close For Comfort

 

Disputes are normally good news for lawyers. But only when they are kept at the client level. For some reason law firms are not the best at handling disputes when they themselves are involved.

 

This can sometimes be due to the nature of the partnership model, which can act as a wonderful system when times are good but a messy and problematic structure when things go wrong.

 

Take the case of one of India’s largest law firms, Luthra & Luthra. The two founders got into a bitter dispute last year following disagreements about equity dilution. The matter went to court in January and then subsequently ended in a settlement, which will allow Mohit Saraf, who was expelled from the partnership, to set up his own practice and compete for Luthra & Luthra’s clients and staff.

 

Last week he launched that operation with 21 partners, most of whom are from his former firm, writes Asia correspondent Jessica Seah.

 

This is the not the first time disputes between partners has led to a split of a major law firm in India. In 2015, a high-profile split involving one of the country’s largest and most high profile firms resulted in the creation of two new firms.

 

Sometimes such fights can create opportunities for new beginnings - other times it is hard to see much benefit beyond the pain.

 

When U.K. shipping firm Ince & Co was acquired out of administration by a listed law firm in late 2018, various disputes arose involving parties such as former partners, the administrators and overseas offices.

 

In its latest accounts, the U.K.-listed law firm revealed that it paid out £1.7 million in settlements and related legal bills following disputes with former partners in Singapore and Greece. The numbers feel relatively small for a £100 million turnover firm, until you consider its operating profits fell 60% in the financial year to just £3.1 million. The firm still hopes to recover some of the costs.

 

There is also the reputational damage to consider when disagreements flare up.

In 2017 and 2018 there were various calls for a German publisher to rename a number of its legal works by removing the names of lawyers associated with the Nazi era.

 

But the publisher resisted, arguing “history cannot be undone”, local correspondent Eva von Schaper reports. Now, however, the publisher will rename the texts, the most prominent of which is a commentary on the German civil code, named after Otto Palandt, a German lawyer who held a number of high-level legal posts in Nazi Germany.

 

And Mishcon de Reya, the U.K. firm which has been gearing up for a possible flotation, is unlikely to be happy that the U.K. industry regulator has referred a case relating to a client account “failure” to a disciplinary tribunal. That is not a great look to potential external investors.

 

According to the U.K.’s Solicitors Regulation Authority, the firm is alleged to have failed to have taken “any or adequate steps” to prevent payments being made into and from one of its client accounts. The circumstances of the payments amount to the provision of a banking facility, according to the SRA, which is against the rules.

 

In all these cases, the institutions involved will be hoping for a quick resolution and a chance to move on. After all, it is client matters that are supposed to be their focus.

Boots on the Ground

 

For centuries it has been a rule of warfare that to rule a region you need troops on the ground there. The same rule applied to business too. But with face-to-face meetings becoming almost non-existent over the last 18 months, perhaps that rule is changing.

 

Freshfields Bruckhaus Deringer, for example, has handled some of the most critical and complex transactions, projects and disputes across Africa despite not having offices anywhere on the continent. Its strategy differs to rivals such as Dentons, DLA Piper, Baker McKenzie, Herbert Smith Freehills, and White & Case.

 

Freshfields’ partner and co-head of Africa, Gabriel Mpubani, spoke to our Africa correspondent Jennigay Coetzer to explain how it works.

 

Then again, that strategy remains unusual. Even after 18 months of working remotely, firms are still looking for ways to establish physical presences in new markets.

The most notable of these came last week when Yingke Law Firm, a major Chinese firm, opened a second office in Germany.

 

Sure, having another office in Germany might not feel like a big deal, but if this is a sign that Chinese law firms are expanding across the globe then this could be significant.

 

Yingke is the already the 69th largest law firm in the world with a revenue of more than $760 million. It told local correspondent James Carstensen that it was following its Chinese clients, which sounds ominous given its clients are institutions driven by an national economy that will, at some point, be the world’s largest.

 

And another expanding giant is that of alternative firm Rimon, which is opening offices all over the place. The model involves a collaboration among lawyers across locations and disciplines, who then set their own compensation rates with clients and are paid directly. Many work remotely, but the firm's rapid growth has now led it to apply to open in Hong Kong, its third Asia office and its 43rd globally.

 

The firm thinks of itself as a ‘cloud-based’ firm, but even this model involves it having physical offices in half of its locations, with the other half covered by flexible rental arrangements.

 

Perhaps the idea of boots on the ground is not so outdated after all.

Where US Law Firms Lag in London

 

U.S.-headquartered law firms are constantly taking market share in the U.K.

 

An analysis of which firms have advised on the most European SPAC deals so far this year is another example of how the likes of White & Case, Skadden, Arps, Slate, Meagher & Flom, Sullivan & Cromwell and Latham & Watkins are sealing the big mandates.

 

U.S. firms in London have also done a good job in shaming U.K. firms on the topic of diversity. Rankings of firms by the number of female equity partners, racially diverse lawyers and LGBTQ lawyers consistently show U.S. firms are ahead of their U.K. counterparts.

 

But there is one area where U.S. firms remain behind – the educational diversity of their lawyers. A survey of more than 40 top U.K. and U.S. firms found that U.K. firms top the rankings when looking at which have the highest proportion of state school-educated lawyers. Hardly any U.S. firms made the list.

 

In fact, U.S. firms have a bit of a reputation for lacking diversity when it comes to educational background. A couple of years ago a “prestigious U.S. firm” advertised to recruit someone in the U.K. who must have attended college/university at either Oxford or Cambridge.

 

Numerous U.S. law firm websites also allow visitors to search for lawyers based on which college or university they attended, as if that denotes a certain quality of lawyer. It is almost like diversity in this area is not classed as important, or is even frowned upon.

 

Perhaps it shouldn’t be an area that requires diversity, as privately-educated graduates no doubt make excellent lawyers – I would welcome your views on this – or perhaps they need to think more about social mobility and put in place some socio-economic diversity targets.

 

But if they do set some targets, then we should all be skeptical. As this excellent analysis by London reporter Simon Lock shows, most firms that announce diversity targets actually fail to hit them.

 

Have a view? Get in touch: phodkinson@alm.com

More Big Stories From Around The World

 

'The Challenge is the Rebuild': Air Canada's New CLO on Piloting His Team Out of the Pandemic

 

Lefosse Poaches 5-Lawyer Tax Team From Brazilian Rival

 

China's Retaliatory Sanctions a Risk for Global Law Firms

 

Hausfeld Launches £920M Group Action Against Google

 

US Firm Office Returns On Knife Edge Amid Delta Variant, Vaccine Slowdown

 

'Corporate Law Isn't Always Negative': Why One Associate Stuck With the Industry During the Pandemic

 

Ince Profits Nosedive as Major Client Calls for Office Return

 

Trainline Looks In House For Next General Counsel

 

Latham Leads in US Associate Laterals Hires Amid 2021 Deal Boom

 

Fertility Funding in Law Firms: Why Now and What Next?

 

Kirkland & Ellis Adds China Real Estate Partner From Paul Hastings

 

Buyout Firm Bridgepoint Names New General Counsel

 

Four-Strong Quinn Emanuel Team Joins Jones Day In Perth

 

International Arbitration Stats: A Post-Covid Boom and Shift in Trends

Get all your news and analysis about legal industry developments in one place.

You can subscribe to other newsletters from Law.com or Legal Week or unsubscribe from this one on the newsletters section under MyAccount, where you will see all the newsletter options.