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

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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.