The legal A-Team

In-house lawyers working for some of New Zealand's biggest corporates and government departments have drawn up an "A team" of external law firms and lawyers they rate as the country's best.

The survey, done in New Zealand and Australia, has been released amid heavy pressure from both governments, and in private sector boardrooms, to cut legal costs.

Corporates and government agencies frequently use outside legal expertise, particularly for specialist transactions.

Some firms have up to nine external law firms and barristers working with their in-house legal teams.

Kiwi companies have nominated 30 external lawyers for their A list; their Australian counterparts have picked 109.

Two Kiwi lawyers, Jack Hodder and Barry Brown from Chapman Tripp, have been rated on the highly competitive Australian list, Brown for his "strategic capacity" and Hodder for his "experience and technical capacity".

Four big  firms dominate the New Zealand ratings  - Bell Gully (seven lawyers, including chairman Roger Partridge)  Minter Ellison Rudd Watts (four), Russell McVeagh (four) and Buddle Findlay (three).
Chapman Tripp and Kensington Swan get one nomination each, as do AJ Park, Anthony Harper, Hudson Gavin Martin, Jones Fee and JT Law. Two ratings are from Crown Law, and barristers Mike Ring QC and Les Taylor make the list. One unnamed Kiwi corporate picked a US-based firm, Munger, Tolles & Olson, saying lawyer Kevin Masuda had "superb technical skills" and was "excellent to work with".

The survey is part of a report just released by the NZ Corporate Lawyers Association, with the research done by Ron Pol and his company Team Factors. Pol is a past president of the association.

More than 150 corporates and government agencies in New Zealand and Australia were surveyed, with a total annual legal spend of $2 billion.

The average annual legal spend for each Kiwi participant is $5.5 million. But nearly 20 per cent spend more than $10 million a year and, of these, more than a third spend more than $30 million and nearly half spend more than $100 million.

About a third spend  less than $400,000 a year on outside firms.

Hourly rates are significantly higher when corporates choose to brief out their work. The median hourly rate for in-house lawyers is $183 compared with more than $600 an hour for outside law firms. For a top barrister, the cost can top $15,000 a day.

Not surprisingly, 43 per cent of those surveyed say they expect to hire more in-house lawyers during the next two years.

About 20 per cent of all lawyers are now working in corporates or government agencies - a jump of nearly 50 per cent in the past 10 years.

None expected to increase use of big law firms - in fact, about 30 per cent say they expected to reduce costs by cutting their use.

But the news is better for local or regional full-service firms, and for specialist or boutique firms. Those surveyed say they expect to increase their use of these firms by 23 per cent and 29 per cent respectively in the nest two years.

Nearly 20 per cent say they intend boosting their use of overseas law firms.

Are the corporates getting value for money?

Some think so. "Value is less about fees and more about proactive commercial advice coming from experts who know my business well," said one private sector general counsel.

Said another: "Hourly rates are still outrageous. If you are going to pay $500 to $700 an hour, you have high expectations of experience, expertise and outcomes that will be achieved."

And another: "When our company went through extreme events, [Bell Gully]  resourced appropriately, managed multiple projects with ease, and allocated the best people to the task. Outstanding."

The top criterion for choosing external law firms is "commerciality of advice". Also significant is overall cost and value, and "optimal outcomes". These factors are more significant than hourly rates.

Of those surveyed, only 2 percent of corporate legal department heads say billing by the hour is the best way of charging for legal services.

But hourly billing is the most common form of fee arrangement for 85 per cent of external law firms.
Respondents also say final costs are on or below budget only 4 per cent of the time.

Along with the survey, the report's authors have devised a took-kit of 100 "action tips" to help corporates work smarter and cheaper.

- © Fairfax NZ News