Comment

What commercial awareness is and what it should not be

By on
23

Legal commentator and solicitor David Allen Green considers what this law firm buzzword actually means

Is this commercial awareness?

A commercial solicitor has to have ‘commercial awareness’. But what does this mean?

Often in private practice you will hear some senior lawyer complain that a junior lawyer is not “sufficiently commercial”. The senior lawyer seems to know what he or she means by this. Strangely, however, even senior lawyers can find it difficult to explain what it means. If asked they may mumble something like “you know, it means being commercial”.

The reason for this vagueness is that even some senior commercial lawyers find it difficult to explain, though they demand it in others. Perhaps like an elephant, they will know it when they see it.

One way of approaching the question of the meaning of ‘commercial awareness’ in private practice is to see the commercial lawyer at the intersection of two commercial interests.

First, there is the commercial interest of the client. For the business client, the lawyer is an expense. That expense can only be justified if the cost of lawyer means that that the client can make more money (or can stop losing so much money) than they would do without the lawyer and their work. Here the lawyer needs to understand how the client makes money, and to grasp the commercial nature of the sectors in which the client has business. The lawyer will then see how their advice fits in.

Second, there is the commercial interest of the law firm. A private practice law firm is also a business. It is there to make money out of the legal work the firm provides to its clients. A commercially aware solicitor therefore will understand the businesses of both the client and his or her firm.

So how does this translate into practice? It means that a commercial solicitor should always be able to explain to the client how any legal work fits in with the client’s business. Why, for example, certain legal protections will be needed in a transaction, or why certain processes have to be followed, or why litigation needs to be conducted in a certain way. A commercial lawyer needs to be able to explain the benefits for a business of a certain course of action and what risks are being minimised or eliminated. A commercial client can then nod and say: yes, I understand why that is important.

A commercially aware solicitor will also be able to provide the advice in a form which the client needs, to provide the right legal instruments for the task in hand, and to meet the deadlines which suits a client’s business.

The same commercial lawyer should also be able to explain to a colleague or partner how the firm can justify charging for that legal work, or how further work can be generated. There is no point being commercial in a client’s interests if you are not also being commercial in your firm’s interests. Stripped of all the legalistic glamour, you are simply one business providing another business with a service in return for money.

The 2018 Firms Most List

Over time, commercial awareness will mean that you not only understand the commercial context of your advice but you will be able to advise your client as a fellow business person as the commercial merits of different legal courses of action: whether to litigate or to settle, or whether to purchase assets or shares. This prowess will not happen by magic, but it will be the consequence over time of understanding your client’s business and your own.

But there is one thing ‘commercial awareness’ is not, or at least should not be. Sometimes some commercial lawyers, even quite senior ones, believe it means doing whatever the client tells you or wants to achieve, as long as the client pays the bill. And so you get contracts which are not enforceable, or aggressive letters before action which can be swatted aside. Of course, if a client is fully and properly advised of the risks of such wonky approaches, and still wishes to proceed, then it can be claimed the lawyer is doing their job. And it is true a lot of money can be made by getting the law and legal instruments wrong, as long as you have the right disclaimers.

Such an approach, however, is misconceived. The primary purpose of any legal instrument, be it a deed or contract or a statute, is that it is enforceable by a court. Any letter before action should be written on the assumption that the claim may go all the way to a full hearing. Just as the main purpose of a computer program is that it will run on a computer, and that the purpose of a musical instrument is that it can be played, any document created by a lawyer has to serve its purpose in a legal process. Other than in exceptional circumstances, and only then with the client’s fully advised consent, a lawyer should not carry out any work which he or she knows will not stand up if put to a legal test. A ‘commercially aware’ solicitor is still a solicitor, and an officer of the court.

Wise and experienced business people expect their lawyers to be both commercially aware and good lawyers. And with a corporate client, your duty is to the company not any one director. A contract may need to be enforced a few years later by a company, by different directors. An unenforceable contract, which seemed a clever commercial idea at the time, will be contrary to the interests of the business. An overstated letter before action may lead to a client being hit for costs regardless of the merits of the case. Placing a client in such predicaments is not being ‘commercially aware’ just because the client pays you. It is instead placing your client in potentially worse commercial predicament.

So ‘commercial awareness’ is important. Without it you cannot be a successful or happy commercial lawyer. And it becomes the reason a client will instruct you, rather than a dozen other commercial lawyers seeking the same work. But it does not mean doing anything just because you can get someone to pay you to do it. You should be commercially aware, and you should be aware of what commercial awareness is not.

David Allen Green is a commercial solicitor and legal commentator.

Comments on this article are now closed.

For all the latest commercial awareness info, and advance notification of Legal Cheek's careers events:

Sign up to the Legal Cheek Hub

23 Comments

Jonathan Mills

The audit profession had commercial awareness before Enron. One big disaster and it’s gone for a generation.

Missing from your list is the biggest one; the cost for a client in engaging with a professional is not the fee*, it’s the time spent by the client prepping, engaging, and responding. Many auditors are dimly aware** of this, very few lawyers I have met are.

*even for lawyers.
**People are more likely to shout at auditors but it still takes years for the message to get through.

(7)(2)

David Allen Green

Excellent additional point. Fully agree.

(8)(3)

jamesc

Well, that’s an amusing way of putting things.
The phrase ‘commercial awareness’ is generally used by people to signify the role of money in a legal issue dispute (actual or potential) and downplay other considerations.
The phrase also is sufficeintly vague to obscure whether it means doing the right thing or receiving enough money to do the wrong thing.
Also, and revealingly, it obscures who is getting the benfit of the ‘commercial awareness’ – client or lawyer.

(4)(5)

Critical Thinker

DAG is a useless hack who pontificates about law despite having a thoroughly sub-standard education in the law.

This is the man who said categorically Article 50 would never be triggered. He does not know what he’s talking about even in his self-professed knowledge area around public law. He knows even less about commercial law, and especially city private practice.

That this man is allowed to write for LC is amusing. That he’s allowed to write in the FT is nothing short of a scandalous disgrace.

(10)(18)

David Allen Green

Thanks Mum!

(28)(5)

Anonymous

Great comeback, kid – with that witty riposte, you’ll go far indeed.

(8)(9)

Anonymous

“There is no point being commercial in a client’s interests if you are not also being commercial in your firm’s interests.“

No point…

(6)(0)

Anonymous

Typical of the loose, imprecise way in which Green writes, I’m afraid.

(5)(6)

David Allen Green

“loose, imprecise”?

As opposed to “loose, precise” or “tight, imprecise”?

🙂

(13)(1)

Anonymous

Oh come now, I know you’re an imbecile, but that’s no excuse for being deliberately obtuse.

Just to spell it out for you, yes, the words in this context have aligned meaning. That is clearly what I intended. Repetition for emphasis. A common writer’s tool, though I suppose expecting your familiarity with the tools of an author might be judging you by an unfairly high standard.

(4)(13)

Dan

DAG – why do you have three names? It seems a bit silly to me. Also, I think you are cute.

(3)(1)

Anonymous

Cute in a kind of “aw, at least he’s trying” kind of way.

(3)(2)

David Allen Green

I actually have four names, so three is a discount.

(9)(1)

Anonymous

His blog is quite good tbh.

(5)(3)

Anonymous

Good that you’re joining in with the comments section, David.

(16)(0)

Anonymous

Finally a decent post on Commericail Awareness!

(6)(2)

Anonymous

*commerical – sorry, fat fingers!

(1)(2)

Anonymous

At most City law firms, ‘being commercial’ means ‘telling the client what they want to hear and checking it’s right later on’. It usually isn’t, but the client will come back. Corporate departments are especially notorious for this given their clients are so mobile.

Overall I think the article is accurate, and useful for prospective trainees since that is what firms mean by commercial awareness. I just fine it funny that in reality those lawyers who think they are the most ‘commercial’ are usually just the people deviating farthest from being actual lawyers.

(4)(0)

Tiffany

Coincidence that your photo is of a woman looking confused by maths? Hmmm…

(1)(0)

Anonymous

Quite a lot of words to basically say “try not to give advice that brings financial ruin to your clients and/or your firm and you’ll do ok”

(4)(4)

Anonymous

Why?

(0)(0)

Anonymous

Commercial awareness: having a working knowledge of your client’s business.

(1)(0)

David Allen Green

Thank you all for your comments, especially those which took the conversation forward.

And thank you for taking the time to read my post.

(14)(1)

Comments are closed.

Related Stories