Magic circle partners bill £110 for typing ‘yes’ or ‘no’ and hitting ‘send’ on an email, claims law firm costs expert

The knives are out for ‘£1,100 an hour’ City law firms

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City law firms are taking the piss when it comes to billing, a legal costs expert has claimed in a report he has authored for the Centre for Policy Studies, a right-leaning think-tank.

And national newspapers are going crazy this morning with Jim Diamond’s claims that London’s top corporate law firms are charging out their hotshot partners for as much as £1,100 an hour — a new record.

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Amid the allegations about spiralling fees, Diamond — who used to work for Allen & Overy and Clifford Chance — has also provided some eye-catching tales to help support his narrative of legal fatcattery.

Explaining that firms typically bill in six minute units of time, he told The Independent that “for typing ‘yes’ or ‘no’ and hitting ‘send’ on an email, the partner might count it as a six-minute time unit and bill £110 for 30 seconds’ work”.

Another Diamond story has an unnamed partner at a top 50 law firm billing his client £2,800 for meeting him for a drink in a wine bar, while an anonymous top 15 law firm apparently “charged a business £44 for sandwiches at a lunch attended by only two representatives of the client company — then added its normal hourly rate to the £22 per head sandwich fee.”

Damagingly for City law firms, the Centre for Policy Studies report, entitled ‘The Price of Law’, accuses them of using a lack of transparency on fees to distort the free market in a way that creates inefficiency and undermines the wider economy. It states:

The high level of legal fees is an efficiency drain on commerce. British industry is forced to suffer a deadweight loss as excessive amounts of time and money must be spent dealing with legal issues.

The report also says that City law firm fees contribute to the wider issue of restricting access to justice — which seems rather tenuous as these organisations exist to serve big corporations rather than small businesses. Still, there is an argument that high City law fees have an inflationary effect on the rest of the legal market.

According to previous research by Diamond, the best magic circle partners are charged out for between £775 and £850 an hour, with partners at the London offices of US firms costing £900. So the jump to a top hourly rate of £1,100 is a major one.

The report comes after a strong recovery in corporate law firm performance since the financial crisis, with fee income recently up by 6% among the top 10 outfits according to Deloitte. These renewed good times have coincided with a mounting junior lawyer pay war — with a host of US firms’ London offices upping their newly qualified associate rates to £100,000 and other leading firms also boosting rookie solicitor remuneration.

Responding to the report, City of London Law Society chair Alasdair Douglas has strongly contested Diamond’s claims, commenting:

The top commercial law firms operate in an intensely competitive market — domestically and internationally — with many firms vying for the same work. There is no cartel of a few UK firms sharing the work out between them. In fact at least 30 firms, US and UK-based, have the scale, international reach and resources to do most commercial work. That high level of competition has a major impact on determining fees.

22 Comments

Anonymous

Surely clients are not just paying for a simple “yes” “no”: they pay for the years of education/experience that partner has accumulated which enables them to give that answer, and the cost of insurance in case something goes very wrong because of their answer.

(72)(3)
Anonymous

What planet are you on read the item properly 1,100 per hour no one should be charged that amount

(0)(3)
Anonymous

If clients are willing to pay for it then it’s fair game.

(27)(1)
Bored Solicitor

Surely market forces will sort this out? There’s not exactly a shortage of law firms. If the clients don’t like high fees at one firm they won’t pay, and next time another firm will take their work for a reduced fee – not to mention that many firms have special reduced rates for favoured clients, or offer discounts as soon as a client queries a bill.

(17)(0)
Anon of Costs

Considering these are most likely representative of Corporate law fee’s I think this article puts a negative spin on the professional.

Corporate clients pay these fee’s usually with no problem. You’re not going to see a regional commercial lawyer, criminal or family lawyer charging £1000 an hour….

(14)(0)
Anonymous

I didn’t know a declarative sentence could be ended with a question mark.

(15)(0)
Not Amused

“Still, there is an argument that high City law fees have an inflationary effect on the rest of the legal market.”

Recoverable fees are capped in the CPR and the rates haven’t changed (even for inflation) in 6 years. So it’s a pretty unlikely argument. Current maximum permitted rates are:

City of London – £409/hour
W1/WC1 – £317/hour
Greater London – £267/hour
South East – £217/hour
Rest of country – £201/hour

This is just a looney lefty trying to find someone to be envious of.

(8)(3)
Anonymous

A loony lefty who worked at A&O and CC and then became a specialist in legal fees? Alright mate.

(10)(6)
juniorbarrister

As someone trained as a Costs Draftsman myself, I know that what you bill and what you get paid in the end are two entirely different things. If you have any kind of argument about costs you can take of 10% straight away just for the privilege, and very quickly you can end up with 50% of your bill being considered a good take home in some of these cases. For example I could charge £1,000 per hour but if there is a costs award in my clients favour given the maximum guideline hourly rate for a Solicitor in the City of London is £409 I would almost certainly never, get awarded more than the guideline rate, so that is £700 per hour of the bill at the start. On the other hand if my client is paying they agreed to the fees, so what is the problem? For example the most expensive burger in the world costs £1,100 but I could get a burger for 99p at McDonalds, if I choose to buy the expensive burger because of the quality and the experience that’s my choice it is my money.

(8)(0)
The Econo-pist

For £1,100 I would expect the whole free-range organic cow, lovingly roasted and presented on a silver platter with a side order of chips sprinkled with gold dust!

(0)(0)
Anonymous

Lawyers (anywhere) will bill what the market can bare. If client’s are willing, the level of fees is immaterial. If the client’s aren’t willing, the work will go elsewhere and the fees will adjust accordingly.

(4)(0)
Anonymous

Attending conference: £500

Knowing the answers to your questions based upon 30 years of legal training and experience in practice: £4,500

Total bill: £5,000

(fans of a certain writer will recognise the above)

(0)(1)
jjp

Presumably it’s a long email and their pay grade is circa £600/hour

(0)(0)
Anonymous

It’s not commercial law but my solicitor sends me bills with time booked and emails cost me £28. However the long list of billed time bares no resemblence to final bill as he says he ‘takes a view’ when writing invoices. 1 truest and £60k later it’s very hard to see the value add.

(0)(0)

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