INTA 2017: No Perfect Compensation Structure, Says INTA Panel

21-05-2017

Similarities and differences in the compensation structure that European law firms use were discussed yesterday during a panel discussion.

As law firms increasingly turn from a lockstep compensation structure, based on seniority, to a merit-based system, it’s clear there is no perfect model for the approach, a panel discussion found yesterday. 

Spain used to follow a lockstep structure, but is beginning to follow the merit-based U.S. approach, explained Jordi Guell (CURELL SUNOL, Spain). 

He was moderating the session CSA20  The Ownership and Operation of Law Firms in Spain and the Broader EU—What Can Others Learn from Their Experience?

The United Kingdom has made the same switch, moving at pace from a traditional lockstep structure to a merit-based system. 

“The troubling question is how do you reward fairly and equally? You can measure numbers, but that doesn’t necessarily represent the whole deal,” said Mark Foreman (Osborne Clarke, UK).

Mr. Foreman added that this shift towards the new structure will continue and will be one of the biggest challenges for managing partners and executive committees.

“There isn’t a perfect model; it all depends on the mentality and culture of the firm,” he said.

Malte Nentwig (Boehmert & Boehmert, Germany) concurred: “In all countries, it’s the same problem—how to apply principles of fairness and competitiveness within a firm.” 

Uncertainty In The Wake of Brexit

Brexit will have far-ranging consequences, not least in the legal sector. When the United Kingdom leaves the European Union on March 29, 2019, the legal profession may be thrown into some disarray. 

Mr. Foreman said that after Brexit, although E.U. lawyers can still qualify in the United Kingdom as overseas lawyers, whether they will be able to live in the country is unknown.

Because of this uncertainty, Imogen Fowler (Hogan Lovells, Spain), a UK-qualified lawyer, has now become qualified in Ireland. 

Outsourcing 

Ms. Fowler also discussed outsourcing, adding that it is becoming more frequent and was advantageous for her practice. 

She explained that a number of her clients who don’t like the outsourcing trend have two reasons for their dislike. 

Liability concerns are top of the list, as there’s a “concern that if you’re outsourcing to some entity that isn’t a law firm, there’s not the same kind of liability,” said Ms. Fowler. 

Second is the rules on conflicts. Lawyers are held to strict rules, but clients may be worried about who controls the entities that work is being outsourced to. 

According to Mr. Nentwig, in Germany there is a tendency to outsource prosecution.

“Why do you outsource? Cost issues,” he said. “Cost efficiency is what clients require.”

The other reason, said Mr. Nentwig, is the development of legal technology, such as software-based solutions, which give clients the possibility to outsource a lot of their prosecution work and trademark searches. 

One concern is attorney-client privilege—when a client decides to outsource, is the privilege lost?

Mr. Nentwig explained that based on case law, for information to fall under the privilege, the outsourcing must somehow be integrated into the structure of the law firm. 

A Different Perspective

Julia Holden (Trevisan & Cuonzo Avvocati, Italy), brought an Italian perspective. 

“Coming from the United Kingdom, I recall that all associates had employment contracts. It is different in Italy, where associates are effectively self-employed, although salaries are generally fixed by the law firm,” she said.

“If Italian law firms had to give everybody an employment contract, they would go out of business,” said Ms. Holden, adding that much like in Spain, individual practitioners there are “free” professionals.

INTA17, panel, Europe, compensation, Curell Sunol, Osborne Clark, Boehmert & Boehmert, Hogan Lovells, Trevisan & Cuonzo Avvocati, Brexit

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