Australasian legal business
LPO: the story that won’t go away
AUSTRALASIAN
LEGAL BUSINESS
www.legalbusinessonline.com ISSUE 10.8 SEPTEMBER 2012
SEPTEMBER 2012 employer of choice
EMPLOYER
aLB 30
OF CHOICE
LPO
The firms you love. The firms you love to hate.
ALB 30 2012 ISSUE 10.8
The largest firms in Australia and New Zealand PLUS: REVENUES REVEALED
IN FOCUS
Survey 2012
Another Gold for Russell McVeagh! Russell McVeagh has, once again, been voted as top New Zealand Employer of Choice. This is the fourth year in a row that Russell McVeagh has won Employer of Choice for New Zealand in the ALB staff survey. Thank you to all our team for your support.
GOLD
Employer of Choice
2012
www.russellmcveagh.com
wellington vo da fo n e o n t h e q uay 1 5 7 l a m b to n q uay p o b ox 1 0 -2 1 4 w e l l i n g to n n e w z e a l a n d dx s x 1 1 1 8 9 t e l e p h o n e 6 4 4 4 9 9 9 5 5 5 fa x 6 4 4 4 9 9 9 5 5 6
au c k l a n d v e ro c e n t r e 4 8 s h o r t l a n d s t r e e t p o b ox 8 au c k l a n d n e w z e a l a n d dx c x 1 0 0 8 5 t e l e p h o n e 6 4 9 3 6 7 8 0 0 0 fa x 6 4 9 3 6 7 8 1 63
CONTENTS
Australasian Legal Business ISSUE 10.8
1
“What we’re concentrating on is opening up new lines of work through LPO – we want lawyers to be concentrating on the work they should be doing, not rote document review.” James Whittaker, Corrs Chambers Westgarth
12
NEWS
COVER STORY Employer of Choice
Which firm would you rather work for? ALB readers deliver this year’s selection of bouquets and brickbats.
24
FEATURES ALB 30 Your authoritative guide to the largest firms across Australia and New Zealand.
12
Analysis Did deregulation cause the GFC?
46
LPO Despite the secrecy, LPO is very much a reality in the Australian market – and it’s here to stay.
32
Postgraduate education The latest trends in postgrad education for lawyers.
54
DEALS
06
Sponsored update Buddle Findlay
09
LEAGUE TABLES
10
ACLA PERSPECTIVE
42
APPOINTMENTS
38
Profiles In-house perspective Chris Bertuch IAG
62
Australasian Legal Business ISSUE 10.8
2
AUSTRALASIAN
LEGAL BUSINESS
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4
EDITORIAL
ROCKET OR DAMP SQUIB?
P
redicting the next big story to hit the global economy has always been an imprecise art. You may remember the wet squibs of the past decade which never quite took off, such as avian bird flu or the millennium bug: stories with catastrophic potential that never eventuated. At the moment, the possibility of a second iteration of the GFC seems to be preoccupying commentators. The fuse at the base of the rocket has been quietly fizzing for a few months now. Some are bracing themselves for the bang, others are confident that the point of ignition will never be reached. Only hindsight will vindicate either group. In that spirit, we’d like to draw your attention to another potential bombshell: the manipulation of the London Interbank Offered Rate by banks. The scandal is rattling the cages of the large European banks but, on a more local level, there’s an enticing piece of speculation for the Aussies. There are four points here: first, the Libor scandal will potentially give rise to the mother of all class actions. Australia’s own Slater & Gordon has already smelt blood in the water; no doubt there will be others. The second point is that the mother of all class actions will result in the mother of all payloads for corporate law firms drafted in for the defence. The third point is that one of the best litigation firms in the UK is Herbert Smith. The fourth point is that as of October this year, Freehills and Herbert Smith will be sharing profits. Those closer to Herbert Smith Freehills than we are may care to test the links in this chain, but it seems that the market’s newest joint venture may be off to a rather auspicious start next year. However, it is also true that litigation takes a while to reach a point of critical mass, so we’re not discounting the possibility that this story may prove to be the first wet squib of the legal industry in 2013. Maybe the banks will somehow avoid a class action. But for the moment, the balance of probabilities seems to be favouring the UK litigators – and anyone lucky enough to be bathing in the same profit pool. On a different note, ALB is launching the inaugural ALBERT Awards this year to celebrate the achievements of the profession in the areas of diversity, environmental responsibility and pro bono work. We know this is an area of pride for many firms and individuals, so do check out the ALB website (www.legalbusinessonline.com) for more information on how to participate. Renu Prasad Australasia Editor, Australasian Legal Business, Thomson Reuters
AUSTRALASIAN
LEGAL BUSINESS
6
deals
Australasian Legal Business ISSUE 10.8
your month at a glance A$1.5 billion banking Westpac Banking Corporation’s Subordinated Notes offer
• King & Wood Mallesons also acted on NAB’s Subordinated Notes offer in May worth A$500 million.
Your month at a glance Deal
Value
Advisor
Client
Lead lawyer
Metroplex at Westgate development
A$1.5 billion development
Mills Oakley
Metroplex Management
Andrew Johnson
Westpac Banking Corporation’s Subordinated Notes offer
A$1.5 billion
King & Wood Mallesons
Westpac Banking Corporation
Greg Hammond, Philip Harvey, David Friedlander, Richard Snowden
Westpac Banking Corporation’s Subordinated Notes offer
A$1.5 billion
Freehills
Joint lead managers:
Philippa Stone, Lauren Magraith
Utilities Trust Australia and Caisse de Depot et Placement du Quebec’s acquisition Diversified Utilities Fund
A$1.4 billion
Gilbert + Tobin
Utilities Trust Australia
John WilliamsonNoble
Vodafone New Zealand’s acquisition of TelstraClear
NZ$840 million
Gilbert + Tobin
Telstra
Bill Spain
Downer EDI’s Meandu Mine mining services contract
A$600 million A$800 million
Minter Ellison
Stanwell Corporation and TEC Coal
David Pearce, Ian Briggs, Julie Whitehead
Seven West Media’s entitlement offer
A$440 million
Ashurst
Underwriters: CBA Equities, Goldman Sachs, JP Morgan & UBS
Sarah Dulhunty
Village Roadshow Entertainment Group recapitalisation
US$380 million
Herbert Geer
Village Roadshow Entertainment Group
Peter Nankivell, Michael Truelove
David Friedlander, King & Wood Mallesons
A$1.4 billion M&A Utilities Trust Australia and Caisse de Depot et Placement du Quebec’s acquisition Diversified Utilities Fund
• Gilbert + Tobin advised the financiers of the winning consortium for the Sydney Desalination Plant. The HastingsOntario consortium (the Consortium), is made up of the Ontario Teachers’ Pension Plan Board and Hastings managed infrastructure funds, Utilities Trust of Australia and The Infrastructure Fund.
NZ$840 million
A$600-800 million
M&A
resources
Vodafone New Zealand’s acquisition of TelstraClear
Downer EDI’s Meandu Mine mining services contract
• Gilbert + Tobin was the key adviser to Telstra on regulatory and various aspects of the NBN which is valued at approximately $11.2 billion over eight years.
• Stanwell Corporation and TEC Coal are long-standing clients of Minter Ellison. The firm has advised Stanwell on a broad range on matters. Minter Ellison also acted on the previous Mining Services Agreement for the Meandu Mine, which was awarded to Thiess.
deals
Australasian Legal Business ISSUE 10.8
7
DEALS REPORTED TO ALB, JUly AND august 2012. Please note that owing to the limited space in this table, only the higher value deals in any given month will be shown.
Your month at a glance Deal
Value
Advisor
Client
Lead lawyer
Gate Gourmet acquisition of Qantas Catering
A$375 million
Gilbert + Tobin
Gate Gourmet
Adam Laura, John WilliamsonNoble
Lend Lease notes issue
SIN$275 million
Freehills
Lend Lease
Patrick Lowden, Justin Pelly, Justin O’Farrell
Crescent Capital Partners rejected bid for ClearView Wealth
A$220 million
Baker & McKenzie
Crescent Capital Partners
Guy Sanderson
CHAMP’s proposed acquisition of Gerard Lighting
A $186 million
Gilbert + Tobin
CHAMP Private Equity
Peter Cook, Rachael Bassil, John Schembri
Mitsui & Co stake in National Plant & Equipment
A$100 million
Allens
Mitsui & Co
Steve Clifford
Limited on Calibre Group IPO
A$75 million
Freehills
Calibre Group
Michael Ziegelaar, Simon Reed
Calibre Group IPO
A$75 million
Gilbert + Tobin
Underwriters: Goldman Sachs and UBS
Peter Cook
Global Forest Partners acquires forestry assets and related facilities
A$61 million
Minter Ellison
Global Forest Partners
Callen O’Brien, Martin Bennett
IOOF Holdings acquisition of Plan B Group Holdings
A$49.1 million
King & Wood Mallesons
IOOF Holdings
Joe Muraca and Peter Stirling
Blackthorn Resources equity capital raising
A$40.1 million
Minter Ellison
Blackthorn Resources
Ron Forster, Daniel Scotti
US$380 million equity, debt Village Roadshow Entertainment Group recapitalisation
• Herbert Geer is VREG’s longstanding adviser on corporate transactions. In 1996 Herbert Geer advised and assisted in the establishment of the film production arm of Village Roadshow Pictures.
SIN$275 million debt Lend Lease notes issue
• Freehills has a longstanding relationship with Lend Lease and is the company’s principal legal advisor.
A$100+ million M&A Mitsui & Co stake in National Plant & Equipment
• Allens has had a relationship with Mitsui stretching back over many decades.
AU$40.1 million equity Blackthorn Resources equity capital raising
Guy Sanderson, Baker & McKenzie
• Minter Ellison’s advisory role in relation to the fundraising transaction is a continuation of its long-standing advisory relationship with Blackthorn Resources.
Peter Sterling, King & Wood Mallesons
Peter Nankivell, Herbert Geer
8
deals
A$40.1 million equity Blackthorn Resources equity capital raising
• Sparks has acted for UBS throughout his career, primarily at his former firm Freehills.
Australasian Legal Business ISSUE 10.8
Your month at a glance Firm
Deal
Value
Client
Lead lawyer
Blackthorn Resources equity capital raising
A$40.1 million
Allen & Overy
UBS AG Australia Branch
Tony Sparks
St John of God Health Care’s new Midland Health Campus (PPP)
Undisclosed
Allens
St John of God Health Care
Nigel Papi, Michael Hollingdale
Clancy Exploration takeover bid for Genesis Resources
Unknown
Mills Oakley
Genesis Resources
Andrew Walker
kikki.K international expansion
Unknown
Mills Oakley
kikki.K
Warren Scott
Glasgow 2014 Commonwealth Games host broadcaster contract
Undisclosed
Henry Davis York
Global Television
Peter Mulligan, Geoffrey Hilton
Undisclosed media Glasgow 2014 Commonwealth Games host broadcaster contract
Tony Sparks, Allen & Overy
• This work follows on from the work done by the firm for Global Television in its winning bid for the broadcasting contract for the Delhi 2010 Commonwealth Games.
Choosing an apple doesn’t need to be this hard. Neither does recruitment. Property – Government Partner
Employment – Workplace Relations Partner
Corporate M&A – Senior Associate
Mid-tier looking for a senior Property lawyer with local government experience. Immediate or quick route to partnership for right person! Experience of managing and building client relationships are essential.
National mid-tier with strong presence in Sydney is seeking a dynamic employment/ workplace relations partner with client following. Progressive culture, supportive partnership. Top of market salary package.
This team is rated 1st choice for high level work & regularly involved in ground-breaking transactions. Global firm, no billable targets. Blue chip clients with mining, oil & gas focus. Progressive practice.
Ref LB4960
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Employment — IR Senior Associate
Banking Litigation Partner
Corporate — Special Counsel
Rare opportunity to continue growing an already thriving practice and lead employment/IR practice area in one of Melbourne’s premier mid-tiers. Big name clients, challenging work, diverse culture.
Leading National Firm is looking to add a partner with a focus in insolvency or banking litigation. Ideal for a self-starter keen to build a team further. Be assured of a seamless and confidential move for your clients.
This first class firm is scoring great work which used to be dominated by the top tier. They offer their clients and lawyers a fresh alternative. Will suit ambitious corporate lawyers seeking partnership.
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Special Counsel — Sydney
Melbourne
Sydney
Melbourne
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Perth
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Firm Profile
NZ Commentary
ULTRA FAST FUTURE: CHANGES TO NEW ZEALAND TELECOMMUNICATIONS The telecommunications sector in New Zealand is currently undergoing significant change, with greater competition in many areas. Consumers have benefited from lower mobile prices with the entry of 2degrees, and more companies than ever are providing broadband services. This article considers the effect of these and other changes to the regulation of telecommunications. New Telecommunications Commissioner
The most significant recent development is not a change in legislation, but in personnel. The new Telecommunications Commissioner, Dr Stephen Gale commenced his new role on 12 July for a five year term. The Telecommunications Commissioner is an important role. While the Telecommunications Act sets objectives and tests for the Commerce Commission to apply in making its decisions, it leaves room for the Commission to exercise its own judgment, especially on price-setting details.
Dr Patterson oversaw the operational separation of Telecom, the unbundling of Telecom’s local loop, and the setting of standard terms determinations to set prices for the local loop and other services. The latter two changes, and the decisions made by the Commission under its new powers, have had significant impacts. Dr Patterson notched up a number of key successes in and out of Court. Perhaps the most significant was the NZ$31.6m settlement reached with Telecom over alleged discrimination by Telecom against its competitors under the operational separation regime. During Dr Patterson’s time, competition in telecommunication markets has increased. Notable highlights were the entry of mobile operator 2degrees and competition over the provision of backhaul services. Dr Patterson also recently led the Commission in a demand-side study into factors that may affect the uptake of UFB.
Dr Gale comes very well qualified to the position. He has been an associate member of the Commission since 2010 and in that capacity has been involved in a range of regulatory and competition decisions.
This is an impressive record, and it would be difficult to find a telecommunications regulatory body in any other jurisdiction that had undertaken so much work over a similar period.
Before joining the Commission, Dr Gale was a director at Castalia, an economic consultancy firm. He holds a doctorate in physics from Cambridge University, and began his career as an energy policy specialist, before moving into regulation and competition policy more generally. Dr Gale has appeared as expert witness in a number of significant cases.
Dr Gale inherits a work programme with a strong focus on networks where competition remains limited. There are a number of significant tasks.
Previous appointees have come from legal backgrounds, so it is interesting now to have an economist in charge. Dr Gale has so far refused to be drawn on whether he will pursue different priorities, and has not expressed a view either way on more contentious matters, including the claimed convergence between broadcasting and telecommunications, and the relationship between copper and fibre wholesale pricing. Outgoing Commissioner
The appointment of a new Telecommunications Commissioner means farewell to Dr Ross Patterson. Dr Patterson served as Commissioner from 2007 and has overseen the implementation of significant new regulation in the telecommunications sector. His decisions are credited with delivering better, lower-priced services to consumers.
The future programme
The UFB and the separation of Telecom’s retail services from its network arm, Chorus, has meant changes to the services regulated by the Commission. The Commission is now responsible for regulating local fibre companies, and Chorus, and has oversight of the ownership separation of Telecom and Chorus. There are also changes to the prices for some services, which the Commission is currently working through. The Commission will also continue its annual reviews of the level of competition in backhaul services (which link local exchanges to other telcos) and regional links. Once entirely owned by Telecom, other telcos also now provide backhaul services. There may be increasing tension between copper and fibre. Many telcos have invested in equipment in the copper network, leading to the unbundling of many exchanges. If customers move to fibre services, much of this investment could be lost. Prices and terms of fibre services vis-à-vis copper services will therefore be very important.
The Commission is also completing the allocation among telcos of the new NZ$50m Telecommunications Development Levy. The Commission decided that content providers such as Skype, SKY Network Television and other overthe-top providers are not liable, because they only make their content available to telcos but do not themselves provide services subject to the levy. The next step is for the Commission to decide how much each liable telco must pay. RECENT COMMERCE ACT MATTERS
Vodafone has announced its intention to acquire TelstraClear. The parties have applied to the Commerce Commission for clearance. It will be interesting to see the Commission’s views on the level of competition in the markets affected by the merger. The Court of Appeal has also recently upheld a NZ$12m penalty imposed on Telecom under the Commerce Act for unlawfully taking advantage of market power by charging downstream competitors disproportionately high prices for wholesale access to Telecom’s network between 1999 and 2004.
Post script: Recent media commentary on the appointment of Dr Gale has picked up earlier comments by Opposition spokeswoman Clare Curran regarding the legitimacy of Dr Gale’s appointment. Questions have been raised about the job description, which incorrectly referred to regulation implemented under the Telecommunications Amendment Act 2006, and whether the failure to correct this constitutes grounds for judicial review. Ms Curran has referred the matter to the Auditor-General and the Ombudsman. This article was written by Nick Crang, special counsel, based in the Wellington office of Buddle Findlay, one of New Zealand’s leading law firms. Nick is a member of our public law and commercial teams. He advises corporates, nick Crang Buddle Findlay Crown entities, statutory boards, producer boards and government departments on legislative change, public law and regulatory obligations, and commercial law. Nick can be contacted on +64 4 462 0863 or nick.crang@buddlefindlay.com.
10
league tables
Australasian Legal Business ISSUE 10.8
Top M&A advisors - Australian announced deals, year to date
1
NO.
Top M&A advisors - completed deals, year to date
1
Freehills
12,511.17
NO.
Value ($Mil)
Deals: 40 Market Share: 26.5
Rank Legal Advisor
Mkt. Value Deals ($Mil) Share
King & Wood Mallesons
21,229.18
Value ($Mil)
Deals: 34 Market Share: 44.5
Rank Legal Advisor
Mkt. Value Deals ($Mil) Share
2
Allens
7,336.97
15.6
27
2
Freehills
16,388.49
34.4
46
3
Ashurst
6,586.44
14.0
21
3
Ashurst
16,363.11
34.3
22
4
Gilbert + Tobin
6,154.91
13.0
16
4
Gilbert + Tobin
16,272.85
34.1
19
5
King & Wood Mallesons
5,425.01
11.5
34
5
Allens
15,961.20
33.5
20
6
Corrs Chambers Westgarth
5,238.01
11.1
15
6
Clayton Utz
12,624.13
26.5
27
7
Latham & Watkins
3,309.12
7.0
1
7
Corrs Chambers Westgarth
11,914.38
25.0
14
7*
Jipyong Jisung
3,309.12
7.0
1
8
Minter Ellison
7,362.47
15.4
28
9
Allen & Overy
2,168.97
4.6
9
9
Allen & Overy
5,291.11
11.1
15
10
Clayton Utz
2,154.37
4.6
21
10
Cravath, Swaine & Moore
4,074.33
8.5
2
11
Norton Rose
1,745.07
3.7
12
11
Norton Rose
3,526.10
7.4
17
12
Minter Ellison
1,490.79
3.2
22
12
McCullough Robertson
3,350.79
7.0
12
13
Johnson Winter & Slattery
1,115.18
2.4
2
13
Baker Botts LLP
2,739.72
5.7
1
14
Herbert Smith
991.54
2.1
3
14
Baker & McKenzie
2,559.85
5.4
15
15
Baker & McKenzie
959.09
2.0
13
15
Orrick Herrington & Sutcliffe LLP
2,554.96
5.4
2
16
Clifford Chance
637.75
1.4
6
16
Stikeman Elliott
2,414.38
5.1
2
17
Simpson Thacher & Bartlett
600.94
1.3
1
17
Kirkland & Ellis
1,485.86
3.1
4
18
McCullough Robertson
523.55
1.1
12
18
Cassels Brock & Blackwell LLP
1,351.86
2.8
3
19
Middletons Lawyers
521.56
1.1
4
19
Werksmans Attorneys
1,334.61
2.8
1
20
Allende & Brea
420.00
0.9
1
19*
CLS Attorneys
1,334.61
2.8
1
20*
Galicia Abogados
420.00
0.9
1
21
1,220.35
2.6
1
20*
Bruchou Fernandez Madero Lombardi & Mitradi
Lawson Lundell Lawson & McIntosh
420.00
0.9
1
21*
1,220.35
2.6
1
20*
Machado Meyer Sendacz & Opice
Davies Ward Phillips & Vineberg LLP
420.00
0.9
1
21*
Kalamba & Associes
1,220.35
2.6
1
24
DLA Piper
409.23
0.9
6
21*
Linklaters
1,220.35
2.6
1
25
Chapman Tripp
404.51
0.9
3
25
Lawrence Graham
1,194.03
2.5
1
35,593.93
75.5
237
Subtotal with Legal Advisor
40,133.06
84.2
226
Subtotal without Legal Advisor
11,572.88
24.5
723
Subtotal without Legal Advisor
7,546.30
15.8
472
Industry Total
47,166.80
100.0
960
Industry Total
47,679.36
100.0
698
Subtotal with Legal Advisor
(*tie) Based on Ranking Value inc. Net Debt of Target Source: Thomson Financial Date:2012-08-084 08:29:51 EDT
(*tie) Based on Ranking Value inc. Net Debt of Target Source: Thomson Financial Date: 2012-08-04 08:16:25 EDT
E R T
2012
AWARDS
Join us on 1 November at the award-winning Hare and Grace in Melbourne where we will announce the winners of our inaugural 2012 ALBERT Awards. The evening will be a recognition and celebration of the extraordinary achievements and leadership demonstated by law firms in both Australia and New Zealand.
On the night awards will be given to those firms who have shown excellence in the following categories: Diversity
Environmental responsibility
Pro-bono
The Berties will be judged by an independent industry panel of judges. Categories award excellence in: Diversity, Pro-Bono, Environment & Sustainability across large and mid sized firms in Australia and New Zealand.
For more details contact Paul Ferris on 02 8587 7114
To nominate your firm visit: www.legalbusinessonline.com.au
12
ALB 30
STATE OF THE MARKET: AUSTRALASIA’S
LARGEST FIRMS & REVENUES
ALB 30
13
ALB 30 2012 OFFICIAL:
THE BEARS ARE ON HOLD Australasian law firms have defied patchy economic conditions by posting solid growth over the past year, according to the results of the 2012 ALB 30 Survey.
A
t the start of the year, Gilbert + Tobin’s Danny Gilbert summed up the sentiments of many in the industry when he predicted that 2012 would be a “bearish” kind of year. It would be hard to disagree with the prognosis either then or now: the sovereign debt crisis continues to grind away in the northern hemisphere, indicators are that the resources boom has peaked and we’re still waiting for that magic moment when the analysts conclude that the equities markets have finally bottomed out. Don’t hold your breath on that one. What, then, is the impact of this malaise on law firms in New Zealand and Australia? Declining revenues, perhaps?
Cut-backs in the number of lawyers? Well, actually no – if there’s one headline to be drawn from this year’s ALB 30 survey, it’s that growth is still the order of the day. In a surprise result, we can reveal that Australia’s largest firms have continued to add lawyer headcount throughout FY2012, and average revenue growth across the survey group was about nine percent. Unfortunately New Zealand firms do not disclose their revenues, so it is not possible to make a corresponding observation about the Kiwi market – however, headcount figures show a significant level of fee-earner growth at some of the larger firms in an otherwise stable market.
14
ALB 30
STATE OF THE MARKET: AUSTRALASIA’S
How to interpret the ALB 30 survey The ALB 30 survey identifies the largest 30 firms across Australia and New Zealand as at July each year. This year, two alternative versions are provided: first, largest firms when measured by partnership size and secondly the largest firms when measured by overall fee-earner size. ALB commentary on the 30 is based on the partnership table. An increasing number of Australian firms have offshore offices or international merger partners or affiliations. We have excluded offshore based lawyers from the main ALB 30 lists, which are intended to be a description of the domestic Australian/NZ market only. For those interested in tracking the progress and scale of Australian firms in Asia, we have compiled a separate list to this end: clearly the intent behind many of the recent mergers is for Australian firms to build capacity in Asia and it is appropriate that each firm’s depth in Asia be measured independently, rather than having those figures subsumed in the Australian headcount.
There is certainly some heavy recruitment taking place, but it is clear that some mid-tier firms have been more successful in boosting their numbers than others. Australian trends Despite uncertain economic times and sporadic hiring freezes and redundancies at some firms, overall hiring patterns have remained surprisingly upbeat. Lawyer headcount in Australasia grew by an average of six percent across the ALB 30 firms over the past year. There is a familiar narrative that the traditional “big six” is shrinking while the real growth is happening at the mid-size level. This is not at trend which is particularly in evidence at the lawyer headcount level: the big six grew their lawyer headcount by six percent last year, while mid-size firms – measured collectively as the remaining 24 firms in the 30, minus NZ and international firms – averaged eight percent. These figures seem to suggest that top tier and mid-size firms grew at a similar pace last year. This may be true at an aggregate level, but not necessarily individually: the firms which experienced truly outstanding growth were all mid-
size firms, including HWL Ebsworth (up 20 percent on last year), Colin Biggers & Paisley (up 35 percent) and Moray & Agnew (up 21 percent). As is often the case, the average figure smooths out the more remarkable results within the set. Partnership numbers are where a difference in strategy begins to appear. ALB 30 firms grew their partnerships by an average of 2.8 percent last year. However, the average growth in the “big six” was less than one percent, a result substantially driven by a seven percent increase at Minter Ellison. When Minters is taken out of the equation, the average “big six” partnership shrank by 0.6 percent. This is an interesting contrast to the strong growth in overall feeearner numbers at these firms and the inference is clear: the “big six” are increasing their leverage, but conserving partnership size in order to protect profitability. By contrast, mid-size firms grew their partnerships by an average of four percent. This top tier/mid tier partnership growth differential of approximately five percent may not seem particularly impressive given the strong media commentary on surging mid-size firm partnerships and shrinking top tier partnerships. Once again, however, the average mid-tier result is understated because of the diversity of the sample. There is no doubt that the most aggressive recruitment has come from mid-size firms – however, this is a result which is balanced by the fact that some mid-size partnerships have not grown at all. Some of the fastest growing partnerships, such as Mills Oakley and Colin Biggers & Paisley, are just outside the 30 and were not counted in the above analysis. The ALB 30 survey confirms the broad trends which have been established by other commentators. Beaton Consulting, which recently completed the somewhat thankless task of tracking individual partner and special counsel movements, concluded that the top tiers had accumulated a net loss of 47 senior lawyers last year, while the mid-size firms had gained 53. The reasons behind this dynamic – protecting profitability at the top tier by downsizing partner count and opportunistic recruitment by the mid-tiers – are well known. The only additional observation ALB would add is that the picture across the mid-tier is patchier than what might initially be expected. There is certainly some heavy recruitment taking place, but it is clear that some mid-tier firms have been more successful in boosting their numbers than others. Readers who have been tracking the ALB 30 over the years may have expected to see the list topped by Minter Ellison, the market’s most famous behemoth. This year however, the top spot is occupied by Clayton Utz and Minters has dropped to third place. The reason for this is purely in the statistics – in previous years, we have incorporated the figures for both Minter Ellison Rudd Watts (NZ) and Minters Australia into a single entity, whereas this year they appear separately. This is an appropriate outcome given this survey’s stated aim of analysing firms by pure Australian and pure off-shore resourcing and indeed it is notable that ME Rudd Watts has managed to scrape into the 30 on the basis of its NZ headcount alone. Asia trends From the outset, it must be said that measuring the scope of Australian firms in Asia can be a fraught process. Firms such as Allens, which have adopted multiple partnership structures and brands in Asia, are difficult to measure. For the purpose of this survey, we have counted firms as single entities even if they use a multi-partnership structure, but we have not aggregated figures where firms use different branding. The result is that Swiss Verein
ALB 30
LARGEST FIRMS & REVENUES AUSTRALASIA’S LARGEST FIRMS - RANKED BY PARTNER HEADCOUNT Firm 1
partners July 2012
partners July 2011
% change
lawyers July 2012
lawyers July 2011
% change
201
203
-1%
602
569
6%
Clayton Utz
2
Freehills
193
193
=
734
716
3%
3
Minter Ellison
188
176
7%
581
511
14%
4
Ashurst
178
176
1%
546
524
4%
5
Allens
165
167
-1%
566
559
1%
6
King & Wood Mallesons
158
161
-2%
601
562
7%
7
HWL Ebsworth
146
124
18%
242
201
20%
8
Norton Rose
139
143
-3%
424
404
5%
9
Gadens
137
128
7%
354
315
11%
10
Corrs Chambers Westgarth
126
127
-1%
446
421
6%
11
DLA Piper
114
113
1%
415
395
5%
12
Baker & McKenzie
91
90
1%
176
186
-5%
13
Gilbert + Tobin
67
66
2%
346
318
9%
14
Maddocks
67
63
6%
215
193
11%
15
Middletons
67
65
3%
213
209
2%
16
Moray & Agnew
65
61
6%
145
120
21%
17
Hunt & Hunt
59
53
11%
139
121
15%
18
Holding Redlich
58
53
10%
121
106
14%
19
Thomsons Lawyers
58
56
4%
158
157
1%
20
M+K Lawyers
56
52
7%
84
88
-5%
21
Lander & Rogers
55
52
6%
166
148
12%
22
Chapman Tripp
55
51
8%
145
146
-1%
23
Henry Davis York
54
57
-6%
159
155
2.5%
24
Sparke Helmore
54
52
4%
236
241
-2%
25
Piper Alderman
53
56
-6%
93
81
13%
26
McCullough Robertson
50
46
9%
164
153
8%
27
Simpson Grierson
48
48
=
181
163
11%
28
Bell Gully
45
47
-4%
163
170
-4%
29
DibbsBarker
45
47
-4%
127
138
-8%
30
Minter Ellison Rudd Watts
44
43
2%
158
145
9%
partners July 2012
partners July 2011
% change
lawyers July 2012
lawyers July 2011
% change
FIRMS JUST OUTSIDE THE 30 Firm 31
Herbert Geer
43
48
-10%
91
91
=
32
Buddle Findlay
41
42
-2%
152
141
8%
33
Russell McVeagh
41
39
5%
175
170
3%
34
Arnold Bloch Leibler
38
33
15%
81
82
-1%
35
Colin Biggers & Paisley
37
28
32%
78
58
35%
Note 1: Johnson Winter & Slattery opted not to participate in this survey. The firm is believed to have around 120 lawyers. Note 2: Slater & Gordon does not have partners and therefore does not feature in this table. See table by lawyer headcount for Slater & Gordon stats.
15
16
ALB 30
STATE OF THE MARKET: AUSTRALASIA’S
Australian firms have defied sub-optimum market conditions and grown revenues over the past year. structures such as King & Wood Mallesons count as a single firm, but alliances such as Allens-Linklaters do not. It is therefore important to keep in mind that firms such as Allens may be entitled to claim a more comprehensive footprint in Asia than what the raw figures may indicate. The Asia headcount table shows that King & Wood Mallesons has achieved its ambition of creating an entity which surpasses its rivals in scale. Firms such as Allens and Minter Ellison have previously been praised for the extent of their investment in Asia, but their efforts have suddenly paled alongside Stuart Fuller’s near 1,000 lawyer behemoth. Remember, that’s 1,000 lawyers in Asia alone – not including Australia. Importantly, KW Mallesons can now begin to benchmark its Asia capabilities not just against Australian rivals, but international rivals too. The statistics show that KW Mallesons is larger than its nearest rival (Baker & McKenzie) by a margin of nearly 400 lawyers and is over three times the size of Clifford Chance and DLA Piper in Asia. Other Australian firms have boosted their Asia capacity and the newly combined forces at Ashurst have resulted in the firm more than doubling its presence in Asia to over 160 lawyers. The picture will be complete in October when we are able to add Herbert Smith Freehills to this list. However, it is already clear that Australian firms in Asia are broadly falling into three categories. First, we have firms which have kept their Asia resourcing at a modest level of less than 100 lawyers. This represents a “status quo” strategy, although we may see more action from these firms down the track. The second category includes firms such as Ashurst and Norton Rose, who have taken steps to boost their Asia Pacific capabilities via mergers and now boast a considerably more sophisticated offering in Asia than they did pre-merger. However, the King & Wood Mallesons entity stands in a category of its own when it comes to sheer scale and it is difficult to imagine any Australian rival coming close in the foreseeable future. This is an analysis on the numbers only and rival firms have already begun muttering about the size versus quality trade-off which Mallesons may have inherited. That’s a question for another day – but going on the numbers alone, this is one race that Mallesons has in the bag. Revenues Australian firms have defied sub-optimum market conditions and grown revenues over the past year. The average growth percentage across the survey group was nine percent. As might be expected, the “big six” were all below this average, but they still managed to record surprisingly sturdy results, with Freehills in particular leading the way on 11 percent. However, data for the “six” is incomplete: owing to structural changes, KW Mallesons was unable to provide a year on year growth figure and Allens continued its policy of not disclosing revenues. Unfortunately this was also the policy at Allen & Overy and
AUSTRALASIA’S LARGEST FIRMS RANKED BY FEE EARNER HEADCOUNT Firm
partners July 2012
lawyers July 2012
TOTAL
1
Freehills
193
734
927
2
Clayton Utz
201
602
803
3
Minter Ellison
188
581
769
4
King & Wood Mallesons
158
601
759
5
Allens
165
566
731
6
Ashurst
178
546
724
7
Corrs Chambers Westgarth
126
446
572
8
Norton Rose
139
424
563
9
DLA Piper
114
415
529
10
Gadens
137
354
491
11
Slater & Gordon
n/a
436
436
12
Gilbert + Tobin
67
346
413
13
HWL Ebsworth
146
242
388
14
Sparke Helmore
54
236
290
15
Maddocks
67
215
282
16
Middletons
67
213
280
17
Baker & McKenzie
91
176
267
18
Simpson Grierson
48
181
229
19
Lander & Rogers
55
166
221
20
Thomsons Lawyers
58
158
216
21
Russell McVeagh
41
175
216
22
McCullough Robertson
50
164
214
23
Henry Davis York
54
159
213
24
Moray & Agnew
65
145
210
25
Bell Gully
45
163
208
26
Minter Ellison Rudd Watts
44
158
202
27
Chapman Tripp
55
145
200
28
Hunt & Hunt
59
139
198
29
Buddle Findlay
41
152
193
30
Holding Redlich
58
121
179
172
FIRMS JUST OUTSIDE THE 30 31
DibbsBarker
45
127
32
Mills Oakley
36
119
155
33
TressCox
36
114
150
34
Piper Alderman
53
93
146
35
M+K Lawyers
56
84
140
36
Herbert Geer
43
91
134
37
McInnes Wilson
21
104
125
38
Jackson McDonald
30
90
120
39
Arnold Bloch Leibler
38
81
119
40
Colin Biggers & Paisley
37
78
115
ALB 30
LARGEST FIRMS & REVENUES Clifford Chance, two firms often rated the most likely to gain market share at the expense of the traditional top tier. Overall, this is a very strong set of results. It should be noted that these figures do not always represent pure organic growth – there has been a steady flow of mergers and bloc partner movements over the past year – but there are plenty of high flying firms, such as Queensland’s McCullough Robertson and Melbourne’s Maddocks, who have not been involved in mergers and are simply reaping the rewards of a solid growth strategy. ALB has collected growth figures for not only the largest 30 firms, but all firms across Australia. We will reveal the fastest growing firms in the market in our annual ALB Fast 10 feature, which will appear in the December issue.
17
AUSTRALIAN FIRMS IN ASIA - This table details the resourcing which Australian firms have in
Asia, with the corresponding figures for selected international firms shown for comparison. This list should not be taken as an exhaustive list of firms in Asia. partners July 2012
partners July 2011
% change
King & Wood Mallesons
232
N/A
Baker & McKenzie
253
251
Firm
lawyers July 2012
lawyers July 2011
% change on 2011
N/A
995
N/A
N/A
1%
605
592
2%
Clifford Chance
85
83
2%
297
280
6%
DLA Piper
60
54
11%
210
182
15%
Ashurst
34
10
240%
127
52
144%
Squire Sanders
25
N/A
-
69
N/A
N/A
Allens
14
18
-22%
73
68
+7%
Minter Ellison
11
10
10%
28
26
8%
Norton Rose
57
58
-2%
150
170
-12%
Freehills
3
3
0%
15
12
25%
Clayton Utz
1
1
0
N/A
N/A
N/A
N/A
N/A
N/A
21
5
420%
AdventBalance
REVENUES 2012 - This table contains revenue figures for firms in the Australasian top 30 (by partner or lawyer count) list and firms ranked just outside this list. ALB has also collected revenue figures for firms which did not make either of these categories and will reveal the overall fastest growing firms in the market in our Fast 10 feature in December. Some firms do not disclose revenues and this list is therefore not complete.
Firm
2012 revenue
2011 revenue
% change
Arnold Bloch Liebler
$67. 8 million
$58.6 million
15.60%
Ashurst
$ 398 million
$380 million
5%
Clayton Utz
$455 million
$443 million
3%
CBP
$40 million
$39 million
4%
$33 million
$32 million
6%
$265 million
$252 million
5%
Cooper Grace Ward Corrs Chambers Westgarth DibbsBarker
$65 million
$63 million
3%
Freehills
$565 million
$511 million
11%
Gilbert + Tobin
$155 million
$141 million
10%
Hall & Wilcox
$46 million
$42 million
8%
HDY
$98 million
$100 million
-3%
Herbert Geert
$62 million
$61 million
-0.30%
Holding Redlich
$69 million
$63 million
11%
HWL Ebsworth
$140 million
$120 million
17%
Jackson McDonald
(undisclosed)
(undisclosed)
11%
King & Wood Mallesons
$424 million
(undisclosed)
-
Lander & Rogers
$75 million
$67 million
12%
M+K
$52 million
$46 million
13%
Maddocks
$114 million
$100 million
13%
McCullough Robertson
$96 million
$83 million
16%
Middletons
(undisclosed)
(undisclosed)
7%
Mills Oakley
$49 million
$42 million
17%
Minter Ellison
$419 million
$389 million
8%
Moray & Agnew
$84 million
$75 million
12%
Piper Alderman
$58 million
$56 million
4%
Sparke Helmore
$105 million
$101 million
4%
Thomsons Lawyers
$93 million
$76 million
22%
Wotton & Kearney
$27 million
$23 million
18%
18
news
Australasian Legal Business ISSUE 10.8
In case you missed it….. The month’s top headlines from www.legalbusinessonline.com
AUSTRALIAN heaDLINES STORY OF THE MONTH Middletons, K&L Gates in merger talks Middletons and global law firm K& L Gates are in discussions regarding a possible merger. If approved, the combination would create a firm of more than 2,000 lawyers in 45 offices throughout Australia, North and South America, Europe, Asia and the Middle East. “Our leadership teams believe that the client-driven consolidation and globalisation evident in the market for legal services will continue unabated and the potential synergies that would arise from the combination of our firms deserve and are receiving serious consideration,” said K&L Gates chairman and global managing partner Peter Kalis. Discussions between the two firms have been underway for several months with formal proposals expected to be presented to both partnerships later in 2012 if talks proceed to a successful conclusion.
30 July
Australia’s first Carbon Farming Initiative deal takes off
Baker & McKenzie has advised RM Williams Agricultural Holdings on the first deal to occur under the Australian Government’s new Carbon Farming Initiative. The deal relates to RM Williams’ Henbury Station property in the Northern Territory, which has the capacity to earn carbon credits by removing cattle from the area to encourage revegetation. Qantas has signed a deal to buy up to 1.5 million offset credits over five years, although according to Reuters reports, the exact quantum will depend on the take-up by Qantas customers under the airline’s voluntary carbon offset programme.
18 July
Sydney practice growth drives Mills Oakley move
Mills Oakley Lawyers has experienced such rapid growth in its Sydney practice that the firm has re-located to larger premises at 400 George St. The Mills Oakley Sydney team commenced operations from the new offices after occupying premises at 60 Margaret St since 2006.
30 July
NZ: Russell McVeagh lawyers take higher office
Former Russell McVeagh partner Michael Heron has been appointed as New Zealand’s Solicitor-General. This is a critical constitutional role in New Zealand, which acts both as a principal counsel and legal advisor to the Crown, and as Chief Executive of the Crown Law Office. Meanwhile, Russell McVeagh partner Sarah Katz has been
appointed to the bench as a New Zealand High Court judge. Katz will be sitting in Auckland and will take up her position next month. Katz joined Russell McVeagh as a partner in 2003, and has been on the board of management since 2009.
19 July
Former Origin GC strikes out on her own
The former general counsel of Origin Energy is seeking to fill short term needs of in-house teams as a sole practitioner. Suzanne ‘Suzy’ Reintals was senior counsel at Origin for nearly 10 years and has been a corporate lawyer for more than 20 years. As a sole practitioner Reintals will be available for short to medium term periods to assist in-house legal departments with their workload.
17 July
Covered bond programs face new rules
The Australian Prudential Regulation Authority (APRA) has released its long awaited covered bonds standards but lawyers doubt the standards will be well received by issuers. According to Norton Rose partner Petar Kuessner, APRA has given a degree of flexibility in how ADIs interpret the rules, but there will be consequences for those that do not follow the program implicitly. “If ADIs do not adopt APRA’s implicitly preferred covered bond program structure on a number of important issues, then ADIs will bear a higher capital charge through the risk weighting assigned to particular assets,” he said. There will be a number of additional administrative burdens that ADIs will need to deal with going forward, to ensure that they obtain the maximum concessional riskweighting for the assets that are inside and outside the cover pool securing the covered bonds.
25 July
Majority of migration agents dip in and out, says report
A new report by the Federal Government’s Office of Migration Agents Registration Authority (OMARA) showed that 70 percent of migration agents did not re-register after the first year. Critics have said that the figures show there is no longevity in the industry and that there is strong evidence that many unregistered agents are working in the industry.
16 August
ILH grows revenue 14 percent
Listed law firm group Integrated Legal Holdings (ILH) has announced a revenue increase of 14 percent for the 2011-12 financial year. ILH grew revenues to A$32.4 million in FY12 with profit after tax coming in at A$1.12 million, which resulted in a A$0.8 fully franked final dividend for shareholders. ILH managing director Graeme Fowler said the result of a 14 percent increase was at the lower end of expected growth as a result of the many acquisitions the group had made in the past year. As part of the financial results Fowler announced that the group had gained additional funding for the coming year in order to continue its acquisition and organic growth strategy. Brisbane in particular is a market identified by the group as a growth market.
news
Australasian Legal Business ISSUE 10.8
>>
In-house Q&A
14 August
Queensland growth prompts Freehills office move
Freehills has signed a new agreement to take up the top three floors of a new office tower to be constructed at 480 Queen Street in Brisbane. The agreement will see Freehills shift to the new premises in 2015 after 18 years based at Brisbane’s Central Plaza One. Freehills acting Brisbane office head Kerry Heilbronn said the Brisbane office was growing very rapidly. “On the back of very strong business growth the number of Brisbane based staff has increased by more than 30 percent to 225 people in the last 12 months,” he said. “The move to 480 Queen Street will give us continued space to expand and provide a cutting edge environment for our clients and people.”
14 August
Sydney firm launches in Singapore
Specialist Sydney firm Ryan Lawyers has opened an office in Singapore. The firm, which services the real estate, hotels, tourism and construction industries, was launched in 2004 by Tony Ryan. The firm has recruited Tien Gui Koh as the practice director and senior legal counsel in the Singapore office. Tien Gui brings more than 18 years of corporate and commercial experience in cross border transactions, hotel mixed use development, fractional ownership and international arbitration.
9 August
Majority of firms increase wages, reports Mahlab
According to Mahlab Recruitment’s annual survey most law firms reported low turnover and limited growth in 2012. The online survey of legal professionals and firms found that 56 percent of firms had an increase in staff compared to 2011, while 38 percent of firms reported no change in their head count figures. The majority of growth was unsurprisingly in resource-intensive markets Brisbane and Perth, and this trend is likely to continue due to the major firms having comparatively small offices in these busy markets. However, limited growth in Sydney and Melbourne is also expected. For most firms (68 percent), graduate intake was the same as last year’ s intake, with an equal number of firms (16 percent in each case) reporting an increase or decrease in graduate intake.
7 August
Hays reports growth in insolvency related recruitment
According to the latest Hays Quarterly Report the current global economic climate is driving the need for employment and industrial relations lawyers and commercial litigators. “The current economy and the number of redundancies and restructuring within large corporate environments means these skill are very much in demand,” said Darren Buchanan, senior regional director of Hays Legal. ALB reported earlier in the year that insolvency related practitioners were seeing an increase in work as significant factors combined pushing more and more Australian companies into collapse or administration. “I think it’s certainly the case that there will be a large amount of insolvency related re-structures in the next 12 to 18 months,” Freehills partner John Nestel said in February.
19
David Thomas Group Legal Counsel,
Costa Group
1
In your opinion, why have in-house lawyers become an increasingly indispensable part of an organisation?
In my view, many organisations that have never had an in-house team first hire a lawyer after conducting a cost/benefit analysis and realising that hiring an in-house lawyer can reduce their external legal spend and enable them to retain a significant amount of corporate knowledge within the organisation. However, once an in-house lawyer is retained, the role often becomes more valued once the organisation realises that they have someone who can answer legal questions but who is also skilled in problem solving, project management, negotiation and people management. As a growing number of organisations have realised the commercial and strategic input that in-house lawyers can bring to many areas of the business, in-house lawyers are now more recognised as being facilitators rather than ‘blockers’. Accordingly, the role of the legal team has become more valued and has broadened to encompass many roles that have not traditionally been considered part of a lawyer’s job description.
2
Increasingly, the role of General Counsel has diversified into a multi-faceted role, (where the General Counsel can wear the ‘hat’ of Lawyer, Legal Manager, Compliance Manager, and Company Secretary). As sole in-house counsel of a growing corporate, does your role encompass other facets and do you believe this has increased your risk profile? The role of sole in-house counsel is definitely multifaceted – one moment I will be dealing with administrative compliance and governance tasks, and the next I will be advising on major strategic initiatives of the company. As a result, I will be wearing multiple ‘hats’ in any given day. If an in-house counsel is concerned by the risk arising from these multiple roles, in my opinion the worst thing they could do is to overly restrict the scope of their role – this would result in a role that is neither fulfilling for them nor beneficial for the company. Instead, a sole in-house counsel should focus on being able to identify which tasks are legal, which are commercial and which are a mix of both. This will enable them to maximise their chances of retaining privilege and to understand when they need to protect the company from legal risk and when they need to facilitate the company’s commercial objectives.
3
In your opinion, having recently made the move from a partner role to a senior in-house role, what do you consider to be the main challenges of moving in-house and the main areas of satisfaction from having made the move? The main challenge so far has been that faced by any new lawyer, whether coming from private practice or in-house – the need to quickly learn the main commercial drivers and risks facing the business, all while trying to be a valuable resource from day one. While I have found the transition to be a relatively smooth one, lawyers who are used to giving “black letter law” advice or who give theoretical, rather than clear and commercially-focused, advice would find the transition to be a huge challenge. Similarly, the main areas of satisfaction are that an in-house counsel is actively encouraged to take the time to understand the company’s business – something that many private practitioners often fail to find time to do. My ‘road trips’ to the company’s farms dotted around the country have given me much more insight into the company’s business than I could ever hope to get from sitting in an office in an external law firm.
JLegal is a global specialist legal recruitment consultancy focused solely on providing recruitment solutions to the legal profession. For a confidential discussion about your career, contact one of our senior consultants today. www.jlegal.com Melbourne t | +61 3 9910 6700
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Survey 2012
Reshaping the model Key Findings Private Practice • More international mergers, tie ups and alliances expected • Subdued market may be masking a profound shift in changes to market share • Business as usual for mid firms despite globalisation • Global brands attractive to junior recruits • Recruitment activity to remain steady for mid level lawyers in Melbourne and Sydney • Recruitment growth in senior lateral hires in mid firms • Lawyers with 1-5 years’ experience were best rewarded • Salary increases for Melbourne and Sydney 7-9% • Brisbane salaries increased by 10% • Perth salaries increased by 13% Corporate • More mid-sized organisations recruiting their first in-house counsel • Brisbane and Perth recruitment markets are highly competitive • 4.42% average salary increase • Declining levels of satisfaction with salary review outcome and processes • Job satisfaction remains high • Concerns expressed over job security • Career development major reason for leaving
The push to go global
About Survey 2012 Conducted online in June 2012, input was provided by individuals and employers across Australia and internationally. Questions were focussed on remuneration and benefits, work habits and practices, job and career satisfaction, retention and future employment intentions. Mahlab gratefully acknowledges the support of the Australian Corporate Lawyers Association (ACLA), Young Lawyers of the Law Society of NSW, the Young Lawyers Section of the Law Institute of Victoria, the Victorian Women Lawyers, the Women Lawyers Association of South Australia, the Women Lawyers Association of Queensland, the Women Lawyers Association of NSW, the Commercial Law Association of Australia Ltd, the Corporate Lawyers committee of the NSW Law Society and Chartered Secretaries Australia for circulating our questionnaire to their members. We appreciate their ongoing commitment to making Survey 2012 a success.
The full report of Survey 2012 is available at www.mahlab.com.au
PRIVATE PRACTICE Market Trends
Most firms experienced a subdued 2011–2012. In particular, corporate transactional work has slowed. The areas with considerable activity are insolvency, commercial litigation, banking & finance (restructuring and project finance), employment law, energy & resources and insurance. The major firms continue to predict growth in Perth and Brisbane and limited growth in Sydney and Melbourne. The most dramatic change is the globalisation of Australia’s legal market. Minter Ellison Perth split from the Minters partnership to join with Cleveland based international firm Squire Sanders. Blake Dawson merged with Ashurst, Mallesons Stephen Jaques became King & Wood Mallesons, Allens formed an alliance with Linklaters and Freehills has announced a merger with Herbert Smith. This leaves just a few major firms; Clayton Utz, Minter Ellison, Corrs Chamber Westgarth and Gilbert + Tobin without a formal international alliance and Freshfields, Slaughter and May, Hogan Lovells and Simmons & Simmons the only top end UK practices without a presence in Australia. Much has been asked as to what these tie-ups, mergers and alliances mean for the future of the private practice market. The questions being raised included what level of interconnectedness exists in alliances that do not have full financial integration; what profitability pressures Australian offices will face if the firms are fully financially integrated (or planning to become so); are tie-ups simply rebranding or a real opportunity to provide a one-firm approach internationally and manage work within the one network. As to referrals of work from overseas, there are winners and losers. Issues of conflict are no doubt more complex than they once were. So at the top end, the share of the legal work is being carved up a little differently. The question is how differently? The globalisation of the Australian legal market has not so much increased the size of the pie, but reshaped who gets what.
Although some discrete practices are very busy, most firms, be they aligned or non aligned with an international firm, are less busy this year. The overall subdued market may well be masking a more profound shift in market share that will only be seen when the global economy improves and there is more transactional activity. The international tie-ups have not impacted the mid firms in terms of their missing out on work. There is a market for quality mid firms practising nationally which have the expertise and history with the client. In many cases, an international firm, with its accompanying charge out rates is not required. Some mid firms are opening new offices in other states. The focus of the major firms has been undergoing a shift for several years now with more focus on high end transactions and other high margin work. This trend continues with the newly aligned firms. Major firms are dropping practices like insurance, traditional property and other more operational areas of law. There has been some fall out as these practices settle into mid firms.
P rivate Practice Salaries Sydney – Major Firms
Year
Low
High
Mode
Grad
$70,000
$80,000
$73,000
1
$78,000
$94,000
$79,000
2
$82,000
$109,000
$90,000
3
$90,000
$136,000
$103,500
4
$100,000
$140,000
$119,000
5+ (not SA)
$110,000
$150,000
$124,500
SA1
$140,000
$165,000
$146,000
SA2
$147,000
$180,000
$165,000
SA3
$165,000
$210,000
$181,000
Recruitment Trends
SA4
$180,000
$235,000
$190,000
Most firms report low turnover and limited growth in 2012. 56% of firms report an increase in staff from 2011, while 38% of firms report no change in their head count. The majority of growth has been in Perth and Brisbane and this trend is likely to continue due to the major firms having comparatively small offices in these busy markets. Recruitment in Sydney and Melbourne is steady and is mainly replacing lawyers who have left or a strategic senior hire who brings a new practice area or clients to the firm (and perhaps staff to support that senior hire). Recruitment activity is strongest in the areas of insurance, employment, banking & finance, litigation, insolvency and energy & resources.
SA5 / SC
$185,000
$320,000
$255,000
Remuneration Trends Nearly three quarters of firms report increasing their salary bands this year with 26% of firms leaving the bands unchanged. Nationally salary bands increased by only 0.5% nationally. Melbourne junior lawyers (1 to 5 years of experience) received a 12% increase while more senior lawyers and senior associates with 1 to 3 years’ experience received a much more modest 3.6% salary increase. Sydney junior lawyers (1 to 5 years of experience) received a 10.5% salary increase while more senior lawyers and senior associates with 1 to 3 years’ experience received a 5.2% increase. Lawyers at junior levels naturally commence their careers on much lower remuneration packages than senior lawyers. Therefore, junior lawyers tend to receive increases that represent a much higher overall percentage of their salaries. The largest jump in salary accompanies the promotion to senior associate that occurs at most firms around a lawyer’s fifth to sixth year of practice. Given the stronger legal markets of Brisbane and Perth, lawyers in these states on average received an increase of 10% for Brisbane and 13% for Perth. In some cases, Perth salaries are on par with Sydney salaries.
P rivate practice Salaries Melbourne – Major Firms
Year
Low
High
Mode
1
$69,000
$90,000
$75,000
2
$74,500
$102,000
$87,500
3
$84,000
$115,000
$95,000
4
$95,000
$136,000
$105,000
5
$106,000
$150,000
$120,500
SA1
$115,000
$165,000
$135,000
SA2
$130,500
$180,000
$154,000
SA3
$145,000
$201,500
$165,000
SA4
$160,000
$230,000
$178,000
SA5/SpC
$164,000
$318,000
$205,000
Given the firms take into account a range of factors when determining remuneration, an individual’s position within a band will vary based on their background, experience and performance. Lawyers paid at the higher end of the bands are usually top performers and/or employees who bring with them an additional skill that is over and above the general requirements of the role. Figures include superannuation but do not include bonuses or other benefits. For tailored advice please contact a Mahlab consultant.
Partners
Jostling for a position on the global stage by Australian firms has absorbed a lot of management time and energy, leaving some partners feeling excluded from the decision-making process. The day to day running of the complex organism that is a national law firm has taken a back seat this year to negotiations with potential global alliances and partnerships. While revenue and per partner profitability has risen in some major and mid firms, other firms are still carrying expenses accumulated before 2008. The cost of exploring and effecting a merger is not insignificant and it’s still early days to see the economies of scale that may flow. At the same time, a ‘springclean’ of non performing partners has taken place in the braver major firms and is still ongoing in others, which has assisted in reducing overheads. Partner movement has increased markedly, with some high profile partners ‘voting with their feet’ against an international merger and joining a competitor firm, a UK firm direct or a major corporate client. Many medium sized firms have appointed partners from the ranks of disenchanted senior associates at the larger firms as well as lateral partner hires from larger practices, often with teams and clients in tow. This has increased revenue and added to client depth amongst the mid firms which is reflected in increased partner income. Salaried partner numbers are on the rise. Most firms reward equity partners under a hybrid model, blending a base income with bonuses based on competitive criteria such as individual and supervised billings and practice development. This means that partner income has become highly variable among partners in the same firm. Overall, national partner income has increased by 3.56% compared to 3.93% last year and 4 to 7% in 2010. Partner drawings at major firms in Sydney and Melbourne have increased by 4.0% and the mid firms in these cities increased drawings by 4.2%. Perth partners have enjoyed the biggest increase, with a 4.5% increase, while Adelaide partners enjoyed the lowest increase in drawings at 2.5%. Small CBD firms in Sydney and Melbourne have seen increases matching CPI at 1.6%. As many major national firms have offices only on the east coast and in Perth, the national average increase for this group is a healthier 4.2%.
Partnership Salaries
Melbourne Mode Major Firms
$1,340,000
Mid Firms
$797,000
Small Firms
$427,000
Sydney Mode Major Firms
$1,440,000
Mid Firms
$891,000
Small Firms
$486,000
Figures include superannuation but do not include bonuses or other benefits.
Corporate Lawyers Market Trends
Corporate lawyers received modest salary increases over the past year. Despite the conservative salary reviews in the south-eastern states, there were obvious exceptions in the resources-rich states of Western Australia and Queensland where corporate lawyers have received greater increases. The remuneration of lawyers in these states is often on par with, and in certain situations, exceeds that of their counterparts in Sydney and Melbourne. Recruitment activity was steady in 2011–2012 with many corporate legal departments gradually expanding. Newly created roles continue to hit the market and are highly sought after in a generally candidate rich market. An in-house career remains an attractive alternative for private practice lawyers with one third indicating that their next move would be in-house. This is an increase on last year where 22% of respondents looked for a future in-house. Most in-house legal teams surveyed have 2-5 members (38%). Sole legal counsel make up 16% of those surveyed. This is an increase on the 13% last year and reflects the fact that more organisations are creating legal functions, particularly in the growth resources industries. Most in-house opportunities continue to be for junior to intermediate level lawyers (3– 6 years’ post admission experience), with the senior end of the market remaining relatively tight. This has given corporations an excellent pool of quality senior lawyers from which to select. Nationally, demand for corporate counsel continues across most industry sectors. There has been particular demand for corporate counsel in the IT, professional services, FMCG, media and entertainment, gaming, health and pharmaceuticals industries. Despite some redundancies in the financial sector, there has been some recent recruitment activity by financial institutions. Given the strength of the mining sector, a significant proportion of the newly created in-house roles in Brisbane and Perth are with resources or energy companies or related consulting, engineering or infrastructure companies. A shortage of quality lawyers with relevant experience in Brisbane and Perth resulted in a highly competitive employment market in these cities. This has led to an upward pressure on salaries. Energy and resources companies, engineering and construction and infrastructure organisations are paying at the top end of the market to secure quality candidates. Some lawyers from other states are looking to relocate to these busy states. Contract lawyers continue to form a considerable part of the in-house legal landscape. The survey results show that just fewer than 10% of corporate lawyers are working on a contract basis. This is almost double last year’s figure and reflects that many corporations do not have budgetary approval or the requisite business confidence to appoint on a permanent basis. The survey revealed that just fewer than 50% of lawyers appointed on a contract basis were working under this arrangement to suit the employer’s requirements. Significantly, however, the survey revealed that one in six contractors were employed on a contract basis with a view to appointment in a permanent role.
Remuneration Trends
Corporate Salaries
Low
High
Mode
1
$60,000
$83,000
$80,000
2
$75,000
$95,000
$92,000
3
$85,000
$120,000
$108,000
4
$95,000
$140,000
$127,000
5
$120,000
$160,000
$152,000
The average percentage increase in salaries for corporate lawyers is 4.42%. Some companies were prepared to pay above the average and on occasion much higher to retain star performers, particularly in Perth and Brisbane. Significantly, just under three in ten corporate lawyers surveyed did not receive a salary increase over the past 12 months. This figure is slightly higher than 2010–2011 and reflects a conservative corporate market. Of the 71.5% of corporate lawyers who received a salary increase, just over half were satisfied with the outcome of their salary reviews. More than 60% of corporate lawyers surveyed rated their performance review process as very poor, poor or neutral. The disappointment with salary reviews and the performance review process was a significant finding in this year’s salary survey.
6+
$140,000
$225,000
$185,000
Recruitment Trends
DGC
$160,000
$275,000
$250,000
GC
$180,000
$600,000+
$305,000
Low
High
Mode
1
$67,000
$85,000
$82,000
2
$80,000
$105,000
$97,000
3
$95,000
$122,000
$117,000
4
$110,000
$148,000
$140,000
5
$130,000
$167,500
$160,000
6+
$140,000
$235,000
$195,000
DGC
$175,000
$285,000
$265,000
GC
$180,000
$600,000+
$310,000
Melbourne Year
Sydney Year
Salary bands in the corporate market tend to be very broad. An individual’s position within a band will depend on a number of factors including background and experience of the individual, size of the organisation and its legal function, industry sector and level of management responsibility within the role. Figures refer to total package including benefits but excluding bonuses and share options. For tailored advice please contact a Mahlab consultant.
Melbourne
Sydney
Level 1, 535 Bourke Street Melbourne 3000 T: +61 3 9629 2111 E: melb@mahlab.com.au
Level 9, 6 O’Connell Street Sydney 2000 T: +61 2 9241 1199 E: syd@mahlab.com.au
www.mahlab.com.au
Corporate lawyers continue to maintain a high level of satisfaction in their roles, with more than 70% reporting they are “very satisfied” or “somewhat satisfied” with their current position. This result prevails despite the fact that members of in-house legal functions are working very hard in an environment where there is a clear desire to do more legal work internally and decrease external legal provider costs. Just under half (45%) of those surveyed advised they are considering leaving their current employer. This compares to just over one third last year (37%). The vast majority (85%) of these lawyers said they would be seeking another in-house legal role, compared to 78% last year. Almost 9% of those considering a move are open to a private practice role. This compares to 7.4% last year and only 3.3% the previous year when the private practice market was flat. There have been some notable senior level private practice appointments of corporate lawyers that reflect this trend. Career development is a major reason cited by corporate lawyers for moving to another organisation (43%). 70% of corporate lawyers surveyed feel that their current organisation does not offer good career progression opportunities. The survey results reveal that remuneration is also a significant factor in driving lawyers to explore other career opportunities. Job security is an increasingly important consideration. 15% of those surveyed felt their roles were ‘somewhat insecure’ or ‘very insecure’. This level of job insecurity is consistent with the cautious nature of the current recruitment market.
Outlook Despite a relatively high level of satisfaction with their current roles, corporate lawyers will continue to seek career alternatives. Career development is a motiving factor in seeking a move. Employers that do not offer career progression opportunities will risk losing key talent.
24
alb employer of choice 2012
Australasian Legal Business ISSUE 10.8
ALB EMPLOYER OF CHOICE
EMPLOYER
OF CHOICE The Employer of Choice survey is back for 2012, revealing Australasia’s top law firm employment brands as voted by ALB readers. Report: Renu Prasad
S
tock markets may crash, the Eurozone may crumble but there is one simple fact of life that will never change for the global legal industry. Law firms are the sum of the people employed therein and the top priority, through the good times and the bad, must be the recruitment and retention of the best and brightest in the industry. Firms understand this point and most have invested heavily in research to help ascertain the level of employee engagement within their organisation. Third party studies, undertaken by specialist consultancies and with a high participation rate across the firm, are the only way to truly understand how an employer is perceived by its employees.
The ALB Employer of Choice (EOC) survey is not such a study and its objective has always been far more modest. The key to the EOC survey can be found in two simple questions: Which firm do you consider to have the strongest employment brand? For which firm would you not wish to work? In other words, this is a study of brand perception, not a study of actual employee engagement, although there is likely to be some correlation between these two indices. It is therefore important to note that no criticism is intended of firms which are not mentioned in the EOC survey. Smaller firms in particular may not garner enough feedback to draw any useful conclusions and in those instances, it would be more accurate to regard these firms as outside the scope of the EOC survey, rather than drawing any negative inferences about their performance as employers. At the other end of the scale, the EOC has produced some interesting data on how the higher profile firms are perceived in the market. We could not produce these results without the efforts of the many readers who took the time to respond to the survey and
alb employer of choice 2012
Australasian Legal Business ISSUE 10.8
25
2012: Your verdict GOLD
Employer of Choice
2012
Firm
Score(*)
Status
7.9
GOLD: Top placed firm – 500+ lawyers
HopgoodGanim
3.6
GOLD: Top placed firm – 100 to 500 lawyers
Cooper Grace Ward
3.8
D
GOLD: Top placed firm – under 100 lawyers
Corrs Chambers Westgarth
NEW ZEALAND Firm Russell McVeagh
Score(*)
Status
12.6
GOLD
*score indicates % of respondent pool who voted for this firm, minus % of respondents who voted against the firm – please refer to article text for further information
we are appreciative of your contribution. Congratulations to all of the 2012 ALB Employer of Choice firms. Top employment brand – Australia Respondents were asked to choose which Australian firm had the strongest employment brand. “Employment brand”, of course, simply refers to a firm’s reputation as an employer. It is a fairly commonly used term, although some respondents felt that ALB’s use of the phrase was an example of indulgent corporate-speak. There was no ambiguity about the result, however, with a runaway vote in favour of Corrs Chambers Westgarth. This is the second year the firm has topped the EOC survey and it has done so by a substantial margin. Several other firms also returned to grace the EOC list for the second consecutive year: these include Cooper Grace Ward, HopgoodGanim, McCullough Robertson and Curwoods. Allen & Overy and Gilbert + Tobin are two new firms to join the list while Freehills is the only “big six” firm to make the list for 2012.
2012 Firm
Score(*)
Status
Allen & Overy
3.5
BLUE
Gilbert + Tobin
3.3
BLUE
Freehills
2.0
BLUE
McCullough Robertson
1.9
BLUE
Curwoods
1.9
BLUE
Score(*)
Status
Chapman Tripp
10.6
BLUE
Bell Gully
9.0
BLUE
NEW ZEALAND Firm
METHODOLOGY Date of poll: July 2 – July 31 2012 Method: online survey Advertised: ALB newsletter, ALB Twitter feed Number of respondents: 708 Employer of choice status was determined by response to the following questions: a) W hich of the following Australian firms do you consider to have the strongest employment brand? (list of 47 firms, plus free text field) b) Which of the following Australian firms would you NOT want to work for? (list of 47 firms, plus free text field) c) W hich of the following NZ firms do you consider to have the strongest employment brand? (list of 13 firms plus free text field) d) W hich of the following NZ firms would you NOT want to work for? (list of 13 firms plus free text field)
26
alb employer of choice 2012
Australasian Legal Business ISSUE 10.8
HONORARY MENTIONS Firms just missing out on EOC status Firm
Firms with strong raw scores but eliminated because of negative ratings
Score
Firm
RAW score (**)
Carter Newell
1.4
King & Wood Mallesons
7.6
Henry Davis York
1.4
Allens
5.9
Wotton + Kearney
1.3
Minter Ellison
4.5
Baker & McKenzie
0.9
Clayton Utz
4.3
Clifford Chance
0.9
Norton Rose
2.9
Ashurst
2.4
Employer of Choice award The top ranked firms in the EOC survey each year are designated as official ALB “Employer of Choice” firms, an acknowledgment which assists these firms in their recruitment campaigns and general brand perception. The top firm in each market segment – large firms, midsize firms, small firms and NZ firms – are designated as a “Gold Employer of Choice.” It is important to note that a high score in the “strongest employment brand” component of the survey does not alone qualify a firm for an “Employer of Choice” award. To determine which firms should receive this accolade, we have taken into account a second survey parameter in which respondents were asked to name the weakest employment brand in the market. The combination of these two scores produces the final EOC score found against each firm in the results table. This is the first time the EOC scores have been calculated in this manner and the result has been a dramatic shift in the results at the top tier end of the table. King & Wood Mallesons, for example, is a firm which has consistently topped EOC polling since the inception of the EOC awards, but it has slipped out of contention this year. This is not because respondents have stopped voting for the firm – the raw scores for KWM were as strong as ever – but there were even more respondents who declared that they would never work at KWM. The same polarised perception can be found across most of the top tier firms where impressive raw scores in the “top employment brand” section were balanced by strong negative scores in the “weakest brand” section. All of the “big six” suffered from this problem, with Allens, Clayton Utz and KWM particularly affected. Freehills also received a significant negative vote, but
NEW ZEALAND DLA Phillips Fox
15.1
Minter Ellison Rudd Watts
8.7
**indicates score before negative rating taken into account. Net result for these firms was generally below zero
OUT IN THE COLD – UNPOPULAR FIRMS Firm
Score(***)
Clayton Utz
14.8%
King & Wood Mallesons
11.3%
Minter Ellison
7%
Allens
6.5%
Gadens
5.3%
HWL Ebsworth
5.0%
NEW ZEALAND Minter Ellison Rudd Watts
24.7%
DLA Phillips Fox
19.6%
*** score indicates % of respondents who indicated they would not wish to work at this firm
not substantial enough to override the positive respondent vote. There is likely to be an element of “tall poppy syndrome” in the vote and we have published the raw scores in the “top employment brand” section to give some indication of how these firms performed by this criterion alone. Allens and KWM continue to attract strong loyalty, while the scores for Ashurst, Minter Ellison and Clayton Utz are a notable improvement on last year’s results. Weakest employment brand Respondents were asked to nominate the firm for which they would not wish to work. The results for such a question need to be treated with caution – as we have indicated above, there is no doubt an element of partisanship at play here, particularly where high profile firms are involved. It comes as no surprise to find all of the large firms on this index of unpopularity, although Corrs in particular (3.3 percent) notably escaped censure from our respondents. Another surprise result was Gilbert + Tobin, which only received 1 percent of the vote, a good result when contrasted with comparable firms.
THE AWARD IS GOLD BUT IT’S OUR PEOPLE WHO REALLY SHINE.
GOLD
Employer of Choice
2012
We’ve always believed in creating an inspiring workplace and building a culture of collaboration and excellence. Thank you to all our people for their commitment to each other, to the firm and to our vision of building a world class law firm. Thank you for choosing to work at Corrs.
WWW.CORRS.COM.AU
28
alb employer of choice 2012
The runaway “winner” of this part of the EOC was Clayton Utz, with KWM not far behind. Freehills fared the best of the “big six”, with only 4.5 percent of respondents naming this as the firm to avoid. The overall message is clear: while many lawyers aspire to work at or are proud to work at the large national firms, these firms are not a destination of choice for all lawyers. That’s an obvious point but one that needs to be made in the context of this survey: top tier practice is clearly not everyone’s cup of tea and the fact that some respondents believe that a particular top tier firm is not the right career choice for them is not necessarily a criticism of that firm. The more significant point which warrants attention is why some top tier firms have attracted a stronger negative vote than others. This may be a fruitful line of investigation for the human resource managers and media officers who are tasked with managing brand perception. Moving onto the mid-size firms, we again advise caution in interpreting these results: this survey is about external perception of firms and does not purport to be an authoritative study on how well employees are treated at each firm – the sample size is not large enough. What we can report is that two mid-size firms in particular were over-represented in this aspect of the survey: Gadens and HWL Ebsworth. Gadens was described by one respondent as “not supportive of support staff development or happy to pay well for [one’s] skills and knowledge” while HWL Ebsworth was described by another respondent as “all about margin and no culture” and “not living core values.” There were other firms which accumulated significant scores in this part of the survey, but these were balanced by excellent results in the “strongest employment brand” category and the overall result could not be said to be an overall negative for those firms. New Zealand Russell McVeagh continues its dominance of the EOC survey in NZ, taking out the Gold award for the fourth consecutive year. Clearly this is a firm which attracts considerable brand loyalty and while Russell McVeagh also attracted a significantly high negative vote (13.7 percent compared to 6.9 percent at Bell Gully and 4.5 percent at Chapman Tripp), the firm’s
Australasian Legal Business ISSUE 10.8
primary brand rating was so strong that it still ended up with the highest aggregate score. This is a notable contrast to the situation in Australia, where most traditional top tier firms – with the exception of Freehills – did not recover from the hit they took from negative ratings and dropped out of EOC contention. Bell Gully is the new name on the NZ EOC top list, taking the space occupied in the 2011 survey by Buddle Findlay. Bell Gully returns to the list after ranking as a Gold EOC firm in 2010. The same caveats that applied in Australia also apply to NZ’s list of less popular firms. Two names stand out: Minter Ellison Rudd Watts and DLA Phillips Fox. There’s hope yet for these firms: both scored well in the “brand strength” part of the survey, but took a hammering in the second stage of the survey. Both of these firms have undergone significant transformation in recent years, so maybe market perception is lagging in this case – something to watch in 2013. Those are the standout results in New Zealand. Several other firms did not attract a large number of votes in either direction but obtained an overall positive result – these included Simpson Grierson, Kensington Swan and Duncan Cotterill. There were other firms which had a low voter response but a net negative result – however the small sample size of respondents for these firms hardly makes any analysis worthwhile.
NEXT MONTH: INTO THE CRYSTAL BALL Your verdict on international firm mergers: which merger will stand the test of time?
2009 - 2012
30
alb employer of choice 2012
INDUSTRY SNAPSHOT
Australasian Legal Business ISSUE 10.8
If you are not provided with a mobile device from your employer would you wish to be?
TOP SUGGESTIONS FOR IMPROVING THE WORKPLACE Flexibility in allowing work from home Modernise the office environment Transparency and fairness in allocation of workload Improve mentoring and training; more partner contact
Yes
No
Maybe
Are you currently provided with a mobile technology device/s to enable remote working? No
37.4%
Yes
43.9% 36.3% 63.7% 18.7%
Landing your career back in Australia.
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alb employer of choice 2012
Australasian Legal Business ISSUE 10.8
In the last twelve months, how much annual leave have you taken? I have not taken annual leave during the last twelve months Less than one week
31
On average, how many hours per week do you work or spend time enagaged in work related activity?
One to two weeks
40 hours or less
70 hours or less
Two to three weeks
50 hours or less
More than 70 hours
Three to four weeks
60 hours or less
More than four weeks
9.1%
15.7%
22.9% 9.4% 38.7% 2.1% 15.6%
28.4%
6.7%
21.9%
When you do attend CPD courses, how is it funded? y employer funds all Continuing Professional M Development
29.5%
How likely are you to change your employer during the next 12 months? Unlikely
Likely
Self funded attendance A mixture of employer and self funding
2.8%
12.1%
9.8%
87.9% 87.4%
32
lpo
Australasian Legal Business ISSUE 10.8
LEGAL PROCESS OUTSOURCING:
When hunger’s the best source
lpo
Australasian Legal Business ISSUE 10.8
Tough economic times are driving firms and clients towards LPO – but they’re going to have to overcome some diffidence and inertia along the way, finds Renu Prasad.
I
n rather a similar fashion to the British government’s refusal to officially acknowledge the existence of secret intelligence service MI6 for many years, there are some law firms who are in an official state of denial about legal process outsourcing. It exists, it’s out there, it’s happening at a law firm near you – but it’s not a matter for public comment. That was the message conveyed by several firms approached by ALB for this story. Of course, there are exceptions to the rule and if you’re going to challenge conventional ideas about what is commercial in confidence, why not call a press conference to tell everyone about
33
34
LPO
Australasian Legal Business ISSUE 10.8
it? That was the unusual situation last year when King & Wood Mallesons managing partner Tony O’Malley fronted the media to announce a formal LPO agreement with international provider Integreon. Industry reaction was mixed. For some, the move was a clever piece of marketing: a chance to align the firm with the in-house commentators who have long been urging firms to take a more active stance on cost control. Other lawyers, however, were shocked at the boldness of the move and issued internal memos warning staff that LPO arrangements were not to be publicly disclosed under any circumstances. This is not Mallesons – so shut up, was the general gist of the message.
Are we witnessing a permanent and irreversible shift towards outsourcing, or only a momentary swing in the pendulum? Only time will tell. In the circumstances it’s hard to state definitively the extent to which LPO has penetrated the Australian market. What we do know is that at least three major firms – King & Wood Mallesons, Corrs Chambers Westgarth and Ashurst – are on the record as having LPO provider agreements. ALB understands that nearly all of the largest 20 Australian firms have conducted Request for Proposal (RFP) or Request for Information (RFI) processes over the past 18 months in relation to LPO. Some have done so voluntarily, while others have done so at client insistence. There is a growing number of in-house counsel who have mandated LPO solutions from their panel firms. AMP’s Brian Salter is one example of a GC who has publicly stated that firms seeking work from his organisation will have to explain how LPO fits into this equation. “I’d be very surprised if any of the [large] firms did not have it on the boardroom agenda – either already actively using it or at the very least engaging in discussions to understand it,” says Exigent managing director Nicola Stott. “GCs here and in the UK are under so much cost pressure and they’ve cottoned onto LPO more so than we’ve ever seen before and they’re telling panel firms they need to find a low cost solution for [certain types of] work.” Evidence of the growth of LPO in Australia can be found in the growth trajectory of
the LPO organisations themselves. Stott describes the growth at Exigent at as much as “100 percent month on month”, although she warns that this is off a low base. Stott believes that the last 12 months in particular have seen LPO activity accelerate in Australia. This observation is fortified by the arrival of a new LPO provider on Australian shores last month, LegalResources Australia, which has clearly sniffed out the same opportunities identified by Stott. Another LPO provider eyeing the Australian market is Pangea3, owned by Thomson Reuters, the publishers of this magazine. Pangea3 first opened its doors in 2005 with only five lawyers, a number which has now expanded to nearly 900 and the company expects to cross the 1,000 lawyer mark shortly. This figure, however, represents the company’s worldwide growth and should not necessarily be taken as evidence of exponential growth in Australia. Some lawyers interviewed for this feature preferred to describe the take-up of LPO in Australia as a steady, predictable evolution rather than a stampede offshore. LPO providers will tell you that legal outsourcing has been around for years. What they believe is new, however, is the sophistication of tasks which it is possible to outsource and the growing number of clients who specifically request LPO solutions from their law firms. Not all of the profession is completely comfortable with LPO and there are accounts of GCs in some organisations pushing LPO solutions, only to be met by resistance within their own in-house teams on grounds such as privacy and quality of work. AdventBalance managing director John Knox, who has worked with LPO organisations on joint pitches, says that he is familiar with these kinds of concerns. He believes this could simply be a symptom of an industry in transition. “There was some reluctance [in relation to LPO] but now we are seeing a lot of positive ‘word of mouth’ from clients,” he says. “I’ve heard a lot from clients on the quality of service and competitive price and once that starts to go around the GC community it spreads like wildfire – people start giving it a go. It’s increasing – there’s no doubt about it.” Ultimately, the extent to which outsourcing occurs is a question for the client. Law firms are left with a delicate balance: on the one hand, they cannot be seen to be pushing clients into LPO arrangements, yet on the other they need to send a message that they are ready and willing to go down that path where appropriate. “We absolutely do not use LPO without the client’s approval,” says King & Wood Mallesons Director of Legal Logistics Michelle Mahoney. “But [the LPO] is there and can be tapped when you need it, rather than a case that we can ‘go find it’ and get it for you if you need it.” This is a case of firms adding an extra string to the bow. “I wouldn’t say that the take-up of LPO has exceeded our expectations – it’s been broadly in line with our expectations,” says Corrs partner James Whittaker. “It’s obviously client driven. We’re not out to push a particular line or to push a particular outcome. We want to provide a range of options. Some clients have initiated [LPO], knowing we have embraced it while others clients are more conservative – and that’s certainly not intended pejoratively.” This is a crucial time in the LPO growth story. Are we witnessing a permanent and irreversible shift towards outsourcing, or only a momentary swing in the pendulum? Only time will tell. How it works GCs may opt to use LPO services by engaging an LPO firm and managing the relationship directly, or by asking a law firm to
Australasian Legal Business ISSUE 10.8
lpo
manage the relationship for them. LPO providers are accustomed to both models: Pangea3, for example has a client base which is about 60 percent corporate and 40 percent law firms. By contrast, Exigent’s client base is 75 percent law firms, a mix which represents this company’s genesis as a service provider for firms. Exigent has since diversified into the provision of services direct to in-house teams. It is tempting to characterise this latter trend as outsourcing in its most pure form: if one is going to outsource, why not dispense with the law firm altogether and go directly to the LPO provider? LPO providers point out that they have excellent relationships with firms and that there will always be situations where the guidance of the firm is required. Pangea3 managing director Antony Alex says that it comes down to the type of work at hand. “For example, document review in the context of litigation and due diligence in the context of M&A lend themselves very nicely to a three way partnership between law firm, in-house and Pangea3,” he says. “However, for other work such as contract drafting, regulatory mapping or legal research we work directly with in-house counsel. So it’s a different model depending on the type of work.” Alex added that he did not believe that LPO providers were cutting into traditional law firm sources of work. “I would say that a lot of our law firm partners benefit from working with us,” he says. “It allows them to gain a greater market share from their clients by offering clients more value which they weren’t able to do earlier.” This Australian approach to LPO is an interesting contrast to the approach used by UK or U.S. firms, where a dominant paradigm is the “insourcing” model, where firms establish their own process operations in lower cost locations within their own jurisdiction. Examples include Hebert Smith opening a Belfast operation to handle volume dispute resolution work, a move which has also occurred at Allen & Overy while Addleshaw Goddard has opened a due diligence centre in Manchester. However, UK firms also use outsourcing models: Clifford Chance, for example, has a wholly owned subsidiary in Gurgaon, India to assist with legal support work. There is one frontier which remains largely unexplored: while many LPO organisations now have staff who are legally qualified in the offshore jurisdiction (for example, India) and in some cases even the client’s home jurisdiction (for example, the U.S.), there has been little enthusiasm for LPOs providing actual legal advice. “We do not practise law. We support lawyers in their practice of law,” says Alex firmly. “That is what distinguishes us from a law firm – we are mindful that we should not been seen as practising law in any jurisdiction.” Still, Alex concedes the idea is possible. “It’s a delicate area,” he says. “We could practise law – it is a logical extension of what we do. However, there are regulatory hurdles and many other hurdles too. It’s not something we are looking at either now or in the near future.” Nor does Alex support the idea of providing services without a legally qualified intermediary. “Our clients are always lawyers – we do not deliver legal services to non lawyers,” he says. Knox points out that LPOs are capable of providing quite a sophisticated level of service without falling foul of the “no legal advice” rule. “They are capable of doing quite high level work,” he says. “For example, they do a lot of document drafting – the first cut of sales agreements, or procurement contracts; they’ll send it back to the in-house team who will take it from there. But they’re not providing formal legal opinions. The clients will provide a very stringent playbook on how they deal with indemnity and issues like that and all the LPO is doing is pulling those together and constructing documents based off that playbook.” Exigent’s Stott says that the full potential of LPO is yet to be completely understood. “People are struggling to get their heads around how it applies to their practice group or organisation,” she says. “One role we play is to really help take [LPO] from being a concept to a reality; helping GCs and law firms disaggregate those tasks and provide a tangible and clear picture of the types of tasks that are easy to outsource.” Clients looking for a tidy brochure summary of LPO options may be out of luck: this is an area which is evolving so quickly that LPOs and clients are creating the options as they go. Effect on graduate recruitment When news of the King & Wood Mallesons LPO announcement first broke, one wit in the ALB offices circulated the news with the ironic subject title “No graduate jobs at Mallies this year”. Actually, both KW Mallesons managing partner Tony O’Malley and Corrs partner Whittaker are on record as denying any link between LPO strategy and graduate intake.
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Australasian Legal Business ISSUE 10.8
That was the avowed position over six months ago – have things changed since then? Whittaker says that Corrs has not changed its stance. “There has been no impact on graduate intake and I don’t think there will be,” he told ALB. “What we’re concentrating on is opening up new lines of work through LPO – we want lawyers to be concentrating on the work they should be doing, not rote document review.” Mallesons’ Mahoney maintained a similar position for her firm. It is also notable that nearly all of the large firms have increased their leverage over the past year, according to the ALB30 survey which appears in this issue. The conspiracy theorists may find the notion of graduate and junior solicitor jobs vanishing offshore difficult to resist, but so far it is not borne out by the evidence. The real point of interest may be the fate of paralegals, who were widely expected to be severely affected by LPO. “If you’d asked me six months ago, I would have expected that impact to be there,” admits Whittaker. “However, we have as many paralegals on our books now as we did a year ago.” Over at Mallesons, the expected reduction in paralegals has transpired. “We had a strategy to move away from large paralegal teams towards LPO – we have structured in that way in anticipation,” says Mahoney. “For jobs like large discoveries you need teams that can sit over longer periods – we wanted to get some continuity. With paralegal teams, you’re getting what’s available in the market and it’s hard to get a continuity of people and days – having a dedicated workforce with someone who does this professionally for a living really changes that equation.” Choice v exclusivity Corrs and KW Mallesons have adopted
different approaches to their LPO relationship. Mallesons has a formal partnership with Integreon, while Corrs has a two-member panel consisting of Integreon and Exigent. Corrs’ Whittaker told ALB that the element of choice was important: not only was there the potential for client conflicts if only one provider was used, but also different providers had different strengths which might be of relevance according to the work or client in question. For KW Mallesons, the investment needed to create a solid working relationship with the LPO and the security issues related to the fact that the LPO would have access to Mallesons technology meant that a single relationship was preferred. “The logic was that if you want a good working relationship, you need to invest in it – you need to have good processes and good supervision,” says Mahoney. “You need to work with people closely and bring them into your team. If you’re going to commit to those things, to reduce risk you can only do that for so many people – so you need to have a strategy around who you’ll work with on that basis.” But what about the conflict issue? “We absolutely check on conflict at both a provider and individual level,” says Mahoney. “We haven’t run into that issue yet, but we do check all that.” As it turns out, Mallesons has a second LPO provider on standby to handle potential conflict situations, but the identity of this provider has not been disclosed as yet. Perceptions of individual LPO providers The Australian LPO market is dominated by two players in particular, Exigent and Integreon, while other providers who operate here include Pangea3 and CPA Global. Certainly it is the rivalry between Exigent and Integreon which has most attracted market attention and both Mallesons’ Mahoney and Corrs’ Whittaker were able to give detailed observations on the key advantages of these players. Whittaker says that he would particularly recommend Integreon for large scale, time sensitive work. “They are mature and have been around for a long time and have a demonstrated track record in dealing with significant scale and doing so with a great deal of efficiency – they have good systems and QA,” he says. “So if you need something very big done very quickly to a very high standard they are good.” By contrast, Whittaker describes Exigent as having an “entrepreneurial” approach which is attuned to understanding the broader cycle of legal service and day to day business. “So if you went to Exigent with three million documents that need review within two weeks, they would not be the better choice,” he says.
LEGAL PROCESS OUTSOURCING – THE KEY PLAYERS EXIGENT
INTEGREON
PANGEA 3
Key selling points:
Key selling points:
Key selling points:
S trong reputation for innovation and
Strong presence in global market demonstrated track record in dealing
Reputation for quality and high
tailoring outsourcing to client needs, as opposed to “rote” tasks such as document review Has Perth office and large operations in South Africa, which is argued to be a superior cultural alignment to India
with tasks of significant scale strong reputation for efficiency, good systems and QA
proportion of Western educated lawyers full suite of legal and IP services Pangea3 is owned by Thomson Reuters, the publishers of this magazine
lpo
Australasian Legal Business ISSUE 10.8
“But where we’re working with them is working collaboratively with firms to design models and disaggregate [work].” Whittaker says that he considers the fact that Exigent has an office in Perth as an important advantage. “Some clients are naturally concerned about security and cybersecurity issues and although a typical LPO would use the Corrs’ website interface there are still some clients who have got concerns about work going offshore – although that’s perhaps diminishing as an issue as the cloud grows in prominence and people become more comfortable,” he says. Mahoney says that KW Mallesons’ choice of Integreon came down to flexibility and capacity to cover multiple jurisdictions. “They have a broad understanding of various jurisdictions,” she notes. “They also have the ability to service the multiple languages that we need – and they can flex out to meet requirements, so they can put people in place on quite short notice.” While LPO providers are usually associated with India, this is not always the case. Exigent, for example, has a large South African workforce which it regards as a distinguishing point. “There is a very large body of highly qualified lawyers and paralegals available to Exigent in Cape Town,” observes Whittaker. The cultural alignment between South Africa and western jurisdictions is also believed to be more advantageous. AdventBalance has a non-exclusive alliance with Pangea3 and Knox says that quality of service is the top priority for his firm. “In our opinion the difference between Pangea3 and the others is just quality,” he says. “They are not the cheapest but the quality is very high and the clients we have worked with on joint projects have been very pleased with the service they provide. They are one of the
few LPOs 100 percent staffed by lawyers – a lot of other LPOs have paralegals and people who are not legally trained. Pangea3 is all legally trained and has one of the highest ratios of U.S./UK trained and educated lawyers to Indian lawyers.” Pangea3’s Alex argues that scale is also a key advantage for his company. “We are probably the only LPO of size and scale that provide the full suite of legal and IP services,” he says. “Competitors provide either only legal services or IP services or even within legal they might focus on only one document review or lower end services. No one provides the full suite that we do.” This is an area where firms and LPO providers all have some kind of commercial alignment, so the commentary in this article cannot be taken as completely objective. However, companies such as Exigent and Integreon and Pangea3 are certainly making inroads into the Australian market and lawyers will do well to familiarise themselves with these names and form their own views as to the respective strengths and weaknesses. If it hasn’t happened yet, you’re highly likely to encounter these operators in the years to come.
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Recruitment
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Australasian Legal Business ISSUE 10.5
Lateral partner appointments Name
Practice area
Going from
Going to
Jonathan Cheyne
M&A
Carter Newell
Johnson Winter & Slattery
Tracey Greenaway
Oil and gas
Shell International
Allens
Timothy Edwards
Corporate
Truman Hoyle
M+K Lawyers
Mathieu Hanaut
Resources
Jones Day
Baker & McKenzie
Cameron Jorss
Corporate/M&A
Carter Newell
Johnson Winter & Slattery
Allan McRae
Corporate
Minter Ellison RW
Lowndes Associates
Scott Singleton
Native Title
Minter Ellison
King & Wood Mallesons
Sandra Steele
Construction
Lend Lease Australia
Middletons
Grant Whatley
Insolvency
Henry Davis York
HWL Ebsworth
Bakers recruits new resources partner from Jones Day
Baker & McKenzie has announced the appointment of energy & resources partner Mathieu Hanaut from Jones Day. A French national with Australian citizenship, Hanaut is a commercial, resources and mining lawyer with 15 years’ experience in France and Australia and has developed a particular expertise in New Caledonian nickel mining and resources projects. He will also concentrate on projects in the emerging African energy market, and will work closely with the firm’s recently opened Johannesburg office.
NZ: Minters partner joins Lowndes Associates
Lowndes Associates has recruited Allan McRae from Minter Ellison Rudd Watts. McRae specialises in corporate, commercial and securities law and regularly advises in relation to joint ventures and other commercial contracts as well as securities offerings. McRae will be based in the firm’s Auckland office.
HDY insolvency specialist joins HWL Ebsworth
HWL Ebsworth has announced the appointment of Grant Whatley as a partner in its Sydney Litigation & Dispute Resolution Group. Whatley, previously of Henry Davis York, has over 12 years of insolvency related experience and has considerable experience with high profile and cross-border insolvencies and restructurings representing a wide range of stakeholders, including major domestic and international banks and insolvency practitioners.
M+K boosts Sydney with Truman Hoyle hire
M+K Lawyers has boosted its corporate and commercial capabilities with the appointment of Timothy Edwards as a principal in Sydney. Edwards, who makes the move from Truman Hoyle, was a foundation director of the St James Ethics Centre and remains a director and secretary of the board.
Mallesons adds partner in Brisbane Minter Ellison
King & Wood Mallesons
King & Wood Mallesons has strengthened its Native Title practice with the lateral appointment of partner Scott Singleton. Singleton joins the firm’s Brisbane office from Minter Ellison where he led the Native Title practice and was a prominent partner in the firm’s energy and resources group.
Middletons recruits from Lend Lease Lend Lease
Middletons
Senior in-house lawyer Sandra Steele has returned to private practice at Middletons as a partner. Steele was most recently assistant general counsel at Lend Lease Australia (Project Management & Construction). After six years in-house Steele said she was interested in applying what she had learned to a private practice environment. Steele is also currently the president of the National Association of Women in Construction (NAWIC).
Allens recruits Shell corporate counsel Shell
Allens
Allens has announced the appointment of Tracey Greenaway as a partner in the firm’s oil and gas practice, based in Perth. Greenaway, who is currently a senior legal counsel at Shell International, will join Allens on 1 October. She has been with Shell for eight years, working in London, The Hague and Perth. Before that, she worked for eight years with Linklaters in the global projects team, advising on the financing and restructuring of international energy and infrastructure projects.
New lateral partners for JWS Carter Newell
JWS
Johnson Winter & Slattery has expanded its partnership with the lateral appointment of two former Cater Newell partners Cameron Jorss and Jonathan Cheyne. Jorss advises major Australian corporations and managed funds on raising capital, mergers and acquisitions, and corporate governance. Cheyne advises on regulated and unregulated mergers and acquisitions, equity capital markets transactions, including initial public offers, rights issues, placements and share purchase plans.
PARTNER PROMOTIONS Atanaskovic Hartnell promotes within
lawyer to partner
Atanaskovic Hartnell has appointed two new partners of the firm through internal promotion. Jon Skene is the first partner appointed from within the firm’s London office, and is to continue his practice in the AH London office. Prior to joining AH, he practised at Herbert Smith for six years, and before that at Clayton Utz in Sydney. Apart from listed and private M&A transactions in the UK and Australia, Skene’s experience has been in the formation and operation of joint ventures, capital markets and securities law, private equity, corporate governance and general corporate advisory matters. The other new partner appointment is of Shane Anderton at AH’s Sydney office. Anderton has been with AH for four years and specialises in commercial litigation and dispute resolution, public and administrative law, judicial review, statutory appeals, and disputes with sector regulators.
Aitken Partners promote within senior associate to partner
Aitken Partners has promoted Anton Dunhill to the firm’s partnership. Dunhill is a member of the firm’s property disputes and compulsory acquisitions team and is also the firm’s pro bono coordinator. He started with Aitken Partners as a lawyer in 2005 and has built a substantial practice in dispute resolution particularly focusing on compulsory acquisition and property disputes.
made easy partner promotions Firm
Name
Practice Area
Office
Aitken Partners
Anton Dunhill
Property disputes and compulsory acquisitions
Melbourne
Shane Anderton
Commercial litigation and dispute resolution
Sydney
Jon Skene
M&A
London
Rebecca Field
Major projects
Perth
Alice Muhlebach
Competition
Melbourne
DLA Phillips Fox
Kerry Anderson
Government
Wellington
Atanaskovic Hartnell
Ashurst
JWS
Richard Lilly
Commercial dispute resolution
Perth
Lynch Meyer Lawyers
Kathryn Walker
Environment and construction
Adelaide
Russell Kennedy
Andrew Parlour
Corporate and commercial
Melbourne
TurksLegal
Darryl Pereira
Financial services
Sydney
Wallmans Lawyers
Harry Patsias
Taxation and superannuation
Adelaide
Ashurst adds two more partners internally senior associate to partner
Ashurst has made a further two partner appointments following its July 1 promotions. The firm has announced the promotion of Rebecca Field, a projects lawyer in Perth and Alice Muhlebach, a competition lawyer in Melbourne. Field has extensive expertise in property and property infrastructure work, while Muhlebach has particular expertise in infrastructure access and in complex merger clearances.
DLA Phillips Fox adds partner in Wellington senior associate to partner
DLA Phillips Fox has promoted local government and resource management lawyer Kerry Anderson to its partnership. Anderson has more than 14 years of experience and counts amongst her clients many local authorities, government entities and private organisations. She has advised on major developments (including resource consent appeals and designations), plan drafting, review and interpretation, infrastructure projects and a variety of regulatory and enforcement matters under bylaws and local government legislation.
JWS grows partnership in Perth senior associate to partner
Johnson Winter & Slattery has promoted Perthbased Richard Lilly to the firm’s partnership. Lilly practices in commercial dispute resolution, with an emphasis on competition and energy & resources sector litigation.
Lynch Meyer Lawyers add partner lawyer to partner
Adelaide-based Lynch Meyer Lawyers, a member of the Kennedy Strang Legal Group, has promoted environmental and construction
law specialist Kathryn Walker to the partnership. In her new role walker will head up the firm’s environment, planning and resources practice. Walker handles large, litigious matters, typically in the fields of environment, planning, building and construction.
Russell Kennedy adds principal and SC Senior associate to principal
Russell Kennedy has added new principal (partner equivalent) Andrew Parlour through an internal promotion. Parlour is a member of the firm’s corporate and commercial team. He has been working at Russell Kennedy since mid2007 and is admitted to practice in Victoria and in England and Wales.
TurksLegal grows its partnership Senior associate to partner
TurksLegal has promoted lawyer Darryl Pereira to its partnership. Pereira has more than 10 years’ experience in financial services and specialises in front-end advisory and transactional work, as well as dispute resolution and litigation. He has worked on many large transactions, including documenting Australia’s largest group life insurance transaction last year.
Over 45 years experience
Wallmans adds tax partner
senior associate to partner
Adelaide based legal firm Wallmans Lawyers has promoted Harry Patsias to the partnership. He is based in the firm’s taxation and superannuation team and advises on all areas of Federal and State based taxation law, superannuation law and commercial transactions. He specialises in managing and resolving contentious issues with Federal and State Taxation authorities, including pre-audit risk reviews and taxpayer representation during comprehensive reviews, audits, objections, appeals and mediation of taxation disputes.
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AUSTRALASIAN LEGAL BUSINESS
Australasian Legal Business ISSUE 10.8
EXPOSURE OF AUSTRALIAN BUSINESS TO CYBERCRIME By Tony de Govrik, Legal Affairs & Communications Director, Australian Corporate Lawyers Association.
T
Tony de Govrik
he China Daily newspaper last month reported that more than 90 percent of the world’s companies have hidden malicious software in their computers. That is a frightening statistic by any measure. The daunting problem of cyber crime, cyber security and identity theft is one that affects all Australians – business as well as individuals. It impacts those affected in terms of both the cost and time associated with combating and responding to such activity. Former U.S. Attorney-General, Janet Reno, once said “Everybody should want to make sure that we have the cyber tools necessary to investigate cyber crimes, and to be prepared to defend against them and to bring people to justice who commit it.” As many businesses would have discovered, cyber criminals are relentless in their pursuits to disrupt business systems and operations. Their methods of attack are ever changing and increasingly sophisticated. Spam, phishing, viruses and spyware are some of the major online threats to business. Because of the range and pervasive nature of these threats, no single organisation can adequately recognise and counter them. Effective and lasting cyber security requires a partnership between business and government. It is against this backdrop that the Federal Attorney-General, Nicola Roxon, in July this year announced the launch by CERT Australia (Australia’s Computer Emergency Response Team) of a survey of Australian business to get a better picture of how cyber incidents affect business and the Australian economy. The Cybercrime and Security Survey will target almost 500 organisations that work with CERT Australia including from banking and finance, communications, energy, food, resources, transport and water, and other
sectors that contribute to the economic prosperity and well-being of Australia. CERT Australia works with Australian business and the international community on cyber security incidents impacting Australian systems. Cybercrime is a global problem but while international reports and experiences are informative they don’t provide a clear picture of what’s happening here. The survey will help government and CERT Australia planning and in turn ensure that all Australians can continue to safely and securely enjoy the benefits of the digital economy. Accordingly, all Australian businesses that work with CERT Australia are encouraged to participate in this survey. The survey results are expected in the next few months and will be published by the Centre for Internet Safety within the University of Canberra, who are working in partnership with CERT Australia. The range of services offered by CERT to Australian business can be viewed at www.cert.gov.au. Earlier this year the Federal Government passed legislation that gave new powers to the Australian Crime Commission (ACC). Under the new powers, the ACC is able to share information with financial institutions and other businesses so that they can protect themselves and their customers from criminal activity, subject to appropriate safeguards. It is important that preventative partnerships can be built with industries exposed to serious and organised crime. So are there any quick fixes for the business community? The answer is clearly yes and in-house legal counsel can play a proactive role in the protection of their company or organisation from cyber attack. At least 85 percent of the targeted cyber intrusions that the Defence Signals Directorate (DSD) responded to in 2010 could have been prevented by following the first four mitigation strategies listed in its Top 35 Mitigation Strategies. These are as follows: • patch applications such as PDF readers, Microsoft Office, Java, Flash Player and web browsers • patch operating system vulnerabilities • minimise the number of users with administrative privileges • use application whitelisting to help prevent malicious software and other unapproved programs from running. The Top 35 Mitigation Strategies (which can viewed at the DSD’s website www.dsd.gov.au) are ranked in order of overall effectiveness. Rankings are based on DSD’s analysis of reported security incidents and vulnerabilities detected by DSD in testing the security of Australian Government networks. As part of their role in risk minimisation, in-house counsel should ensure that those responsible for protecting their company’s IT are fully across these Mitigation Strategies.
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technology
Australasian Legal Business ISSUE 10.8
From managed information to networked intelligence – collaboration in the business world as an opportunity for differentiation
U
Petra Stark, Global Marketing Manager, Winscribe
nless you are a communications refusenik or driven by some other reason to ignore the pace of modern world communication and interaction, you may not be surprised that the impact of mobile devices and how they are being used in an interconnected fashion has secured the top position in Gartner’s Top 10 Technology Trends for 20121. According to the International Communication Union (ITU) mobile subscriptions reached almost six billion at the end of 20112, corresponding to an 86 percent penetration globally, and with over 40 percent of mobile phones used in the developed countries being smartphones3, multimedia social interaction is being conducted anywhere, anytime! Mobile devices dictate the way people interact in their daily lives, not just with people who are remote but also within the same household, perhaps even at the same dinner table. We check our bank balance online, book a doctor’s appointment via phone, get our car park ticket via text and check our emails online. Increasingly, we share experiences, thoughts and photos with our online community of friends and family, merging business tools with personal communication tools. Bring your own device (BYOD) is only the beginning Networking and collaborating online has become part of today’s lifestyle and it is only natural that people don’t want to give this up when going to work. How people communicate in today’s world has an effect on how they expect their work environment
to function. BYOD has become a reality4 and it goes beyond bringing your own mobile device to work. BYOD in a broader sense has an impact on what today’s employees expect from their organisation’s process infrastructure. Which technologies are being used to communicate? What are the expectations in terms of user experience, user friendliness, and which applications are being utilised to execute certain tasks? Are business processes keeping pace with new technology trends? It is evident in some cases that the impact of a technology trend will call for a radical change in status quo in terms of current technology, IT processes and the business processes that are employed by an organisation. Such change could result in considerable cost and disruption. While it seems like a straightforward concept, reality shows that back office processes are often not geared to run at the same pace as the new technology that is being implemented. Using an analogy based on Gartner’s trend predictions on tablets, this is like sourcing the latest generation tablets for staff without providing wireless internet access. It’s like buying the bodywork without the chassis. The organisational implications that technology trends can have on a business’ structure, how they affect particular roles and responsibilities and require new skillsets and business processes must not be ignored. A phrase that has been used quite frequently in this context is that historically technology has been an enabler for change when today it is creating change. Nobody will argue that people have come to expect communication instantaneously, but when transferring this modus operandi to a work environment it becomes obvious that most organisations aren’t in a position to provide the same free-flowing communication and barrier-free collaboration environment that works so efficiently on a social level. The question is not whether this will change, but when it will. Law firms have to break down operational silos that disconnect people and replace them with transparent interactions. Technology can help to bridge the gap, but the organisation has to make it happen. Business processes need to be adjusted in order to allow this collaboration to take place. Tools like business process management (BPM) solutions can help to connect the disparate silos to ‘translate’ information flowing
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between different parts of the organisation and, most importantly, to generate business logic to allow for smart business decisions to be made. According to Gartner experts, advanced analytics will play a more important role in modern business life. Real-time analytics as the basis for business process decision-making combined with predictive analytics to support strategic decisions seems the way forward. However, just like in other areas, networking tools that create breeding grounds for collaborative decision-making will cause disruption to the status quo. At the same time, it will present immense opportunities for legal organisations to gain competitive advantage in their market space. Challenging times for law firms In an interview with a major legal technology provider at the end of last year, legal technology expert Richard Susskind identified the so-called ‘More for Less Challenge’ as the main issue affecting law firms in 2012. The challenge describes how lawyers have to deliver more service for less cost and, therefore, have to explore new ways to work more efficiently. Susskind has determined two strategies to cope with this challenge. One method is an efficiency strategy which aims to reduce overheads on one hand, and on the other deliver legal services at lower cost. The use of technology to streamline businesses, in particular back office processes, plays an important part in the execution of this strategy. Automation versus innovation One of the most obvious areas for improving efficiencies is to cut out the duplication of administrative processes. Not only will this result in less work but also in a lower risk of data errors. Business process management solutions are great tools to begin addressing and implementing this initiative. They can assist a company in tying together disparate information repositories and software applications that handle the same or similar data for different purposes within an organisation. A perfect example would be the client-matter-intake process which requires information to be checked against existing data within the firm and, later on, processed and stored in various matter-related data locations such as accounting, billing, client management and case management. Eliminating some of the steps and making data more readily accessible and usable means a cost reduction as a result of more efficient information handling – both on the administrative side and also for the fee earners. In any law firm a multitude of processes exist that could be potential candidates for business process improvement. While process automation may be the first step in this exercise, it is wise to take a close look at all the processes first, to identify whether there is room for improvement, before starting to automate seemingly inefficient processes. Certain business process management suites allow the users to achieve better efficiencies by improving processes incrementally. Not only does that allow a law firm to improve their process performance via knowledge gained from their own learning curve, it also reduces the entry barrier that these projects often have. Once a firm has gained experience in refining high-volume, repetitive task processes, it will find it easier to apply similar techniques to other high-value processes. Instead of just automating, the firm might be looking at introducing a totally new approach to a process which would define it as innovation rather than pure automation. Since it is uncertain whether a strategy of improving efficiencies will allow law firms to achieve a significant competitive advantage,
technology
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Susskind suggests that in the future law firms will have to employ a more drastic approach that fundamentally changes the way they operate, such as a ‘collaboration strategy’. Rather than simply cutting cost for providing legal services, clients will come together to share cost for legal services by using online collaboration tools. From information access to networked intelligence People have become accustomed to interaction and collaboration via social online platforms and given the pace with which this trend, that originated in a consumer world, is growing it is a matter of when, not if, these changes will spread into the business world. In a collaborative model people are the core of the business, noticeable through a shift from the focus on the corporation to the individual. In his book “The Collaborative Organization”5 Jacob Morgan identifies three main drivers for a shift from an information age to an age of networked intelligence, with collaboration being a dominating business practice. The drivers include demographic changes, a demand for business networks and a shift in technology. As the new generation of employees that have grown up in a digital age enter the workforce it is obvious that they bring a different approach to collaboration and business processes in general. A new form of interaction amongst stakeholders requires a new business environment based on networks, rather than a hierarchical structure, allowing for decision-making based on context rich insights. From an era of information management we are moving towards an era of collaboration and collective intelligence. Where along this evolutionary scale is your firm? How can you achieve the efficiency gains, openness and responsiveness that your customers will demand? Business process management seems like a good place to start.
1 The Top 10 Technology Trends for 2012, David W Cearley, Carl Claunch, Gartner Inc, February 2012 2 ITU World Telecommunication/ICT Indicator Database, 2012 3 2012 Mobile Future in Focus, comScore Inc, 2012 4 70 percent of respondents to ILTA’s 2011 Technology survey responded ‘No’ to the question whether certain devices would not be allowed to connect to the firm’s email system. (ILTA’s 2011 Technology Survey Results, October 2011) 5 The Collaborative Organization: A Strategic Guide to Solving Your Internal Business Challenges Using Emerging Social and Collaborative Tools, Jacob Morgan, 2012
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analysis
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analysis
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Is deregulation to blame for the
global financial crisis? Claims that deregulation was responsible for the chain of events culminating in the GFC are off the mark, writes David Barker
F
inancial regulation, or lack of it, has created political conflict in the United States since the nation’s founding. Central banks were established, dismantled and established again, and in the states and territories, banking was at times outlawed and at other times only lightly regulated. Financial regulation reached a high point following the Great Depression of the 1930s, but it was far less popular around the most recent turn of the century. Despite a disastrous experience with deregulation of savings and loan institutions during the 1980s, there was great enthusiasm for financial deregulation during the administrations of Bill Clinton and George W Bush. The financial crisis that began in 2007 led to another reversal in the popularity of deregulation. But is it true that deregulation helped cause the financial crisis? The story sounds plausible at first, but it breaks down when specific policies are analysed. For example, some financial regulations enacted during the 1930s were repealed, but it is difficult to see how any of them would have prevented the crisis. Claims that financial firms’ capital requirements were relaxed shortly before the crisis are greatly exaggerated, and derivative mortgage securities multiplied not because of deregulation, but because their use was actively encouraged by government policy.
An argument can be made that a completely different regulatory structure, such as the Canadian system, might have prevented the crisis. The institutions of the United States before deregulation, however, probably could not have done so. Whether a comprehensive regulatory system covering all kinds of previously unregulated entities is desirable or possible is a different question than whether deregulation caused the financial crisis. The argument that regulators were asleep at the switch is also different than blaming deregulation for the crisis. Regulators can be caught up in the same fads and memes as the finance industry, and they have always had considerable discretion as to how they interpret and enforce regulations. Regulators with perfect foresight could have used existing laws to prevent the crisis, but regulators will never be omniscient.
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analysis REPEAL OF 1930s - ERA REGULATIONS Following the Banking Act of 1933 (also known as the Glass-Steagall Act) and through at least the 1990s, U.S. banks were arguably the most heavily regulated in the developed world. The act created the Federal Deposit Insurance Corp to insure deposits and also to supervise and examine many of the banks that were insured. The Federal Reserve was given additional authority to prevent banks from making loans that were deemed too speculative or that were made to insiders. New criminal penalties were established for misconduct by bank officers. All of these parts of the 1933 act are still in effect. The parts of the 1933 act that have been repealed are the prohibition of interest being paid on ordinary bank accounts and the separation of commercial and investment banking activities into different institutions. In addition, state regulations that prohibited interstate banking and branching have been repealed.
It is difficult to imagine this bit of deregulation as a culprit in the financial crisis of 2008. The prohibition of interest on demand deposits started to break down during the 1950s and 1960s as banks competed for deposits by offering services other than higher interest rates. The prohibition further deteriorated with the introduction of NOW (negotiable order of withdrawal) accounts during the 1970s, which for technical reasons did not fit the legal definition of demand deposits, but for practical purposes were just like them. Savings accounts, money market accounts and other devices went further in allowing banks to compete for deposits on the basis of interest rates, and the regulation was completely repealed in 2011 by the DoddFrank Wall Street Reform and Consumer Protection Act. It is difficult to imagine this bit of deregulation as a culprit in the financial crisis of 2008. Weak institutions have at times irresponsibly raised deposit rates to attract deposits, such as during the savings and loan crisis of the 1980s. This behaviour, however, was not an important factor in failures of financial institutions in recent years. The end of the GlassSteagall Act’s separation of commercial
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and investment banking is also unlikely to have been an important cause of the financial crisis. Financial firms that failed, such as Bear Stearns and Lehman Bros, had not combined with commercial banks. In fact, as some observers have pointed out, if they had, they would have been more likely to survive. President Clinton pointed out that Bank of America’s purchase of Merrill Lynch may have prevented that firm’s failure, which would have significantly exacerbated the crisis. Even before the repeal of Glass-Steagall in 1999, investment banks were allowed to do the things that many people believe led to the crisis, such as investing in mortgage securities, credit default swaps and other derivative financial instruments. Prohibitions on interstate banking are believed by many financial economists to have led to more banking panics in the past, since banks confined to single states are more susceptible to local economic busts and do not have the financial strength of nationwide institutions to handle market fluctuations. The fact that more banks are regional or national in scope than before deregulation almost certainly reduced the number of bank failures that occurred as a result of the crisis. The financial regulation that remained after deregulation was onerous enough to push many transactions into the unregulated shadow banking system. New regulations, such as the Dodd-Frank Act, may have the perverse effect of reducing oversight by sending more business into the unregulated sector. CAPITAL REQUIREMENTS None of the erosions of 1930s-era regulations seem likely to have caused the financial panic of 2008. But what about bank capital requirements? Minimum capital requirements are now perhaps the most important of banking regulations. Regulators have long required weak banks to raise additional capital, but bank capital as a percentage of overall assets was not explicitly regulated until 1981. Capital ratios, now adjusted for asset risk, are still strictly regulated, although non-bank financial firms face looser requirements. Financial institution capital is simply the difference between assets and liabilities. By selling shares, retaining earnings or selling assets and retiring liabilities, an institution can increase its ratio of capital to assets. More capital relative to assets reduces the chance of failure. Although the capital requirements of commercial banks have not weakened over the past few decades, many observers believe that capital requirements for investment banks were significantly weakened by the Securities and Exchange Commission in 2004. In 2008, a former SEC official wrote an article in a banking industry publication claiming that a rule change in 2004 allowed some financial firms to hold less capital and dramatically increase their leverage. The claim was that leverage was allowed to increase from 12-to-1 ($1 of capital for every $12 of assets) to 33-to-1. This claim was widely reported in major news outlets and was repeated by prominent economists. However, a convincing case has been made by Massachusetts Institute of Technology economist Andrew Lo that nothing of the kind actually happened. SEC Rule 15c3-1 was amended in 2004 in an attempt to help the five largest investment banks in the United States meet European regulatory requirements. Some investment banks, referred to as holding companies, owned several “brokerdealers”, meaning firms that traded securities. Individual brokerdealers were regulated by the SEC, but there was no regulation of the holding companies themselves.
2012
WINNER
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analysis European authorities required this level of regulation, and so the SEC rule change provided it. No requirements for holding companies were eliminated or relaxed, because none had previously existed, and the rules for individual broker-dealers remained the same. The additional layer of regulation was misinterpreted by many observers as deregulation. It turns out that the original 12-to-1 capital requirement was not a binding constraint for broker-dealers, because there were numerous ways to get around the rule. Leverage at large investment banks did increase from 2004 to 2007, but it had been just as high or higher in the late 1990s as it was in 2007. Of the largest investment banks only Merrill Lynch had significantly higher leverage in 2007 than it had in the late 1990s, and it was not one of the firms that failed during the crisis. In other words, regulatory capital requirements had little to do with leverage levels that were chosen by investment banks. In particular, there was no deregulation that led to higher leverage.
CREDIT DEFAULT SWAPS Another alleged culprit of deregulation is the Commodity Futures Modernization Act of 2000. That act established that complicated financial instruments traded between “sophisticated parties” would not be regulated as futures, securities or insurance. In particular, credit default swaps, which are contracts that require one party to pay the other in the event that a third party defaults on some obligation, could no longer be regulated by states as insurance or gambling. CDSs grew rapidly during the years before the crisis. By 2007, the total amount of coverage from these instruments exceeded
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$60 trillion, and in 2008 the insurance giant American International Group required a federal bailout because of losses from writing CDSs. Traditional insurance regulation requires that a buyer of insurance have an “insurable interest.” In other words, a person is allowed to purchase insurance against her own house, but not a neighbour’s house. The CDS market attracted speculators who believed that they had better information than other market participants about whether companies would be able to pay their debts. It also attracted bondholders and others owed money by companies who wanted to hedge against the risk of a default. Without speculators willing to bet that the odds of default were low, investors wanting to hedge would not have been able to find counterparties and would not be able to protect themselves. Observing CDS pricing also gave many interested parties useful information about the probability of a company’s likelihood of default. The claim is often made that the CDS market caused the demise of firms such as Lehman Brothers, leading to the financial crisis. When CDS prices indicate that a firm is weakening, creditors demand payment, worsening the firm’s condition. But supporters of CDS markets respond that this argument is like attacking a messenger — hiding information from investors hardly seems to be a good solution to the problems of firms. The continuing importance of the CDS market suggests that maintaining the existing regulatory structure would not have prevented its growth. Stanford economist Darrell Duffie has said, “If you outlaw them, then the financial engineers will just come up with something else that gets around the regulation.” THE MORTGAGE MARKET The market for mortgages backed by houses clearly played an important role in the financial crisis. Was deregulation involved? The Federal Government has played a major role in housing finance since the Hoover administration. The government’s goal, however, has been very different than it is in other areas of financial regulation. In banking and finance generally, the goal is stability. Regulators want to avoid company failures and financial panics. In housing finance, the goal has been to expand mortgage credit so more people can afford to buy houses. True deregulation would have involved less support for house buyers, which would have lessened the financial panic. Demand for mortgage-backed securities came from what has been called the “giant pool of money.” Capital available for investment in the world increased very rapidly during the 1990s and 2000s, aided by economic development in countries such as India and China. Owners of that capital bid up asset prices and drove down yields. Investors accustomed to higher yields wanted new investments that would pay more than Treasury securities or certificates of deposit. Securities backed by loans, in turn backed by houses, seemed like perfect investments. House prices were rising and seemed unlikely to fall. As more capital fuelled house purchases, prices rose and made mortgage-backed securities even more attractive. Accelerating this cycle were government programs that assisted homebuyers with down payments, subsidised their interest payments and punished lenders who did not aggressively extend credit to racial minorities and poor neighbourhoods. Mortgage-backed securities were a creation of government agencies such as Ginnie Mae (Government National Mortgage Association), established in 1968, and government-chartered
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analysis companies such as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Private issuers followed. The Federal Government had pushed for expansion of mortgage lending for decades, but the push became much stronger during the George W Bush administration. Tying homeownership to the fight against terrorism, he said that he wanted to “make sure America is secure from a group of killers, people who hate — you know what they hate? They hate the idea that somebody can go buy a home.” In the same speech, he advocated smaller down payments, tax credits for house buyers and simpler mortgage documents. “The rules are too complex,” Bush said. “People get discouraged by the fine print on the contracts. They take a look and say, well, I’m not so sure I want to sign this. There’s too many words.” The American Dream Downpayment Act of 2003 implemented many of Bush’s recommendations, and subprime lending, financed by mortgage securities, accelerated. Deregulation means reducing the government’s role in some part of the economy so that market forces determine outcomes. The Federal Government is deeply involved in housing finance, pulling some levers and pushing others. Some rules were relaxed before the financial crisis, but the goal was not to allow housing markets to operate freely, it was to push these markets to move in a certain direction. The unfortunate outcome should not be considered to be the result of deregulation.
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THE CANADIAN ALTERNATIVE To the north of the United States, temperatures, temperaments and financial markets tend to be cooler. In Canada there were no bank failures or bailouts during the financial crisis, and the recession has been less serious there than in the United States. In fact, there were no Canadian bank failures during the Great Depression or the panics of 1893 and 1907. Does the Canadian experience suggest that deregulation was a mistake? Oddly enough, deregulation in the United States moved the country’s system closer to the Canadian model. Canada has never had restrictions on branching and had already allowed commercial and investment banks to merge in 1987. Canadian banks were also more heavily leveraged than large U.S. banks such as JPMorgan Chase and Wells Fargo at the time of the crisis. Financial regulations in the United States have always been fragmented, complex and contentious, unlike the Canadian system. Americans would never have consented to the Canadian compromise of a highly profitable banking oligopoly along with strict supervision. The United States did not have a golden age of financial regulation that resembled the Canadian system and which was destroyed by deregulation. Also, the Canadian system, with its implicit government guarantees and lack of competition, might not avoid crises forever. Conclusion Deregulation did not cause the financial crisis, because financial regulation in the United States has always been flawed. In many ways, regulation worsened the crisis, and keeping old regulations might have made it even worse. Instead of blaming deregulation, it would be more appropriate to ask how regulators could help banks lure business away from the shadow banking system and how the Federal Government can be prevented from undertaking massive and disruptive social engineering schemes such as the promotion of home ownership. David Barker received his PhD from the University of Chicago, where he previously taught real estate, urban economics, industrial organisation and corporate finance. He has worked as an economist for the Federal Reserve Bank of New York and taught at the University of Iowa.
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postgrad
“If you like the University at which you did your undergraduate study, stick to it. A lot can be said for familiarity and making the whole study process flow more smoothly.� Olivera Stojanovska
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postgrad
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Postgraduate Possibilities The prospect of going back to university can be daunting for any lawyer considering postgraduate study. ALB’s Kathryn Crossley spoke to four current and former postgraduate law students about choosing a course, finding a university, and juggling work and study.
A
cross Australia there are some 14,000 postgraduate law students. For legal practitioners, postgraduate study is an opportunity for specialisation, career advancement and furthering their interests. Lawyers considering postgraduate study are spoilt for choice: more than 30 Australian institutions offer courses ranging from Graduate Certificates and Diplomas to Masters programs and PhDs. Course Options Master of Laws: Research versus Coursework A Master of Laws (LLM) can be studied through coursework or research. Universities require applicants to hold a Bachelor of Laws or a Juris Doctor, and some stipulate a minimum average mark or period of relevant work experience after graduation. The traditional Master of Laws by research allows candidates to delve into the complexities of their pet area in a 50-60,000 word thesis. The length of the course is dependent on the drive of the
individual student, although most complete their thesis in two years of full time study, or four years part time. The other option, an LLM by coursework, typically involves the completion of eight subjects over the course of one year (full time) or two to four years (part time). The popularity of coursework is due to the flexibility students have in selecting subjects that interest them. “It was great, stimulating, and exceedingly tough,” lawyer Wai Kaey Soon says of his LLM by coursework at the University of Sydney. “There is far more scope to argue a position and really consider ideas that would be new and groundbreaking in a very specialised area of law.”
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Students opting for a coursework LLM do not avoid lengthy research essays entirely. Essays are the major assessment component in many, if not most subjects. Ben Hine, LLM by coursework student at the University of Melbourne, says that many of his subjects have an optional research component comprising of a 10,000 word paper: “While it is coursework, the boundaries [between research and coursework Masters] in my mind are mixed,” he says. In addition to essay-based assessments, some institutions give students the option to substitute a minor thesis for several coursework subjects. When it comes to a Master of Laws, the choice isn’t just a matter of coursework or research. For coursework students there is also the decision between a general LLM,
and a specialised Master of Laws. For students with an interest in diverse areas of the law, the LLM by coursework offers unrestricted subject choices, whereas a specialist Master of Laws only offers subjects relevant to the specialisation. International Law, Dispute Resolution, Intellectual Property, Commercial Law, Communications and Media Law, and Environmental Law are some examples of popular specialised programs.
Doctor of Philosophy and Doctor of Juridicial Science For lawyers looking for a bigger academic challenge, a Doctor of Juridicial Science (SJD) offers the best of both worlds. The professional doctorate program is a hybrid of coursework and research, providing the benefits of a classroom environment and the opportunity to explore a complex legal area through independent research. Students spend the first part of the degree completing coursework, and the balance sees them applying and expanding on those subjects through a 50,000-70,000 word thesis – a contrast to the 100,000 word paper normally completed by PhD candidates. An SJD is three to four years of full time study (eight years part time) and is usually undertaken by Master of Laws by the cost of a master of laws by coursework coursework graduates. (Based on a 1 year cousre of full time study) Lawyer Helen McGowan is in her second Institution Course Cost year of a PhD in law at Australian National University. She says that while her Masters Australian National University $14,747 by coursework was very much a team experience, completing a PhD is more of a Bond University* $22,920 *1.3 years course duration solitary journey. “It’s very much a trial and error thing, whereas with the coursework Deakin University $22,290 it’s much more comfortable. It was like that first step of going from a safe environment James Cook University** $16,560 **1.5 years course duration like being a lawyer, knowing there are answers out there, to the Masters which La Trobe University $22,290 was exploring how we work in a more creative way to the PhD which recognises Macquarie University $19,040 there are some things which we don’t know and asks how are we going to go Monash University $25,700 about creating that knowledge. I love the progression of it,” she says. University of Adelaide $19,000 University of Canberra
$16,190
University of Melbourne University of New England
$32,640 $15,876
University of New South Wales
$24,000
University of Queensland
$24,300
University of Sydney
$28,320
University of Technology, Sydney
$19,860
University of Western Australia University of Wollongong
$22,416 $16,000
Source: www.myuniversity.gov.au
Choosing a University The availability of particular courses is but one consideration when it comes to choosing a university. For Soon, the choice of course came down to his desire to experience study at a different university: “[I] decided on Sydney Uni, because it was still in Sydney and their coursework was ‘classical’ law, where I could learn about the more esoteric parts of the law,” he says. Soon recommends undertaking postgraduate studies at a different institution from your previous degree. “Universities teach in different ways … learning in different ways and environments is great.” Sydney University LLM student
postgrad
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Olivera Stojanovska also opted for a different institution for her postgraduate course but warns against changing universities just for the sake of it. “[If] you like the University at which you did your undergraduate study, stick to it. A lot can be said for familiarity and making the whole study process flow more smoothly.” For Hine, Melbourne Law School’s performance in the QS World University Rankings for law was an indicator that his preferred institution was well regarded, not just in the Australian legal profession, but also internationally. Recommendations from industry contacts also helped Hine’s decision. “Speak to people in the industry,” he suggests. “Talk to lawyers who have done the Masters you plan to study.” Covering Course Costs With Masters degrees costing thousands of dollars, course fees are a key consideration for most prospective postgraduate law students. For prospective students it is important to ascertain what the fees cover. Hine says that although the cost of the University of Melbourne’s LLM is high, the course fees include all reading material and catering for the duration of intensive classes each semester. “I think it’s fair to say that this cost is actually reflective of the cost of the degree because all materials you need are supplied,” he says. While large law firms and professional services firms will often subsidise employees’ postgraduate study, alternative options are available to those studying on their own dime.
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Higher Degree Research students – those completing a Doctorate or a Master of Laws by research – may be eligible for tuition fee exemptions under the Federal government’s Research Training Scheme (RTS). Alternatively, prospective students can consult their preferred faculty about scholarship options or search for postgraduate scholarships online via the JASON database (www.jason.edu.au).
“People have an innate ability to stretch themselves, and if you love learning enough and love earning your degree enough you will find the time.” Wai Kaey Soon Employment Prospects Completing his Bachelor of Laws during the GFC, Soon initially found it difficult to find a graduate position. He decided to go back to study and secured a role in a law firm one month into his postgraduate degree. Enjoying the intellectually stimulating classes, he continued his masters, juggling
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postgrad full time work and study. Soon warns against undertaking postgraduate study to get a “better job”, and says the real value of a postgraduate degree is expanding your horizons: “It doesn’t get your the foot in the door; it helps you in your job once you’re in,” he explains. “A well-targeted masters degree can be leveraged in any legal job,” says Soon, whose study focused on exclusion clauses and penalty provisions in contract law. Stojanovska also enrolled in a Masters after encountering difficulty finding a job as a junior or graduate solicitor after completing her Juris Doctor. “I thought [a Master of Laws] would be beneficial to me in terms of opening more doors for my career. Having handed in my last assessment, I do feel that I have achieved a greater exposure to areas of law that interested me. As for work … I guess time will tell,” she says. There have been few studies to examine the employment outcomes for those who complete a postgraduate degree in law. Graduate Careers Australia’s 2010 report Postgraduate Destinations found that 80 percent of research Masters and PhD graduates in law who were available for full time employment were in full time work. Fifteen percent were working part time, and five percent were not employed. Similarly, of the Master or Laws by coursework graduates available for full time employment, 93 percent were in full time work, two percent were working part time, and five percent were not employed. According to The Good Universities Guide, 11 percent of law postgraduates who were looking for work did not find full time employment within four months of graduation. In 2012, the public sector attracted the greatest number of employees with postgraduate qualifications in law (34 percent), followed by private practice (33 percent) and the private sector (22 percent). Seven percent of graduates work overseas. Despite the high employment rates, these reports do not indicate whether law postgraduates already held these roles or if their qualifications were a factor in their employment.
“The more people that do postgraduate study, the more it adds value to our community of practice.” Helen McGowan
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Back to School: Some things to consider For any lawyer considering their work and study options, flexible course delivery options and ease of travelling to classes after work are a must. Lawyers with special interests should look into the expertise and special opportunities available at their preferred faculties. For example, students studying the LLM (Coursework) at the University of New South Wales have the option to study International and European Economic Law or International and European Commercial Law at Switzerland’s University of Lausanne for a semester. For lawyers considering a Masters, SJD or PhD the chance to work with a prominent academic can make a particular university stand out. To avoid disappointment, check with the institution prior to enrolment to confirm that preferred lecturers, thesis supervisors or subjects will be available. Those long hours spent studying towards a postgraduate qualification can also count towards Continuing Legal Education (CLE) requirements – check with the university or your state law society to ensure the course complies. How Australia’s Law Schools Rate Internationally Global Rank
University
8
University of Melbourne
=10
University of Sydney
14
Australian National University
15
Monash University
30
University of New South Wales
51-100
Griffith University Queensland University of Technology University of Adelaide University of Queensland
101-150
University of Western Australia University of Technology, Sydney
151-200
University of Tasmania
Source: 2012 QS World University Rankings by Subject – Law
Finding Flexibility To manage the competing commitments of work, study and family, the majority of students take advantage of flexible study options. Universities typically offer a range of attendance modes for postgraduate courses. These include regular night classes conducted throughout semester, summer school programs that allow students to fast track their degrees and intensive courses conducted over several days. Hine and Stojanovska studied in block attendance mode, and both stress the need for a flexible employer that allows for days off work to attend intensive classes. “For people who plan to do the Masters full time you will need a very flexible workplace because it is eight weeks out of the year in class,” Hine says.
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Online and distance study modes are available for certain subjects and courses. For example, the College of Law’s Master of Applied Law programs in commercial litigation, in-house practice, wills and estates, and family law are predominantly run online. Even with flexible study modes, prospective postgraduate students can expect a large workload. “The course is intense,” says Stojanovska. “I think the intensity arises because I did it full time; from what I could gather, both at enrolments and from class mates, the course is generally undertaken in a part time study mode. Most colleagues would be doing one to two subjects a semester.” Hine agrees. “If you do it part time it can be done in a minimum of two years though the lawyers I know who have done the Melbourne Law Masters said it took three to five years while practicing.” According to The Good Universities Guide, more than half of postgraduate law students study part time. When planning for a postgrad degree and deciding whether to study part time or full time, prospective students should consider not only the required class time, but also the amount of time needed to complete readings and assignments. The Juggling Act Succeeding in a postgraduate law degree takes dedication and organisation. “Make sure postgrad is something you are committed to,” says Hine. “It’s a lot of time, work and money.” Soon agrees. “You will be dealing with experts in their field and they don’t have time for people who don’t take their subject as seriously as they do. It’s voluntary, after all!”
The World’s Ten Best Law Schools Rank
University
1
Harvard University
2
Yale University
3
University of Oxford
4
University of Cambridge
5
Columbia University
6
Stanford University
7
New York University (NYU)
8
University of Melbourne
9
London School of Economics and Political Science (LSE)
=10
University of Sydney National University of Singapore
Source: 2012 QS World University Rankings by Subject – Law
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“Make sure postgrad is something you are committed to. It’s a lot of time, work and money.” Ben Hine “You need to be absolutely organised; your days need to be planned and you need stick to that schedule,” stresses Stojanovska, who also recommends that students consult subject handbooks ahead of semester to ascertain the assessment regime for each subject – making it easier to choose subjects, play to your academic strengths, and plan ahead. McGowan, who studied for her Masters full time, while also raising three young children and running her own practice says of the experience: “It was a lot of juggling but I think a lot of people I know like the challenge, they like to have a full palette of choices. At the time the kids were primary school age. When they were at school I had all that time to do my paid work plus my study as well. The way I did it was having dedicated office space which gave me uninterrupted time.”
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Continuing to practice while completing her PhD, McGowan says her work now takes more of a project approach, which allows her to plan her time. “From 8am to 3pm everyday I do my PhD which is my best thinking time… then by the time three o’clock comes around I’m really ready for a break so that’s when I do my phone calls, letters and visits,” she says. “It’s about timelines, it’s about having a task to do within a time and to just have regular days where I can just do that work and to prioritise my PhD over the other demands on my time.” While juggling legal practice and a postgraduate degree in law may sound daunting, Soon, who worked and studied full time during his postgraduate degree, says it can be done. “People have an innate ability to stretch themselves, and if you love learning enough and love earning your degree enough you will find the time.” McGowan believes postgraduate study offers many benefits to lawyers. She was able to use her Masters In Rural Commerce to build up a specialist practice in farm succession planning and encourages lawyers contemplating a Masters in substantive law to also consider multidisciplinary studies. While younger lawyers are comfortable returning to university, “as a nation we’ve got a bit of space to make up with trying to recruit the older practitioner to further study. But often they say ‘for what purpose’ or ‘is it going to add more money?’ But the main thing it does is it can be inspiring to be thinking new ideas,” says McGowan. “The more people that do postgraduate study, the more it adds value to our community of practice.”
THE FIRST LAW OF
FURTHERING
YOUR CAREER ALWAYS STAY ONE STEP AHEAD
In a competitive world the UQ Master of Laws (LLM) degree will help you to stay ahead. With a choice of over 70 contemporary legal courses taught by industry professionals and internationally renowned academics, the UQ LLM offers you the flexibility to construct a program around your particular interests or industry, in a format that suits your lifestyle. To find out more call 07 3365 8824, email llm@law.uq.edu.au, or visit www.law.uq.edu.au/llm
UQ LAW MASTER OF LAWS
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Special focus: the UQ law point of view
C
hoosing a Master of Laws (LLM) program can be a daunting process, but can be made easier when considering the scope of benefits to be gained beyond the classroom. Director of Postgraduate Coursework Programs at The University of Queensland Law School, Dr Alan Davidson, says that factors like teaching quality and the range of courses offered should be taken into account alongside less tangible features such as the opportunity to network with respected industry figures. “If you’re going to focus on a particular field of law then you want to study with an influential and experienced presenter, because names count,” he explains. “UQ Law School has the advantage of many long-standing relationships with the judiciary and legal profession enabling us to work with them to design and deliver an LLM program that provides the skills and knowledge practising lawyers need to stay ahead, and offers networking opportunities that could open doors for them in the future.” Dr Alan Davidson Full time students can complete the eight courses (16 units) required to gain a UQ LLM in just one year, while part time students can undertake as few as one or two courses per year over a maximum period of seven years. Courses are offered in semesterlong or four-day intensive formats to enable students to fit study around professional and other commitments. LLM graduates who wish to update their skills and practitioners who want to test the waters before embarking on a full program of study may enrol in a single course on a non-award or Continuing Professional Development basis. UQ Law offers a choice of over 70 courses delivered by internationally renowned academics and guest speakers chosen for their expertise and experience in their field. The LLM course list is continually revised to meet the needs of professionals from all industries, and in anticipation of emerging issues that will be the focus of the future. “We monitor the demand for particular subjects and suggestions for new topics to ensure we deliver the skills most needed by the legal profession,” Dr Davidson says. “Mainstream topics, particularly in the corporate and commercial arena, are always popular but we’ve experienced a significant increase in enrolments in subjects within the alternative dispute resolution and mining and natural resource stream of courses.” Dr Davidson says that many lawyers are also choosing to diversify into emerging or ‘boutique’ areas of the law. “We’re accommodating this by regularly testing new course offerings. For example, courses such as Cultural Heritage Law, Native Title and Elder Law are niche areas which we are able to offer because we have staff with significant expertise in those areas.”
Elder Law was one of the new courses offered by UQ in 2012 after identifying a requirement for legal expertise in the areas of estate planning, retirement home legislation and advanced care directives. “This was a test for us this year and like all our new courses will be reviewed as part of our planning for 2013 and 2014. It’s an example where social change can affect the demand for legal services; in this case the demand will rise in tandem with the projected growth in Australia’s ageing population.”
For more information about UQ’s Master of Laws program visit: www.law.uq.edu.au/llm
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In-house perspective
From courts to corporate: Chris Bertuch, IAG Insurance Australia Group (IAG) group general counsel and company secretary Chris Bertuch may have started his career as a litigator, but he is well and truly embedded in the corporate world now, writes Olivia Collings
F
or Chris Bertuch, group general counsel and company secretary at Insurance Australia Group (IAG), the past 12 months have been “challenging and very interesting”; unsurprising when you consider that Bertuch only took on the role a little more than 12 months ago. “Since I joined IAG we have seen major peril events, including the second major New Zealand earthquake (Christchurch), the Thai floods and Christmas Day storm in Victoria,” says Bertuch. “The insurance industry generally has been under significant pressure during that time and I think my team and the whole legal team across IAG has responded very well to that.”In addition, since joining IAG – which owns brands such as NRMA and CGU – Bertuch has worked across a number of significant transactions and initiatives, including a strategy reset, the acquisition of AMI (in a very short time period), an Australian hybrid offer and a retail bond offer in New Zealand. “We also had the Queensland Floods Commission and a total of 10 concurrent government enquiries underway in Australia alone, all of which put a lot of pressure on our businesses,” adds Bertuch. More recently IAG has acquired Malaysia-based KSK
Group’s insurance arm Kurnia Insurans, through its joint venture with Malaysia-based AmBank, AmG Insurance Berhad. It is the most recent in a string of deals that IAG has been involved in throughout Asia. “Our Asia business has been very busy over past 18 months and we will be involved in the completion and integration of the Malaysia acquisition… and provide support to the group’s strategic initiatives offshore, including, in relation to the Asia growth strategy,” says Bertuch. Learning the ropes What makes Bertuch and his team’s feats in the past 12 months even more impressive is that Bertuch came from a non-insurance background and had only even dealt with insurers when on the opposite side of the court. “I was very grateful they would consider someone who had not worked in the industry,” says Bertuch of his employer. However, as with many general counsels Bertuch adds that he was not hired for his technical legal skills, but rather his corporate work, of which there has been plenty. As an in-house lawyer and then general counsel and company secretary at CSR for 17 years Bertuch was involved in a variety of corporate work, although his roots were firmly in litigation. He started his career within the litigation team at Freehills before moving into a smaller firm where he could work across a broader brief. He then moved to Gadens where his work included commercial litigation and media defamation work for Kerry Packer’s magazines (now ACP). “I acted in defamation proceedings for the then Prime Minister of Australia (Paul Keating) in the lead up to the 1993 federal election. I was also involved in a variety of interesting issues with the firm’s banking and finance and local government clients, together with work for a number of
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profile entrepreneurs for whom we acted,” adds Bertuch. Like many before him, having made partner Bertuch reached a point where he wanted to get closer to the business, when the opportunity came up at CSR. “They were looking for somebody to join their established legal team, primarily to manage litigation commenced against insurance companies to secure coverage for CSR’s asbestos claims,” says Bertuch. He adds: “I think litigators are quite well qualified for commercial legal work, particularly in drafting, as they have seen the issues come up in a litigious environment and should have a good eye for what to avoid when putting documents together or negotiating deals.” The CSR litigation involved complex proceedings in NSW and, ultimately, in the U.S. When CSR settled with the first insurer for A$100 million it was at the time the largest insurance settlement in Australia. CSR then commenced proceedings against numerous other insurers in the U.S. taking Bertuch with it. Along with litigation against insurers Bertuch also worked closely with the senior executive and board of CSR on general commercial matters, thus building his corporate nous. “I was fortunate to be closely involved in a number of significant transactions, including the demerger of the Rinker business – which was then only the second Australian demerger,” recalls Bertuch. After assisting CSR in selling its sugar business, he decided it was time for something new when IAG came along. “As group general counsel and company secretary I was not hired to do insurance work – my role was corporate work, which I had done a lot of at CSR and which is my bread and butter,” says Bertuch. Indeed, as far as corporate structures go, Bertuch says there are many similarities between IAG and CSR. “Like CSR, IAG has a devolved structure,” he states. “CSR had a portfolio of businesses, which included aluminium, building products, sugar and property portfolios. IAG has a portfolio of general insurance businesses, including the Direct Insurance business (particularly under the NRMA, SGIO and SGIC brands), the intermediated CGU business, a significant New Zealand business, a motor insurance business in the UK and a growing Asia business. Each of these businesses has their own CEOs and management teams and the direct insurance business, CGU and the New Zealand business also have their
Australasian Legal Business ISSUE 10.8
own legal departments. “It is similar to where we got to at CSR although at IAG it is a truly devolved model,” he adds. Legal leadership Despite the legal supervisors for those businesses reporting officially to their business managers, Bertuch says the entire IAG legal group is quite collegial. “While each team provides legal support for the business it serves, we work collaboratively on issues that are of interest to the other business divisions or are likely to be material to the group,” he says. “We have a strong community of practice across all of the legal teams in the group. We aim for the senior lawyers from each team to meet monthly and have the entire legal community get together at least annually,” he adds. The IAG approach to legal is that each of the lawyers in each of the businesses are closest to that markets, customers and the issues, and therefore there is little need for an overarching manager when the work so diverse. “In some cases, it is important that we take a coordinated approach to the management of legal or regulatory issues or the sharing of information,” says Bertuch, “if only to avoid duplication or wasted resources.” The community of practice also allows IAG to retain talented staff by offering them opportunities across the business and giving them variety. Lastly, it assists in the acquisition of external advice, through a panel of 12 law firms. Bertuch recently reviewed the panel and has no intention of making changes within the next year; although, new regional and global arrivals in the legal market are catching his attention. “To have a firm with a strong Australian presence and offices in Asia, where we are growing, is helpful to us,” says Bertuch. “The key for the firms that are merging with overseas firms is to ensure that they have the right cultural mix and people we want to engage with.” A changing future Insurance, like other financial service areas, is undergoing period of significant regulatory change, and for those in the general counsel and company secretary seat this has additional impacts. “The regulatory environment, particularly the Basel III changes, obviously impacts on the work we do and our legal and governance framework,” states Bertuch. One of the key regulatory changes for IAG is the Life and General Insurance Capital (LAGIC) proposals being formulated by Australian Prudential Regulatory Authority, which will affect risk assessment and capital adequacy testing, governance and the capital recognition received for various capital instruments and reinsurance arrangements. “The challenge for us and other insurers is to ensure that our capital initiatives meet our commercial and stakeholder needs while complying with changing regulatory requirements,” says Bertuch. Keeping on top of new or amended regulation is an area which Bertuch sees as being an important opportunity for law firms: “Firms can improve their offer by contributing to their clients’ skills and understanding of issues that are likely to affect their businesses, particularly in a changing regulatory environment. For example, an improved understanding of the 10 government inquiries relevant to insurance and how the outcomes may impact our business – both short term and over the longer term – would obviously add value from our perspective,” he says. “Regulation and compliance is always going to be part of our business, that is not going to change, and it is part of our job to ensure that we understand and influence any change as positively as we can.”
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