Global Legal Industry Trends: U.S and Asia-Pacific Region in Focus

Global Legal Industry Trends: U.S and Asia-Pacific Region in Focus

The legal services sector include sole practitioners specializing in one particular type of law such as business/commercial, criminal, family, taxation, insolvency, real estate and intellectual property law, as well as large law firms that act as legal advisors for business deals including initial public offerings, mergers & acquisitions and real estate. Commercial success for firms depends largely on the reputation of its partners and their reliability; a strong track record helps to attract future clients. The demand for legal services varies in accordance with the number of court cases and commercial/civil legal transactions.

Global Legal Services to Grow Looking at the global legal services industry, more than $585 billion was generated in 2010, as per MarketLine research. It is expected that the market will grow at a yearly rate of 5% between 2010 and 2015 to reach almost $752 billion. The number of legal professionals operating over the 4-year period ending in 2010 was more than 3, 285,000 – in excess of 1.5%. Large legal firms, smaller firms offering specialized expertise as well as virtual law firms are all on the rise.

Over the five years to 2014, the online legal services industry also witnessed strong growth with more consumers demanding online services. This trend is expected to continue till 2019, as the number of services provided online steadily increases.

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Market Watch in the Asia-Pacific Region The industry in the Asia-Pacific region generated revenue of more than $69 billion in 2010.

Yearly growth was recorded at the rate of almost 6% between 2006 and 2010, and the growth is expected to slow down until 2015, when it is expected to exceed $91.5 billion.

There was a report early this year in The Lawyer that firms in Australia such as King & Wood Mallesons (KWM) and Herbert Smith Freehills (HSF) froze salaries amidst challenges to growing revenue. However, now the legal market in Australia seems to be gradually rising in confidence according to a study conducted by Mahlab, the Australian legal recruiter. The overall increase in commercial activity and business confidence in the country in the new financial year is expected to soften the impact of pay freezes while helping to curtail partner exits. These were the traits of the financial year of 2013-14 in Australia. Junior lawyers are still faced with lethargic salary band raises though there is a lifting of bonus freezes and salary that were imposed during the previous financial year.

Though firms such as the above mentioned ones have lifted these freezes, only the really strong performing attorneys are being offered pay rise, according to the Mahlab study. It also revealed that 44% of the firms that were surveyed had raised their salary bands, when compared to the 90% in 2011, 75% in 2012 and 50% in 2013.

Pay Hikes Still Limited Overall The fact that only high performing lawyers have been awarded significant pay hikes has been a factor of discontent among many lawyers who were expecting raises for braving the financial crisis of recent years. This was evident in the survey which conveyed that 62% of the surveyed private practice lawyers did not express satisfaction with what the salary review conveyed. The average salary increase for 2013-14 was 3.8% which was an increase from the 3.7% the year before.

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Last year also witnessed an increase in the appointment of partners though the overall partnership size at the major law firms displayed a downward trend.

This has been

explained as the result of partner departures as well as the length of time it takes for lawyers to make partnerships.

Profitability Challenge and Partner Departures In large and mid-sized firms the challenge to maintain profitability remains, though some of the firms have managed a solid revenue growth. This is due to the overall trend of declining demand for legal services in the country on account of the sluggishly growing economy, the presence of low-cost alternative service providers, and technological competition, the research indicates.

There have been many significant partner departures from law firms last year, which the Mahlab report indicates is set to continue this year since firms follow the practice of only retaining high performing partners. Firms also look to increase their ranks of salaried partners. Equity partnerships are on the decline, and in the replacement process with salaried partnerships that are dependent upon billings. Getting rid of the billable hour seems to be unavoidable because of the rising pressures of the legal profession complying with the tough demands of the market.

The Mahlab report also discovered a rise in annual

remuneration in large and mid-sized firms in the past year.

Situation Better in America All these findings point to more challenges the Australian legal industry is set to face this year. The situation in America is much healthier though the month of July saw a decrease in jobs in the legal services industry, according to the findings of the US Department of Labor.

However, experts are of the firm view that this decrease in jobs is no indication of some greater negative trend. In fact, July 2014 showed a significant improvement from July 2013

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in spite of the decrease in jobs by 200. Experts say that the American legal industry is still strong.

America had 1,225,452 attorneys as of April 2011. At present there are around 180,000 legal services establishments in the US that together earn annual revenue totaling around $260 billion. These services include not only law firms, but also legal process outsourcing services that carry out various legal tasks for law firms and independent attorneys.

At least four of the top ten richest lawyers in the world are actively practicing American attorneys, while the profession is one of the highest earning in America. Among the 100 highest-grossing law firms in the world 80 firms are based in the US, according to the First Research report. That surely tells something.

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