Deutsche Bank refuses to pay for external legal work completed by trainees and newly-qualified lawyers

And City law firm partners are not happy

Financial powerhouse Deutsche Bank will no longer pay City law firms for legal work undertaken by trainees and newly-qualified (NQ) lawyers.

The move, which has raised partners’ eyebrows across London, comes as the banking giant nears the end of its global panel review. Occurring every two years, Deutsche Bank — which employs over 100,000 people across the world — opens up a tender process that allows City law firms to fight over a number of coveted spots on the bank’s legal advice roster.

But it would appear this time around Deutsche Bank is looking to receive more legal-bang for its buck.

According to Legal Week (£), “new payment plans” have been introduced as part of this latest round of tendering which state that the bank will no longer pay for legal work completed by trainees and NQs. Continuing, the report claims that those firms likely to be “reappointed” include Hogan Lovells, White & Case, Latham & Watkins, Mayer Brown and Cleary Gottlieb Steen & Hamilton.

One partner, unwilling to reveal their name, said that this year’s process was “more aggressive” and Deutsche Bank’s refusal to pay for work undertaken by trainees and NQs has “annoyed a lot of people.” Another top lawyer, again wishing to remain anonymous, said:

This is something I have seen for the first time this year. I think it is fair enough for trainees, but for NQs it seems very unfair — they are proper solicitors, so why should they not be paid? I have heard about this at other banks; usually in the US, but never in Europe.

But just how prevalent are Deutsche’s demands? A survey, undertaken in 2011 by the Association of Corporate Counsel and published in The Wall Street Journal, revealed that over 20% of 366 in-house legal departments had at one time or another refused to cough up cash for work completed by junior lawyers.

Deutsche Bank declined to comment.

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26 Comments

Not Amused

This is very US.

If European clients start behaving like US clients then the firms will adapt and we will end up with US firms. That is not something anyone sane should want.

However put in the context of the last 10 years, if this is the stupidest thing Deutsche does this year then this will be a good year for them. Not all of us are convinced it will be here forever – and moves like this, desperate and illogical cost cutting, hardly restore confidence.

(26)(1)
Anonymous

Quite. All it means is that Senior Associates and Partners will have to do more of Deutsche’s legal work themselves, which will in turn increase their bill. If a firm isn’t doing that then I can’t fathom why they would even want Deutsche as a client if they aren’t willing to pay for work.

(4)(0)
Anonymous

“I think it is fair enough for trainees, but for NQs it seems very unfair — they are proper solicitors, so why should they not be paid?”

But they are being paid. The firm is just not being paid for their work. I know there is a wish to make us weep for the poor NQs, but in reality the firms have a choice. If this work becomes economically unviable, then don’t do it. If it reduces the profits a bit but is still worth doing they will have to take the hit.

(6)(3)
Tim NiceButDim

Or trainees will continue to have to do the work, but not be able to charge time to it thus making it more difficult to achieve trainee target hours..

(23)(2)
Anonymous

Umm, no. Hours billed and hours collected are two entirely different things, as we all well know. The hours will be billed as usual and then written off, just like when a project has gone overboard in terms of hours and the billing partner needs to find a way to reduce the fee.

When it gets really annoying for the associates is when bonuses are based on actual collections, as was the case in my old firm. If you were an associate of any seniority and your partner issued an unrealistically low fee quote, you could be as efficient as you want and your hours would still get written off and your bonus reduced accordingly. I do not know how prevalent this system is among City firms.

(8)(1)
Anonymous

That is shocking. What a redundant bonus system. Glad to hear that you have now left that firm!

(2)(0)
Anonymous

I appreciate the sentiment, though as a trainee I wasn’t personally affected. I do know of at least one junior associate (~2-3 PQE) who grew so frustrated by the system that he ended up leaving for a competitor (he had missed out on what would have been a healthy five figure bonus two years in a row, simply because he got stuck on large cases with terrible cost arrangements both years). The sad thing is that it wasn’t even about the money – the base salary was higher than anywhere else so he likely isn’t earning more now – but the fact that the firm’s supposed incentive systems were dysfunctional and left some people feeling severely underappreciated.

(2)(0)
No longer at Fladgate LLP.

Fladgate LLP still operates a bonus system like this.

(0)(0)
Anonymous

Firms have been pretty clever at hiding these type of hourly charge outs by disguising them as other costs, or inflating other costs. I am sure this will just continue if this approach becomes more of the norm.

(9)(0)
Anonymous

I am a paralegal at a City firm and we have been told that DB will continue to pay fees of paralegals. Suddenly we’re super busy with even more NQ/trainee level work.

(23)(0)
Amal

When I get my hair done I REFUSE to let a junior deal with my split ends….Same thing babes.

(6)(2)
Anonymous

Deutsche Bank Tesco Law Till Receipts

Day 1
Advice £200
Trainee £100

Day 2
Advice £300
Buy Advice get Trainee Free

(40)(0)
Anonymous

Firms would have to be pretty desperate to accept these conditions, why would you?

Signing up to this sets a dangerous precedent and one that I think most of us would agree needs to be avoided.

(3)(0)
almosthippy

I’d accept on those conditions! Just give DB a year of 3 year PQEs carrying out trainee and NQ work and billing them accordingly for it. I’m sure they’ll change their mind.

(6)(0)
Anonymous

It’s all a matter of bargaining power. If DB is one of the biggest clients of a firm, it can exercise considerable influence by threatening to move its business elsewhere.

I used to work at a sizeable US firm whose biggest client would only pay for NQ and trainee hours if they had previously signed off on the respective NQ or trainee working on a particular matter. It was no more than a empty admin exercise because evidently, the client had no real way of knowing which junior was suited to work on their case. Still, it meant the client excised its influence wherever it could.

(2)(0)
Anonymous

We have an NQ who was a paralegal in the team for 18mths before starting her TC; it would be madness for not to charge her time. Firms dread these bank panel reviews and it is only going to get worse – lawyers must begin to take a stand or else it’ll continue to be race to the bottom for lender-side instructions.

(3)(0)
Anonymous

I had difficulty collecting $5000 due from Deutsche Bank many years ago, I eventually told them that if they didn’t pay, I personally would come to Berlin. They scoffed and asked me what difference that would make. I explained that the last time anyone from my family visited Berlin ,they reduced it to rubble in a Lancaster bomber. Deutsche Bank paid up!

(5)(12)
Anonymous

I shall remember this next time I’m accused of being a little too aggressive because I threaten to cc overdue bills to banks to the PRA or bafin with a cover letter using the term “failing to meet their obligations as they fall due”.

(0)(0)
A drunk man looks at a thistle

Deutsche Bank is creaking financially. It is far from a ”powerhouse”.

(0)(0)
Anonymous

Presumably all work will be done by solicitors with whatever minimum PQE DB demands, at rates to match. If they are asking for the work for free, they could presumably have got a lower charge out rate instead, and they’re just getting their discount in a strange way.

(0)(0)

Comments are closed.