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LEGAL EXCELLENCE, INTERNATIONALLY RENOWNED UK LEGAL SERVICES 2017

1 November 2017 @thecityuk www.thecityuk.com UK legal services 2017

About TheCityUK

TheCityUK is the industry-led body representing UK-based financial and related professional services. In the UK, across Europe and globally, we promote policies that drive competitiveness, support job creation and ensure long-term economic growth. The industry contributes nearly 11% of the UK’s total economic output and employs over 2.2 million people, with two-thirds of these jobs outside London. It is the largest tax payer, the biggest exporting industry and generates a trade surplus greater than all other net exporting industries combined.

2 www.thecityuk.com contents

Foreword ...... 5

Key findings ...... 6 Legal services in the UK ...... 6 The UK’s position internationally ...... 7

English law and UK legal services post-Brexit ...... 8

TheCityUK and legal services ...... 9

Legal services in the UK ...... 11 UK legal activities revenue ...... 11 UK law firm fee revenue and key market trends ...... 12 International practice of barristers and advocates ...... 18 International legal services firms in London...... 19 Legal services across the UK ...... 22

Dispute resolution in London and the UK ...... 27 Courts-based dispute resolution ...... 27 International work in the Business and Property Courts ...... 27 Alternative dispute resolution ...... 31

Contribution to the UK economy...... 35 The UK’s position internationally...... 39 Sources of information ...... 46

3 UK legal services 2017 LEGAL EXCELLENCE, INTERNATIONALLY RENOWNED UK legal services 2017 Legal services contributed

Legal services employ 311,000 people, 2/3 25,872 outside London disputes were resolved by alternative dispute resolution in the UK £24.1bn to UK economy in 2015

THE revenue of the UK’s largest 100 law FIRMS English law is used in There are over grew by 7%* to 200 40% foreign law FIRMS £22bn of all global with offices in The UK corporate arbitrations

Legal services’

*(2016/17) trade surplus nearly doubled over the The UK is second past 10 years to

70% £4bn of cases in the Admiralty and Commercial Court globalLY were international for legal services in nature fee revenue 4 www.thecityuk.com Foreword

The UK’s world-class legal services sector is a vital national asset, and this report underscores the important contribution that it makes. It generates 1.5% of UK gross value added (GVA) and employs over 311,000 people across the country, two-thirds of whom are based outside of London. For the first time, this report sets out the scale of the contribution made by the sector in the nations, regions and cities of the UK.

The UK-based legal services sector forms an integral and crucial part of the wider financial and related professional services ecosystem which makes the UK a truly globally-leading international financial centre. It is the most international legal sector in the world, with a trade surplus worth nearly £4bn in 2016.

This is driven by the primacy of English law which is the leading choice of governing law for, and resolving disputes in, cross-border trade and investment. Some 27% of the world’s 320 legal jurisdictions use English common law. When disputes arise, international parties know that they can rely on world-leading dispute resolution services, whether through litigation, arbitration or mediation. Indeed, some 70% of cases in the Admiralty and Commercial Courts, part of the newly launched Business and Property Courts, were international in nature in the year ending July 2017.

However, this primacy, and the ability of UK-based practitioners to provide best-in-class legal and advisory guidance for global clients, could be impacted by Brexit. The mutual recognition and enforcement of court judgments is critical to the international use of English law. The UK government has given a strong signal of its intention to maintain close judicial cooperation with the EU on civil matters. It should put these commitments into action as soon as possible by mapping out the process of accession to the Hague and Lugano Conventions, and consulting on draft legislative texts. There should also be a commitment to progress the incorporation into domestic law of the Rome I and II instruments on choice of law and applicable law in contractual and non-contractual matters.

A key part of TheCityUK’s Brexit work has focused on delivering continued mutual access to skills and talent for both the UK and EU-27. This includes practice and establishment rights of UK-qualified legal practitioners. It is essential that the government places a high priority on this, together with a rapid agreement of transitional arrangements and a bespoke future relationship that delivers mutual market access based on mutual regulatory recognition and cooperation.

As we look beyond Brexit, as a country we must determine the shape of our national economy. We need a vigorous debate on how we play to our strengths as a country. TheCityUK has made a start to this process with our publication of a ‘Vision for a transformed, world-leading industry’ in July 2017.

Underpinning this vision is the UK’s internationally trusted legal system and rule of law, which must be maintained and enhanced. More broadly, our industry and the UK’s long-term economic prospects are closely linked to the ability of the legal services sector to offer a full range of enabling legal services to clients from across the world. Aligned to this, as the UK develops its own independent trade and investment policy, there is a unique opportunity to pursue new market access arrangements and to ensure that services – including legal services – are part of the next generation trade and investment agreements concluded with partners from around the world.

TheCityUK’s Legal Services Group, chaired by James Palmer of Herbert Smith Freehills, provides a senior strategic reference point for TheCityUK-wide legal related activities. It is critical that the world-leading expertise of UK-based legal practitioners can be harnessed – working in partnership with government and regulators – to address the challenges and opportunities that our industry and Britain as a whole faces as it moves to leave the EU and shape its destiny in the years ahead. Miles Celic Chief Executive Officer, TheCityUK 5 UK legal services 2017 Key Findings

Legal services in the UK

• The UK has a strong reputation as the leading global centre for the provision of international legal services and dispute resolution. It is also an important centre for legal education and training. In addition to firms and other practitioners based in London, there are high-quality providers offering choice and value in cities such as Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle.

• Revenue generated by legal activities in the UK was £31.5bn in 2016. The top 100 UK law firms generated over £22bn in 2016/17. The majority of large firms saw an increase in revenue during this period, with growth less consistent among mid- tier firms. However, the depth and breadth of the sector was evidenced by the fact that many niche and boutique firms – for example, those focused on insurance and shipping – recorded growth.

• The business of law remains a significant contributor to the overall UK economy. The sector employs around 311,000 people, two thirds of whom are located outside London. Major centres of legal services employment include Manchester (with 12,000 in employment), Birmingham and Leeds (8,000 each), and Bristol (7,000). These jobs are highly skilled with clusters of expertise which attract investment and drive growth. The sector’s trade surplus has nearly doubled over the past decade to £4bn in 2016, helping to partially offset the UK’s trade in goods deficit. Legal services’ contribution to the UK economy was £24.1bn in 2015, equivalent to 1.5% of GVA.

• The legal services sector is becoming more complex as law firms, alternative legal services providers (ALSP) and technology firms both compete and collaborate. This ongoing evolution is a response to client-led demand and the increasing disaggregation of service delivery across the spectrum of legal services providers.

• In-house legal functions are looking across legal, advisory, professional and technology services providers to source integrated cross-border advisory expertise. This, coupled with continued fee pressure and the prevailing view of legal services as a buyers’ market, has intensified the need for law firms to differentiate their offering.

• Technology is increasingly viewed as a strategic enabler to proactively offer client- centric solutions. Firms are analysing key practice areas, for example financial regulation and derivatives transactions, to identify potential technologies that can deliver scalable and cost-effective solutions and improved client outcomes. Collaboration and joint ventures (including through equity investment) between legal and technology firms continue to grow and are an increasingly important driver of technology utilisation across the sector.

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The UK’s position internationally

• The UK accounts for around 7% of global legal services fee revenue, which totalled between $580bn and $640bn in 2016. It is by far the largest market for legal services in Europe and second globally only to the US, which accounted for around 45% of total legal services fee revenue. The UK is very open in allowing virtually unrestricted access for foreign law firms. Over 200 foreign law firms from around 40 jurisdictions – employing in excess of 10,000 people – operate in London and other cities across the UK. • The popularity of English law is an important factor contributing to the UK’s strong global position and attractiveness to foreign law firms. Some 27% of the world’s 320 legal jurisdictions use English common law. The choice of English law for global commercial contracts is in part driven by the UK’s reputation as the leading centre for international dispute resolution – whether through litigation, arbitration or mediation. • The leading global position of international law firms based in the UK is underlined by the following facts: – Five of the largest 15 Global 100 law firms, based on number of lawyers in 2016/2017, have their main base of operations in the UK. In terms of revenue, UK- based firms held three of the top ten places. – The largest international law firms in London have between 45% and 65% of their lawyers based outside the UK, and many other London-based firms have between 10% and 20% of lawyers overseas. Nearly 7,000 practising solicitors from the UK were located abroad in 2016, according to the Law Society of England and Wales. • The strength of the UK as an international centre for dispute resolution is reinforced by the expertise of barristers and advocates involved in international practice. Over 1,600 members of the Bar of England and Wales, including around 1,500 members of the Commercial Bar Association (COMBAR), now receive instructions from abroad. A significant component of their practice is in the field of international commercial law, with many international cases heard in the Business and Property Courts, which encompass the specialist civil courts and lists of the High Court including the Commercial Court, the Technology and Construction Court and the courts of the Chancery Division. • London’s reputation as a leading global centre for international dispute resolution through the courts is underlined by the fact that in 2016, over 1,100 claims were issued in the Admiralty and Commercial Court, of which 70% involved at least one party whose address is outside England and Wales and 45% were cases where all parties involved were international. In the year end to July 2017 there were over 700 claims, with 71% being international in nature and over 49% of those being cases where all parties were international. • UK-based law firms continue to grow and develop their presence in both developed and emerging markets. This is in response to client demand and a focus on ensuring multi-jurisdiction trade and investment transactions and dispute resolution can be supported by firms regardless of location and time zone. • Law and legal services are a cornerstone of the broader financial and related professional services cluster that makes the UK the leading international business hub. Major global firms come to the UK to access this unrivalled breadth of services, seek advice from world-class legal and advisory firms, raise finance, and insure their businesses – helping to create jobs throughout the UK. A strong, competitive and well-regulated legal services sector is essential for sustainable economic growth. 7 UK legal services 2017 English Law and UK legal services post-Brexit

TheCityUK believes it is critical to ensure that international parties understand the ongoing benefits of using English law and UK legal services practitioners following the UK’s exit from the European Union.

It is also essential that the UK remains the jurisdiction of choice for international legal services and dispute resolution. The efficient and cost-effective resolution of disputes is critical to that goal and to the ongoing development of English law. This is at the core of the international attractiveness of the UK and of our world-leading legal services sector.

The Lord Chief Justice and the Chancellor of the High Court developed the below points to underscore the unique strengths of English law and the high quality of dispute resolution services in the UK.1

• The UK has a totally independent judiciary and compliance with the rule of law. These factors inspire business confidence and underpin international trade and investment.

• The substantive English common law is clear, fair and predictable, and based on precedent.

• The English common law, together with the UK legal system, is, and has always been, flexible. It adapts to meet the challenges of an ever- changing commercial world.

• UK court and arbitral procedures are practical and innovative, delivering speedy and efficient resolution of business and financial disputes.

• Litigation and arbitration in the UK is cost effective.

• The UK will remain a global Arbitration and Alternative Dispute Resolution (ADR) centre post-Brexit. Brexit will have no impact on the New York Convention on Arbitral Awards.

• The mutual recognition and enforcement of UK judgments abroad will largely continue as before, whether under long-standing bilateral treaties or under common law principles of comity.

• A UK exclusive jurisdiction clause will continue to be given effect after Brexit.

• London and the UK will continue to provide unrivalled access to high- quality legal services.

• London will remain one of the leading financial, insurance and commercial centres in the world.

1 Legal UK, ‘The strength of English law and the UK jurisdiction’, (2017), available at: https://www.judiciary.gov.uk/wp-content/ uploads/2017/08/legaluk-strength-of-english-law-draft-4-FINAL.pdf 8 www.thecityuk.com TheCityUK and Legal Services

TheCityUK is focused on ensuring the continued international competitiveness of the The Justice Select Committee’s UK legal services sector. This involves assessing and responding to events which have final report noted and endorsed the potential to impact on the sector, with a particular focus on Brexit-related issues. our calls and recommendations, In December 2016, TheCityUK submitted a paper to HM government (HMG) quoting TheCityUK’s entitled ‘The impact of Brexit on the UK-based legal services sector’. It discussed and characterisation of the role of identified the key Brexit-related issues which have the potential to impact on the the legal sector in the business competitiveness of the UK’s legal sector, as well as identifying possible opportunities. ecosystem:2

The paper underscored the sector’s contribution to the UK economy, stressing that the “It is one of the jewels in the UK’s long-term economic prospects are closely linked to the ability of the legal services crown. Indeed, it is part of sector to offer a full range of enabling legal services to clients from across the reason why London, and the world. the UK, is the leading global financial centre. It is also a It defined the sector’s priorities with the aim of informing HMG’s Brexit negotiations. This was followed by submission of both written and oral evidence to the Justice reason why people come to Select Committee implications of Brexit for the justice system inquiry. London and the UK. They come here to access the law. A core component of our ongoing work is to make clear that for the UK-based legal They come here to deal with services sector, the right Brexit deal will be bespoke, underpinned by mutual market a situation where the courts access and based on mutual regulatory recognition and cooperation. provide certainty and fairness, We have also argued strongly that the UK should seek to ensure continued cross- and where the judiciary have border recognition and enforcement of judgments from UK jurisdictions in the EU a very strong reputation after Brexit. This is clearly in the interests of parties to contracts in the UK, EU and for impartiality. We believe globally, as well as to the ongoing primacy of English law and dispute settlement. very strongly that this is not TheCityUK is a member of the Professional Business Services Council (PBSC), which just about the legal services comprises organisations from across the Professional Business Services (PBS) industry, industry itself but about the including the legal services sector. We have been heavily engaged in its Mutual underpinning that English Market Access Working Group, whose objective is to put the government in the best law gives the wider economy position to negotiate market access deals in the interests of the PBS industry. and business relations. It is a very important part of the For the legal services sector, this includes a specific focus on post-Brexit establishment UK offering.” and practice rights. TheCityUK is contributing to the legal sector-specific work as well as offering broader analysis and insight on the key issues facing the wider PBS industry. This work seeks to articulate clearly the needs of the PBS industry and identify effective outcomes and solutions that maximise the benefits to the UK. It also aligns with our broader trade and investment policy work.

The UK is the largest specialist centre for the resolution of financial, business and property disputes anywhere in the world. We therefore continue to work closely with the senior judiciary on a range of activity to ensure the UK remains the jurisdiction of choice for international business and dispute resolution.

9 UK legal services 2017

TheCityUK supported the launch of the Business and Property Courts in July 2017. We believe this is a forward-looking decision, indicative of the judiciary’s determination to ensure that the UK remains at the forefront of dispute resolution globally. It also gives greater clarity to users about the focus and coverage of legal services available at the Courts.

Other examples of TheCityUK’s domestic agenda include submissions to:

• Financial Conduct Authority (FCA) consultation on overall responsibility for the legal function under the Senior Managers Regime.

• The Ministry of Justice (MoJ) Corporate Liability for Economic Crime call for evidence.

• HMG consultation on the UK’s future legal framework for imposing and implementing sanctions.

TheCityUK plays an active role in promoting the use of UK legal services on the international stage. This includes identifying opportunities for TheCityUK members in initiatives including the following:

• TheCityUK co-signed a Memorandum of Understanding with the Astana International Financial Centre and the European Bank for Reconstruction and Development which identifies dispute resolution and the development of an English law based court system as key themes for ongoing cooperation.

• Capital market and financial sector development: the demand for assessing and implementing international standards to build emerging market capacity is a key area of interest for members. TheCityUK has undertaken a variety of activities including member-led masterclasses, seminars and workshops in a range of jurisdictions.

10 www.thecityuk.com Legal Services in the UK

The UK has a strong reputation as the leading global centre for the provision of international legal services and dispute resolution. It is also an important centre for legal education and training. In addition to law firms and other legal practitioners based in London, there are high-quality providers offering choice and value in cities such as Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle.

The economic contribution of legal services should be seen in its broadest context of facilitating the administration of justice and a wide range of transactions and business activities. Legal services have both a multiplying and an enabling effect for business growth and stability. The sector also offers bespoke expertise to support other parts of the economy. UK legal activities revenue

In line with a global economic recovery, revenue generated by legal activities in the UK has generally trended upwards in recent years, although it declined by 2% year-on-year in 2016, to £31.5bn. (Figure 1).2

Figure 1: UK legal activities revenue Source: Office for National Statistics

£bn

35000

30000

25000

20000

15000

10000

5000

0

2010 2011 2012 2013 2014 2015 2016

2 Office for National Statistics, ‘TOPSI: Turnover of Legal Activities for GB, January 2010 to December 2016’, (10 February 2017), available at: https://www.ons.gov.uk/economy/economicoutputandproductivity/output/adhocs/006650topsiturnoveroflegalactivities- forgbjanuary2010todecember2016 11 UK legal services 2017

UK law firm fee revenue and key market trends

Overall, the revenue of the largest 100 law firms in the UK grew by 7% in 2016/17 to £22.1bn and has grown from £12.3bn over the last decade. The majority of large firms saw an increase in revenue during this period, with growth less consistent amongst mid- tier firms. However, the depth and breadth of the sector was evidenced by the fact that many niche and boutique firms – for example, those focused on insurance and shipping – recorded growth.

Figure 2: Revenue and profit of the largest 100 law firms in the UK Source: Legal Business

£bn 25

20

15

10

5

0 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Revenue of largest 100 law firms in the UK, £bn

Profit of largest 100 law firms in the UK, £bn This growth has been achieved against a backdrop of political and economic uncertainty. Firms continue to focus on cost reduction and improving headcount utilisation in response to ongoing pressure on fees and structural changes in how clients procure legal services. For example, the PwC Law Firms’ Survey 2016 illustrates that 43% of fees are either fixed or contingent/performance-based for UK law firms ranked 51–100, compared with only 18% in 2010.3 As a result, these firms are increasingly focused on developing the most efficient delivery model for each project.

The continued growth of in-house legal teams – particularly across highly-regulated sectors such as financial services, pharmaceuticals and telecoms – continues to impact the extent to which external firms are utilised, how they are procured and the structure of fee arrangements.

This includes a drive by many corporate clients to reduce the number of firms on their legal panels, typically resulting in fewer, but larger and more complex opportunities for law firms. The nature of these opportunities means they are increasingly the preserve of larger firms who continue to focus on winning work from global clients and building their international presence and key practice offerings to best support them.

3 PwC, ‘Annual Law Firms’ Survey 2016’, (2016), available at: https://www.pwc.co.uk/industries/business-services/law-firms/survey.html 12 www.thecityuk.com

Figure 3: Geographical distribution of lawyers in largest 100 UK law firms (% share), 2016/17

Source: Legal Business

UK Europe (excluding UK) 7% 3% Asia US 7% Other Americas Middle East/Africa

10%

56%

18%

In contrast, the fortunes of mid-tier firms rely on a combination of factors, including agility, flexibility, improving utilisation and a focused strategy through which they can differentiate their offering from both peers and larger firms. The breadth and diversity of UK-based law firms is evidenced by niche and boutique firms who in turn focus on specific sectors or specialisms. These firms can be subject to potentially greater economic shocks if their key client sector suffers a slowdown. Their growth strategies must therefore consider how best to mitigate the possible risks of over-reliance on a particular sector or specialism.

While traditional legal panels may be shrinking, there is also a greater willingness among corporate clients to disaggregate aspects of their legal needs and to allocate responsibilities for different aspects of a single matter to a range of service providers. For some high-value global clients, this has given rise to law firms taking on a broader management function to ensure that all elements of client delivery meet their needs. Both mid-tier and niche firms, as well as ALSP and technology providers, are developing strategic alliances with leading law firms to position themselves as part of this increasingly complex supply chain.

This has increased the need for many law firms to further develop their project and resource management capabilities, whilst at the same time clearly articulating the core value of services that only lawyers can provide. It is therefore essential that law firms and other practitioners invest in building strong and effective relationships with key clients. There is an increasing need to engage at senior levels outside of the legal function to demonstrate a clear understanding of clients’ challenges and commercial objectives.

ALSP are an increasingly important component of the legal services landscape. According to a 2017 study by Thomson Reuters, the value of the global ALSP market is around $8.4bn. The research found that around 50% of law firms and 60% of corporate legal departments are using ALSP for at least one type of service.4 The most common of these is low-risk or standardised high-volume tasks.

4 Thomson Reuters, ‘2017 ALSP Study: Understanding the growth and benefits of these new legal providers’, (February 2017), available at: https://blogs.thomsonreuters.com/legal-uk/2017/02/06/2017-alsp-study-new-legal-providers/ 13 UK legal services 2017

Law firms typically use ALSP for standardised high-volume tasks to reduce costs and improve efficiency; for example, document review and electronic discovery services. However, there is a strong drive for law firms to undertake tasks involving legal interpretation in-house.

The study also provided an insight into where law firms may invest in the future, by noting that while 46% of corporations plan to use an ALSP for specialised legal services in next five years, only 15% of law firms have created or plan to create an affiliate. In addition, 56% of corporations will be looking to an ALSP for help with regulatory risk and compliance, and only 5% of law firms plan to have such an affiliate up and running in the next five years.

The introduction of Alternative Business Structures (ABS) through the Legal Services Act 2007 has enabled areas of the legal services sector to secure external funding and has contributed to the growth of ALSP in the UK. An analysis published in 2016 identified £510m of external investment in the legal sector. This investment had been made in the residential conveyancing, corporate structuring and finance, injury, and other market segments.5

A June 2017 report by the Legal Services Board noted there were 892 active ABS licenses as of the end of March 2017.6 Of all ABS, 47% deliver services in the wills, trusts and probate segment, and more than a quarter in the conveyancing market segments – both residential and commercial. Prior to gaining their ABS licence, 63% offered legal services – 56% regulated and 7% unregulated. The remaining 37% did not offer any form of legal services before being granted an ABS licence.

While many of the ABS entities don’t currently compete with commercial law firms, there is increasing competition from other market entrants. Accountancy firms are broadening the scope of their legal offerings and continuing to gain traction in the market. For example, PwC Legal, prior to its full integration into PwC LLP, reported a 23.5% rise in revenue in 2015/2016. In headline terms, its total revenue of £59.9m placed it just outside the UK’s top 50 law firms by revenue. In addition, RSM, the UK’s seventh largest provider of audit, tax and consulting, launched a legal practice in January 2017.

There has been a marked rise in the number of legal start-ups, some of whom are licensed ABS. According to a Knight Frank report, there were 15 legal start-ups recorded on AngelList’s investment platform in 2009 and 1479 in early 2017.7 As these market entrants evolve and penetration of ALSP grows, pressure on law firms will continue to increase. This is evidenced by the continued growth of law firm combinations, which firms use to build scale, deepen specific practice experience and enter new geographical markets. According to Jomati MergerLine UK, there have been 133 publicly-reported mergers involving UK- based law firms in the Lawyer 100 rankings since 2011.8 Of these, 54 involved a UK firm merging with a firm in another jurisdiction, further reinforcing the desire of firms to better service international and global clients.

5 Arden Partners, ‘Analysis of external and corporate investment in UK law firms: sustainable momentum established’, (2016), available at: http://www.arden-partners.com/ 6 Legal Services Board, ‘Evaluation: ABS and investment in legal services 2011/12-2016/17 – Main report, An analysis of investment in legal services since the introduction of ABS licensing’, (June 2017), p.14., available at: https://research.legalservicesboard.org.uk/wp- content/media/Investment-research-2017-Report-Main-report.pdf 7 Knight Frank, ‘Your Future, Now’, (2017), p.6/7., available at: http://www.knightfrank.co.uk/resources/commercial/occupiers/legal- services-sector-profile-2017.pdf 8 TheCityUK calculations based on Jomati Consultants LLP, ‘UK Law Firm Mergers’, (2011-2017), available at: http://jomati.com/uk- mergers 14 www.thecityuk.com

Figure 4: Total fee-earning headcount of the largest 100 UK-based law firms STRUCTURE OF THE LEGAL Source: Legal Business PROFESSION IN THE UK 70,000 12 The legal systems in England and 60,000 10 Wales, Scotland and Northern 8 50,000 Ireland each have separate laws, 6 judiciaries and legal professions. 40,000 There are differences between 4 30,000 Scots law, English law and 2 Northern Irish law in areas such as 20,000 0 property law, criminal law, trusts law, inheritance law, evidence law 10,000 -2 and family law, while there are 0 -4 greater similarities in areas such as commercial law, consumer rights, contract law, taxation, 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 employment law, and health and safety regulations. Scots law offers Number of fee-earning (LHS) Number of fee-earning, % change year on year (RHS) the advantages of a common law The total number of deals involving the largest UK law firms increased by 5.5% in 2016 system that also has affinities (Figure 5). The average value of deals has, however, declined slightly during this period, with the civil systems of resulting in modest growth of 4% in the total value of deals. Continental Europe. There are also differences in the Figure 5: Top 50 UK ‘City’ law firms deals terminology used between the Source: The Law Society of England and Wales, City Legal Index jurisdictions. For example, in Scotland there are no Magistrates’ 200 Courts or Crown Court but there are Sheriff Courts and the Court 150 of Session. The Procurator Fiscal Service provides the independent public prosecution service 100 for Scotland like the Crown Prosecution Service in England and Number of deals 50 Wales and the Public Prosecution Service in Northern Ireland.

0

2013 2014 2015 2016 2017 Q1 2017 Q2

Number of deals (index 2009=100) Value of deals (index 2009=100)

A key purchaser of legal services is the financial services sector, and the attractiveness of the UK as a place to set up and grow a financial services business has contributed to the strength of the UK’s legal services sector.

15 UK legal services 2017

Data from the Law Society of England and Wales shows that between 2013 and the first half of 2017, the financial services industry accounted for 40.9% of the total value of deals on which the top 50 ‘UK City’ law firms advised. Energy and utilities accounted for 11.5%, technology, media and telecommunications 9%, real estate and construction 5.1% and manufacturing 3.3% (Figure 6).9

Figure 6: Number of deals made by the top 50 UK City law firms by industry (% share, 2013-17*) Source: The Law Society of England and Wales, City Legal Index *2017 refers to the first half of the year only

Finance and banking Fund/investment management Technology, media and telecoms Energy and utilities Real estate and construction 30% 30% Manufacturing Other

3%

5% 11%

11% 9%

The Legal Services Board is an organisation created by the Legal Services Act 2007. The Board came into being on 1 January 2009 and became fully operational on 1 January 2010. Its overriding mandate is to ensure that regulation in the legal services sector is carried out in the public interest; and that the interests of consumers are placed at the heart of the system. The Board itself is responsible for overseeing legal regulators in England and Wales. It is independent of Government and of the legal profession. It oversees 11 separate bodies, the Approved Regulators. The Board also oversees the organisation established to handle consumer complaints about lawyers, the Office for Legal Complaints. Different regulatory arrangements apply in Scotland and Northern Ireland. The legal profession in the UK is distinctive from many other countries in being divided into two branches, solicitors and barristers (advocates in Scotland). The judiciary is drawn from both branches of the profession. Solicitors provide the great bulk of ‘first line’ legal advice, undertaking detailed advisory work on behalf of their clients. While solicitors serving the local community, solving the legal problems of the public are often in a general practice, solicitors serving business customers tend to be specialists in a particular area of law. Barristers (advocates in Scotland) provide specialist legal advice, with particular expertise in advisory, drafting and advocacy work. They include individuals with expertise in all areas of the law. Many are also qualified in other jurisdictions, have knowledge of other systems of law and are able to advise on complex international matters. The regulatory differences between solicitors and barristers/advocates have been diminishing, but the

9 TheCityUK calculation based on The Law Society of England and Wales, ‘City Legal Index’, Data up to end Jun 2017, (2017), p.16. 16 www.thecityuk.com

main distinction remains that solicitors typically provide a continuous service to clients, while barristers/advocates are a source of specialist legal advice on particular points of law or strategy, and present cases orally before courts, arbitrations or other tribunals. In England and Wales, barristers, who are independent sole practitioners, typically join together with other barristers and share premises in what are called sets of chambers, which tend to specialise in one or more legal fields. There are approximately 1,600 senior barristers known as Queen’s Counsel (QCs), which is a world-wide recognised kitemark for excellence in advocacy. Lawyers and clients from other jurisdictions can instruct barristers directly, without using a domestic law firm, in a range of international transactions and disputes. Many barristers are members of specialist bar associations, which provide further education for their members and represent their interests. The Bar Council is the representative body for all barristers in England and Wales and is responsible for maintaining the independent regulator of barristers, the Bar Standards Board. In Scotland, an advocate performs the same function as a barrister in England and Wales. All advocates are members of the Faculty of Advocates based in Parliament House in Edinburgh, where the supreme courts are located. The Faculty is responsible for the admission of advocates and their professional conduct. It also provides library facilities, including the renowned Advocates’ Library. In Northern Ireland, over 650 barristers and a further 94 QCs operate as an independent referral bar from an iconic modern building – The Bar Library – in central Belfast. It is also the home of the Inn of Court of Northern Ireland. The governing body of the profession is the Bar Council of the Bar of Northern Ireland. Barristers in this jurisdiction provide a comprehensive range of advanced legal services in advocacy and representation both at home and abroad. Specialisations offered from the members of the Bar Library include advanced advocacy, arbitration and mediation. The proximity of the Bar Library in Belfast to other European jurisdictions such as Ireland and the very close ties with the US makes legal representation from the Bar Library an attractive option for the many foreign entities and corporations who avail themselves of both referral and also Direct Professional Access.

17 UK legal services 2017

International practice of barristers and advocates

The importance of the UK as the leading global centre for international financial and related professional services has created significant demand for specialist legal advice in a wide range of areas. The Bar Council of England and Wales and its International Committee undertake many initiatives to help barristers develop an international practice. The Bar Council plays an active part in the work of the most important multi-national lawyers’ organisations and has built strong relationships with foreign lawyers’ associations and Bars, both in legal business development and rule of law advancement.

The Commercial Bar Association (COMBAR) was formed in 1989 to bring together barristers who practice in the field of international and commercial law. The principal fields of practice for over 1,500 members of COMBAR cover international trade, shipping and aviation, banking and financial services, insurance, commodity transactions, international arbitration, insolvency, oil and gas/energy law and EU law. According to COMBAR, its members have been instructed to appear as advocates or experts in 40 international arbitration centres and courts in 25 jurisdictions globally.

In addition to COMBAR, there are other specialist bar associations, many of whose members include barristers practising in aspects of international and commercial law. The Chancery Bar Association encompasses practitioners with specialised knowledge of international trusts, taxation, pensions, financial services, insolvency, patents and corporate law. The Technology and Construction Bar Association (TECBAR) represents barristers specialising in disputes arising from the technology and construction sectors. The Criminal Bar Association is the focal point of contact for those concerned with commercial and business fraud. The Intellectual Property Bar Association is the specialist bar association for barristers practising in all areas of intellectual property law.

A concentration on court work has enabled barristers to develop specialist expertise, particularly as representatives in courts where common law is practised. Barristers also provide advice and opinions on contentious and non-contentious legal matters across a broad spectrum of industries. They are involved in arbitrations, either as legal representatives or as arbitrators, in the UK and other major arbitration centres around the world.

The main services offered by barristers include:

• Advocacy and litigation. Barristers can receive instructions to appear in a wide range of international, foreign and UK courts, including, for example, the International Court of Justice, the International Criminal Court and the European Court of Justice.

• Legal advice and expert evidence. Barristers may be instructed to give advice, orally or in writing, on any matter of the laws of the UK, as well as European or international law arising anywhere in the world. They can also appear as expert witnesses on such laws for overseas courts and arbitration proceedings.

• Arbitration . London is a major centre for international and commercial arbitration. As a result, many QCs and other barristers, as well as some law firms in the UK, have developed considerable expertise in the field of arbitration. This includes undertaking arbitration using the rules of the International Chamber of Commerce and the London Court of International Arbitration.

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Advocates in Scotland. Advocates are available to be instructed in a wide range of courts and tribunals in Scotland and elsewhere, including the UK Supreme Court, the European Court of Justice and the European Court of Human Rights. They may also be instructed in arbitrations and other forms of alternative dispute resolution. Advocates may be instructed to give advice, orally or in writing, on any matter of Scots or European law. International legal services firms in London London is the leading global centre for international financial services. The co-location and clustering effect of banking, insurance, fund management and other financial services help to underpin its position as a major centre for international legal services. London’s reputation as a leading global centre for the provision of international dispute resolution is underlined by the fact that over 70% of claims issued in the Admiralty and Commercial Court involve at least one party from outside England and Wales. Furthermore, the UK capital is viewed as the leading preferred centre for arbitration (Figure 13).

The UK is very open in allowing virtually unrestricted access for foreign law firms. There are over 200 foreign law firms in the UK from over 40 jurisdictions, whose presence adds to the sector’s contribution to the UK economy. US firms in particular have a long-standing presence in the UK, with more than 100 based in London and the wider UK. According to Altman Weil Inc, between 2007 and 2016, 21% of all US cross-border combinations involved UK-based firms, and the trend continues with two US-UK deals announced in May 2017.10 Around 40–50% of foreign firms offer a full service English law capability in addition to their home jurisdiction offering.

Law firms from other jurisdictions in the UK typically provide services to UK-based international corporations undertaking business in the country from which they originate, and to domestic clients looking to invest in the UK and Europe. Many of these firms derive a large proportion of their overall revenue and employ a large amount of staff to support business conducted in London. The largest firms ranked by London fee-earners on this list include White & Case, Baker McKenzie, Dentons and Reed Smith (Figure 7).11

Figure 7: The largest offices of non-UK law firms in London, 2016/17 Source: Legal Business Of which London fee-earners English qualified Other qualified White & Case 448 344 104 Baker McKenzie 389 304 85 Dentons 385 337 48 Reed Smith 367 361 6 Latham & Watkins 329 197 132 Mayer Brown 245 201 44 Jones Day 202 135 67 Shearman & Sterling 191 119 72 Kirkland & Ellis 187 150 37 Weil, Gotshal & Manges 174 165 9 Dechert 165 92 73 Squire Patton Boggs 163 112 51 Skadden, Arps, Slate, Meagher & Flom 149 111 38 Ropes & Gray 144 88 56 Sidley Austin 134 118 16

10 Altman Weil, Inc., ‘US Law Firm Merger Market Continues to Accelerate’, (2017), available at: http://www.altmanweil.com/index. cfm/fa/r.resource_detail/oid/A73F1BDD-46DE-42B9-9B3C-BA1BD93145DB/resource/US_Law_Firm_Merger_Market_Continues_to_ Accelerate.cfm 11 Legal Business, ‘Global London 2017 – Main table’, (07 April 2017), available at: http://www.legalbusiness.co.uk/index.php/ analysis/255-global-london-2017/9519-global-london-main-table 19 UK legal services 2017

The headcount of the largest 50 foreign law firms in London reached a record 6,033 fee earners in 2016. This was up from 5,953 in the previous year (Figure 8). The total number of partners also grew to a new high of 1,680. It is notable that the number of non-UK lawyers – primarily US-qualified – employed by these firms rose by 29% to 1,286 in 2016.12 This increase has been driven in part by a growing number of UK and European corporates accessing US capital markets and a convergence in leveraged finance terms between the US and European markets.

Figure 8: Total headcount of fee-earners and countries of qualification (50 largest overseas law firms in London) Source: Legal Business

7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 2008 2009 2011 2011 2012 2013 2014 2015 2016

21.3%

UK qualified lawyers 2016

UK non-qualified lawyers 2016 78.7%

Large international law firms remain at the core of London’s leading reputation as an international legal services provider. TheCityUK identifies firms as international if more than a third of their lawyers are working outside their home jurisdiction. Some firms, however, may have few lawyers working abroad but remain very global in their work and outlook. International law firms in London feature prominently in rankings of the largest global firms (Figure 25). The largest UK law firms typically have 45–65% of lawyers outside the UK. US firms have traditionally been more orientated towards their domestic market. However, the increasing level of cross-border combinations and ongoing international expansion has resulted in many leading US firms having 25–40% of their lawyers outside the US. International law firms in London have become leading advisers in deals taking place in international capital markets. They also offer a substantial range of services, including advising on mergers & acquisitions (M&A), project finance, tax and intellectual property around the world. Other smaller firms are world leaders in their own niche practices, providing deep sector-specific experience. For example, the UK is the world’s leading centre for the provision of legal services to the international maritime community, with over 40 law firms active in the sector.

12 TheCityUK calculations based on Legal Business, ‘Global London 2017 – Main table’, (07 April 2017), available at: http://www. legalbusiness.co.uk/index.php/analysis/255-global-london-2017/9519-global-london-main-table 20 www.thecityuk.com

RANGE OF INTERNATIONAL LEGAL SERVICES The biggest areas of practice of law firms in the UK include corporate work, banking and capital markets. Property and dispute resolution have gained in importance in recent years, although the extent of each law firm’s involvement in the various areas of practice will vary. The main areas of international work undertaken by law firms in the UK include: • Corporate finance - joint ventures, M&A, equity issues, corporate re-organisations, management buyouts, company law. • Other corporate and commercial law - aviation, shipping, commodities, competition, IT and digital media, telecoms, media and entertainment. • Banking/project finance - bank lending, debt rescheduling, project finance, public private partnerships, securitisation, aircraft and ship finance, World Bank and EBRD projects work. • International capital markets - equity issues, asset securitisation, privatisation, derivative products, eurobonds. • Tax - corporate tax (and personal tax planning where there is no private client department), stamp duty, VAT. • Trade law - The World Trade Organization, international commercial law on trade in goods and services, trade and intellectual property, cross-border transactions, and trade disputes. • Dispute resolution - arbitration, mediation and litigation. • Insurance and reinsurance - advising on claims and related litigation and arbitration. • Property - sales and leasing of commercial property, property finance, property development, construction, environmental law, town and country planning. • Intellectual property - patents, trademarks, copyrights, confidentiality. • Product liability - liability along the chain of manufacture of any product for damage caused by that product. • Employment/pensions - implications of M&A, establishment and maintenance of pension schemes, contracts of employment, immigration advice. • Public international law - relates to the handling of legal issues affected by international jurisdictions such as the International Court of Justice. • Private clients - family law, probate, tax planning, trusts. • Competition - anti-trust law, monopolies, mergers, cartels and abuse of a dominant position. • EU Law.

21 UK legal services 2017

Legal services across the UK

The UK is the major global hub for international legal, financial and other related professional services. Within the UK, the importance of London is core to its position, but other cities such as Edinburgh and Glasgow in Scotland; Birmingham, Bristol, Leeds, Manchester and Newcastle in England; Cardiff in Wales; and Belfast in Northern Ireland are also important centres for the industry.

The UK legal services sector directly employs around 311,000 people and offers education, training and apprenticeships to develop the skills of its employees. These jobs are highly skilled and distributed across the whole country, with clusters of expertise which attract investment and drive growth. Around two thirds of those employed by the sector are located outside London (Figure 11).

This deep pool of labour and skills has seen the legal services sector respond to the needs of key sectors throughout the UK. For example, with more than 2,000 companies operating in the energy sector, the Scottish legal profession has a highly-developed expertise in the oil, gas and renewable energy sectors.

Figure 9: Largest UK law firms in the UK, by revenue, 2016/17 Source: Legal Business

Firm name Headquarters location Revenue, £m 1 DLA Piper International 1,675 2 Clifford Chance International 1,540 3 Allen & Overy International 1,519 4 Linklaters International 1,438 5 Hogan Lovells International 1,420 6 Freshfields Bruckhaus Deringer International 1,330 7 Norton Rose Fulbright International 1,243 8 Herbert Smith Freehills International 921 9 CMS International 827 10 Ashurst International 541 11 Slaughter and May London 539 12 Clyde & Co London 508 13 Eversheds Sutherland National 439 14 Pinsent Masons National 423 15 Gowling WLG International 390 16 Simmons & Simmons London 316 17 Bird & Bird London 303 18 Berwin Leighton Paisner London 272 19 Taylor Wessing London 270 20 Irwin Mitchell National 235 21 Osborne Clarke Bristol 209 22 DAC Beachcroft National 207 23 DWF National 201 24 Addleshaw Goddard National 198 25 Stephenson Harwood London 176 26 Withers International 175 27 Macfarlanes London 168 28 Holman Fenwick Willan London 166 29 Fieldfisher London 165 30 Watson Farley & Williams London 160 31 Mishcon de Reya London 152

22 www.thecityuk.com

32 Kennedys London 150 33 Charles Russell Speechlys London 144 34 Nabarro London 131 35 Travers Smith London 125 36 Shoosmiths National 117 37 BLM National 107 38 Bond Dickinson National 104 39 RPC London 103 40 Hill Dickinson Liverpool 102 41 Trowers & Hamlins London 97 42 Olswang London 97 43 Weightmans National 95 44 Mills & Reeve National 93 45 Ince & Co London 89 46 Burges Salmon Bristol 87 47 Stewarts Law London 78 48 Gateley Birmingham 78 49 TLT Bristol 75 50 Blake Morgan National 75

Figure 10: Largest UK law firms outside London, by revenue, 2016/17 Source: Legal Business Note: The table excludes firms identified by Legal Business as ‘national’

Firm name Headquarters location Revenue, £m 1 Osborne Clarke Bristol 209 2 Hill Dickinson Liverpool 102 3 Burges Salmon Bristol 87 4 Gateley Birmingham 78 5 TLT Bristol 75 6 Freeths Midlands 72 7 Shakespeare Martineau Birmingham 72 8 Keoghs Bolton 68 9 Browne Jacobson Nottingham 67 10 Brodies Scotland 67 11 Burness Paull Scotland 54 12 Shepherd and Wedderburn Scotland 51 13 Maclay Murray & Spens Scotland 44 14 Clarke Willmott Bristol 43 15 Dickson Minto Scotland 43 16 Birketts Ipswich 42 17 Walker Morris Leeds 42 18 Ashfords Exeter 41 19 Bevan Brittan Bristol 39 20 Foot Anstey Exeter 38

23 UK legal services 2017

Figure 11: Legal services across the UK Source: ONS Nomis; TheCityUK calculations

UK EMPLOYMENT = 311,000 UK LEGAL SERVICES GVA = £24.1bn

Legend for map

Figures represent employment and GVA in legal services, 2015

Map shading

Scotland Scots law 19,000 Northern Ireland law £ £1.5bn English law

Northern Ireland North East 6,000 6,000 £ £0.25bn £ £0.46bn

North West 40,000 Yorkshire and The Humber £1.9bn £ 22,000 £ £1.1bn

East Midlands 15,000 £0.9bn Wales £ 16,000 £ £0.4bn East of England 15,000 £ £2.3bn West Midlands 17,000 £ £1.3bn

London 100,000 £ £8.5bn

South West South East 22,000 33,000 £ £1.6bn £ £3.8bn

24

*Practicing certificate holders not in domestic private practice include those working in-house, in foreign firms and on a contract basis, and those not attached to an organisation. www.thecityuk.com

A number of leading firms have established operations in cities outside of London. For example, Allen & Overy, Baker McKenzie and Herbert Smith Freehills in Belfast; Hogan Lovells in Birmingham; Ashurst in Glasgow and Berwin Leighton Paisner, Freshfields Bruckhaus Deringer and Latham & Watkins in Manchester.

While these operations initially focused on back office support and commoditised legal work, many firms are now increasing their scope to include a range of increasingly complex legal activity. This enables firms to develop differentiated client offerings by responding to their demands for cost-efficient service delivery.

The scale of the contribution that legal services makes across the nations, regions and cities of the UK is further illustrated by the table below (Figure 12).

Figure 12: The employment and GVA contribution of legal services across the UK

Legal services employment in selected Legal services GVA in selected nations/regions/cities, 2015 nations/regions/cities (£m), 2015 East Midlands 15,000 928

Nottingham 3,500 127

Leicester 1,500 64

Northampton 1,000 75

East of England 15,000 2,276

Cambridge 1,500 182

Norwich 1,000 82

Chelmsford 1,000 52

Ipswich 900 111

Peterborough 600 90

St Albans 500 89

Luton 500 85

Southend-on-Sea 450 35

Watford 400 133

London 100,000 8,463

London 100,000 8,463

North East 6,000 463

Newcastle 3,000 119

Sunderland 250 31

North West 40,000 1,917

Manchester 12,000 291

Liverpool 6,000 122

Bolton 1,250 57

Stockport 500 78

Warrington 450 127

Salford 350 85

Northern Ireland 6,000 255

Belfast 2,919 110

25 UK legal services 2017

Legal services employment in selected Legal services GVA in selected nations/regions/cities, 2015 nations/regions/cities (£m), 2015 Scotland 19,000 1,526

Edinburgh, City of 6,000 276

Glasgow, City of 5,000 222

Aberdeen, City of 1,750 324

Fife 700 55

South East 33,000 3,844

Southampton 1,750 87

Reading 1,500 162

Guildford 1,500 119

Brighton and Hove 1,250 100

Milton Keynes 1,000 171

Crawley 800 80

South West 22,000 1,612

Bristol 7,000 253

Exeter 1,750 92

Bournemouth 900 51

Cheltenham 900 50

Swindon 450 71

Poole 400 30

Gloucester 400 62

Wales 16,000 426

Cardiff 5,000 128

Swansea 1,000 30

West Midlands 17,000 1,277

Birmingham 8,000 321

Coventry 800 74

Wolverhampton 400 37

Yorkshire and the Humber 22,000 1,123

Leeds 8,000 345

Sheffield 4,000 106

York 1,250 57

Bradford 900 82

Halifax 225 50

26 www.thecityuk.com Dispute Resolution in London and the UK

English law is the most commonly-used law in international business and dispute resolution. The abundance of legal talent in London and the UK contributes to its reputation as the leading global choice for international dispute resolution, whether through litigation, arbitration or mediation.

This pre-eminence is built on the impartiality, integrity and depth of experience of the judiciary, state-of-the-art courtrooms and the vast network of world-class support services (including interpreters, transcribers, translators, document services and IT providers). In addition, London’s position as the leading international financial centre means that most experts in banking, funds and insolvency disputes are in close proximity.

Courts-based dispute resolution

The Rolls Building, the biggest dedicated business, property and commercial court in the world, was opened in London in 2011. It houses all the specialist jurisdictions of the High Court dealing with business, property and commercial disputes.

As of October 2017, the Business and Property Courts have become the new name for England and Wales’ business dispute resolution jurisdictions and will act as a single umbrella for specialist civil courts across England and Wales. The Business and Property Courts reinforce and highlight the strengths of the British legal system and what makes it attractive to foreign users.

This helps give the UK courts the visibility that they deserve, and ensures international users can readily identify the services they need when using the courts in this country, through simpler terminology and a more logical and business-friendly court structure. These developments enhance the attractiveness of the courts, particularly for international commercial users who have a choice of where to litigate.

International work in the Business and Property Courts

In 2016, 14,540 cases were issued in the Business and Property Courts in London. This includes 9,003 cases in the Insolvency and Companies Court, 3,977 cases in the rest of the Chancery Division, 1,192 cases in the Admiralty and Commercial Court, and 368 cases in the Technology and Construction Court.

In 2017, the number of cases issued to the end of July has been 10,169, with 6,690 cases in the Insolvency and Companies Court, 2,549 in the remainder of the Chancery Division, 719 in the Admiralty and Commercial Court, and 211 in the Technology and Construction Court. The numbers, when compared pro rata to those of 2016, have therefore remained stable, and have in fact increased slightly.

The Business and Property Courts continue to attract high numbers of international users, notably through the Admiralty and Commercial Court, and through the Patents Court.

In 2016, 70% of cases in the Admiralty and Commercial Court were international in nature, with at least one party with a registered address abroad. Of those international cases, 45% were cases where all parties involved were international. In the year to end of July 2017, 71% of cases in the Admiralty and Commercial Court have been international in nature, and of those international cases, 49.2% have been cases where all the parties involved were international. The Admiralty and Commercial Court remains hugely attractive to international users and influential on other commercial courts worldwide, as was demonstrated during the inaugural Standing International Forum of Commercial Courts that took place in London in May 2017.

27 UK legal services 2017

The Patents Court has continued its ground-breaking work in the area of patents and other science-oriented intellectual property work. Judgments handed down in the Patents Court are often of international significance, not only because they concern international users but also because they set industry standards that are followed or replicated elsewhere. For example, 75% of cases heard in the Patents Court in 2016 involved at least one international party, with 47% of those international cases involving exclusively international parties. In the first half of 2017, those numbers rose significantly to 86% of cases in the Patents Court being international, and 63% of those international cases involving exclusively international parties.

CASE STUDY Patents Court case study In April and June 2017, the judgments in Unwired Planet International Ltd v Huawei Technologies Co Ltd [2017] EWHC 711 (Pat) and [2017] EWHC 1304 (Pat) made a number of key determinations in relation to FRAND licensing commitments. FRAND commitments exist to protect the patent rights of innovative companies that have invested in the creation and development of an invention, while balancing those rights against the need for implementers to use the invention under licence in circumstances where its use is essential to the technical standard in the industry in question. Under these commitments, the patent holder makes a commitment with the standard-setting organisation to enter into licensing.

The claimant patent holder in Unwired Planet wanted the defendant implementer to enter into a global licence and sought a determination to that effect. The implementer had infringed the holder’s patents on several occasions, but was only prepared to take a national licence. In April 2017, the court ruled on the full global terms of a FRAND licence between the parties, setting royalty rates applicable for all countries. In June, the court decided that an injunction should be granted against the implementer which would take effect until it entered into the FRAND licence settled by the court.

Supreme Court patent case study The Supreme Court also decided a landmark patent case this year, Actavis UK Ltd v Eli Lilly & Co [2017] UKSC 48, which was a matter with a complex appellate history involving a patent protecting a cancer drug manufactured by a pharmaceutical company. The Supreme Court looked at whether the limited terms and language of the patent nevertheless protected the patent holder against infringement through the use of the drug by other pharmaceutical companies in slightly different chemical conditions. Its interpretation of the European Patent Convention led to the conclusion that there had been infringement of the pharmaceutical company’s patent, not only in this country, but also in various other European countries, despite the chemical conditions being different from the exact terms of the patent claim.

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Judicial-led innovation Innovative judicial-led initiatives are at the core of the ongoing development of the Business and Property Courts. They focus on improving service delivery and the overall user experience as well as reducing the cost and improving the speed of litigation. Recent initiatives include:

The Financial List, a specialist cross-jurisdictional list that launched on 1 October 2015. It draws on the expertise of both the Commercial Court and the Chancery Division judges in tackling the most complex and market determining financial cases.

It introduced, for the first time anywhere in the world, a market test case procedure. This enables parties to submit a case for resolution by a judge or judges of the list where there is no live dispute between the parties but there is a point of uncertainty in the law and the financial markets would benefit from a steer from the courts as to how they would come down on the issue at hand.

The Financial List sits within the umbrella of the Business and Property Courts of England and Wales and as of October 2017 cases can be heard in one of the Business and Property Courts centres outside of London if the case warrants it.

Cases heard or in progress in the Financial List in the past 12 months have included those concerning the interpretation of standard form documents or terms in market- wide use, market behaviour, complex financial instruments and derivatives, financial structuring, sovereign debt, duties of trustees, emissions trading, interest rate benchmarks, and Islamic finance.

Overall, the Financial List has had 36 cases since it was established in October 2015. Nine were transferred in from the regular Commercial Court or Chancery Division lists, with the remaining 27 issued directly into the Financial List. Cases have progressed through the List efficiently and effectively, with several cases being settled out of court and judgments handed down in eight cases, some of which have progressed to the Court of Appeal.

Also in the past year, the definition of cases appropriate for the Market Test Scheme has been made coextensive with that of the Financial List, and the pilot has been extended for a further three years. It is thought that the opinions that the court will be able to provide under this scheme may be useful in bringing greater certainty to financial law in the Brexit context and more generally. Financial List case study – Singularis v Daiwa Capital Markets [2017] EWHC 257 (Ch), a case that was heard in the Financial List by Mrs Justice Rose. It is noteworthy because it determined the duties of a bank in identifying fraud within the internal corporate structure of one of its clients, on the basis of the imputation of acts carried out by persons within that company.

Specifically, it decided (1) the scope of a bank’s duty to its customer not to pay money away on the instruction of the person authorised by the customer to operate the account when the bank has notice that that person is misappropriating the customer’s money; (2) when the fraudulent activity of that customer’s director can be attributed to the customer so as to defeat the customer’s claim against the bank, and (3) an application of the illegality test laid down by the Supreme Court just recently in July 2016 in Patel v Mirza [2016] UKSC 42.

29 UK legal services 2017

Judgment was handed down in February 2017 and the case is now progressing to the Court of Appeal. It will be heard in the Civil Division in December 2017, by a panel of specialist judges.

Reducing the cost and burden of litigation through reforms to disclosure is a key area of focus. Providing disclosure in commercial cases is frequently cited as the most expensive and time consuming aspect of conducting civil litigation in England and Wales. In response to feedback from the GC100 (the body representing general counsel and company secretaries working in FTSE 100 companies) and legal practitioners, that despite amendments to the Civil Procedure Rules in 2013, the burden and cost of disclosure continues to be unacceptably high, a Working Group on Disclosure chaired by Lady Justice Gloster was established in June 2016 to work with practitioners and court users to devise innovative new procedures to address these concerns.

Subject to the outcome of a formal consultation and approval from the Civil Procedure Rules Committee, the proposals will provide a mandatory framework for achieving the following:

• Introducing a requirement to give Basic Disclosure at the pleadings stage, by which parties may only be required to disclose documents on which they rely.

• The ability for parties to then apply for Extended Disclosure, which may involve a range of different orders on disclosure being made by the Court, to encourage a move away from standard disclosure as the default order in practice.

• Bringing about a change in party behaviour by imposing express duties (backed by sanctions) on litigants and their advisers to co-operate and engage constructively in relation to disclosure, particularly with regards to the processing and review of electronic data.

• Providing for the mandatory completion of a Disclosure Review Document (DRD), which the parties will use to structure and record their discussions about disclosure. The DRD will replace the current Electronic Disclosure Questionnaire and will focus, in particular, on the use of technology assisted review software. It has been developed in close consultation with seven law firms, two banks and representatives from the government Legal Department.

These proposals are intended to signal and provide for a modern and efficient new approach to disclosure, and are an integral part of the strategy of the Business and Property Courts to remain attractive to domestic and international court users alike.

The Standing International Forum of Commercial Courts was inaugurated at the Rolls Building in London in May 2017 during a two-day meeting of commercial judges from around the world. Of a total of 22 jurisdictions present at the forum, 16 were represented by their Chief Justices. The forum explored how judgments of commercial courts could most effectively be enforced abroad, and discussed best practices for the running of hearings in the commercial law context.

It also considered how best to interact with arbitral bodies, which require assistance from commercial courts with the enforcement of their awards and to which commercial courts are complementary in situations where parties cannot agree on which dispute resolution mechanism to use. England and Wales were designated to provide the secretariat for the forum, which will take place annually, with the next forum taking place in New York in 2018.

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Alternative dispute resolution

Alternative dispute resolution (ADR) refers to ways of resolving disputes between parties that don’t involve going to court. Arbitration is a form of dispute resolution that allows contracting parties to choose a neutral venue where their disputes are settled. The UK is a global leader in international and commercial arbitrations. More of these take place in London, under English law, than in any other city in the world. Within the UK, Scotland provides an attractive alternative forum for dispute resolution.

London and the UK are well positioned internationally in the conduct of commercial arbitration:

• London is the preferred seat of arbitration, favoured by 47% of respondents in the 2015 International Arbitration Survey undertaken by Queen Mary University of London and White & Case (latest available data). It compares with 38% favouring Paris, the next most-popular seat (Figure 13). The primary factor driving the selection of a seat is its reputation and recognition. The survey also found that 90% of respondents prefer international arbitration as their dispute resolution mechanism, either as a stand-alone method (56%) or together with other forms of ADR (34%).13

• The Business and Property Courts play a key role in sustaining the UK’s reputation as the first choice for business law, including arbitration. In 2016, 27% of claims commenced in the Commercial Court related to arbitration. In the year to end of September 2017, this rose to 30%, clearly illustrating the value of the courts in underpinning arbitration enforcement.

Figure 13: Preferred seat of arbitration, 2015 Source: Queen Mary University of London/White & Case International Arbitration Survey Note: The question posted to survey respondents was: “What are your or your organisation’s three preferred seats (if any)?”

London

Paris

Hong Kong

Singapore

Geneva

New York

Stockholm

0 10% 20% 30% 40% 50%

13 Queen Mary University of London and White & Case, ‘2015 International Arbitration Survey: Improvements and Innovations in International Arbitration’, (2015), p.12., available at: http://www.arbitration.qmul.ac.uk/docs/164761.pdf 31 UK legal services 2017

Parties have a variety of requirements in choosing the jurisdiction used to resolve the dispute and the location of the arbitration or mediation. Such requirements, which are met in London and the UK, may include:

• Arbitration and Alternative Dispute Resolution (ADR) legal framework provided by the Arbitration Act 1996 and the Arbitration (Scotland) Act 2010 under which an award is enforceable, with limited grounds for challenging the award.

• Flexibility in procedures developed by dispute resolution organisations.

• Neutral forum for resolving disputes between international parties.

• Confidentiality of proceedings.

• Party autonomy in language and law.

• Depth of expertise in larger complex cases with appreciation of the commercial issues involved. Expertise in the UK may be derived from specialist dispute resolution organisations, individual arbitrators and mediators, expert witnesses as well as international law firms and barristers that provide specialist advice and advocacy.

• A well respected judiciary and appropriately resourced courts system is a vital support mechanism for a well-functioning arbitration and ADR sector.

• Availability of suitable venues and supporting services, such as interpreters, translators, stenographers and IT services.

ADR services in the UK continue to be provided across a range of activities and sectors at a domestic and international level. The total number of commercial and civil disputes resolved through arbitration, mediation and adjudication totalled around 26,000 in 2015. Over 21,000 of these were domestic and around 5,000 mostly international (Figure 14).

According to data from the Law Society of England and Wales, over 686 solicitors firms in the UK specialise in alternative dispute resolution (specialist firms with over 30% of revenue from that area).14

14 The Law Society of England and Wales, ‘The future of legal services’, (January 2016), p.22. 32 www.thecityuk.com

Figure 14: Arbitrations, mediations and adjudications in the UK15 16 17

Number of referrals, appointments or cases submitted

2007 2009 2011 2013 2015 2016

Mostly international

London Maritime Arbitrators’ Association 2,673 4,445 3,555 2,966 3,160 2,994

London Court of International Arbitration 137 285 237 301 332 303

Lloyd’s Open Form 107 122 106 61 50 48

ICC Int. Court of Arbitration (UK seated) 58 73 62 70 70 65

Centre for Effective Dispute Resolution 300 400 600 691 838 1,042

Ad hoc arbitrations16 300 300 300 300 300 300

Total international 3,575 5,625 4,860 4,389 4,765 4,752

Mostly UK domestic

Royal Institute of Chartered Surveyors 9,112 8,917 5,004 4,462 4,512 5,100

Centre for Effective Dispute Resolution 2,500 3,500 4,000 4,500 4,792 7,401

Adjudication Society 1,506 1,730 1,064 1,282 1,500 1,511

Other mediations17 2,281 4,668 6,440 6,653 6,574 6,608

Trade associations18 500 500 500 500 500 500

Total domestic 15,899 19,315 17,008 17,397 17,878 21,120

Total 19,474 24,940 21,868 21,786 22,643 25,872

Main ADR organisations and services in London and the rest of the UK include:

London Court of International Arbitration (LCIA): The LCIA received 303 requests for arbitration in 2016 and eight requests for mediation or another form of alternative dispute resolution.

International Chamber of Commerce (ICC): International Court of Arbitration 65 arbitration tribunals were administered in London in 2016 by the ICC, second only to Paris, where the ICC is headquartered.

15 TheCityUK estimates 16 Ibid 17 Ibid 33 UK legal services 2017

London Maritime Arbitrators Association (LMAA): The LMAA has grown organically from a small association of members set up in 1960 to serve the local London maritime broking community. It is now the leading arbitration body used by maritime communities worldwide, notably in China, Korea, Greece and the UK, among many others. It is estimated that around 30% of the LMAA’s caseload now involves at least one Chinese party. The LMAA now has 750 members in 40 countries and serves users of LMAA arbitration around the world. Over the 20 years since the Association has collected statistics, its arbitrating members have consistently received in the region of 3,000 new appointments per year. LMAA arbitration remains the forum of choice for disputes across the maritime spectrum and usage is expanding, increasingly being seen, for example, in related industry areas such as the commodities world. Together with the other sectors of international arbitration dealt with in London, the LMAA assists London in maintaining its position of the leading centre worldwide for international arbitration.

Lloyd’s Open Form Lloyd’s Form of Salvage Agreement (LOF): The LOF has been in use for over a hundred years, providing a framework for determining the amount of remuneration to be awarded to salvors for their services in saving property at sea and minimising or preventing damage to the environment. Originating in the late 1800s, it is today the most widely used international salvage agreement of its kind. In shipping there were nearly 50 maritime arbitrations made under LOF in 2016. In about a half of those cases arbitration is invoked and an arbitrator appointed; the rest are settled without recourse to arbitration.

The Centre for Effective Dispute Resolution (CEDR): CEDR handled over 8,000 disputes in 2016. It has continued to see a rise in cases arising from dispute resolution clauses in contracts where it is the named service provider and also from arrangements from trade bodies, regulators and parts of Government that will automatically refer disputes to CEDR, often as a final stage in a dispute resolution process.

The Royal Institute of Chartered Surveyors: In 2016 resolvers were appointed to 5,100 disputes.

The Adjudication Society: 1,511 disputes were reported in 2015/16 to the Adjudication Society, which promotes the use of adjudication in the resolution of construction disputes. Other bodies, including CEDR, CIArb, Royal Institute of Chartered Surveyors and the Royal Institute of British Architects, nominate adjudicators to resolve disputes in construction and engineering.

The Scottish Arbitration Centre: The Centre promotes domestic and international arbitration under the Arbitration (Scotland) Act 2010 and Scotland as a place to resolve disputes. The Centre has an independent arbitral appointments committee, which can make appointments in ad hoc cases and its arbitration suites provide an attractive forum for dispute resolution. It is also home to the International Centre for Energy Arbitration (ICEA), an energy arbitration project between the Centre and the Centre for Energy, Petroleum and Mineral Law and Policy (CEPMLP) at the University of Dundee, which is focused on research and the development of dispute systems for the energy sector. In May 2016, the Centre won its bid for Edinburgh to host the International Council for Commercial Arbitration (ICCA) Congress in 2020, the world’s largest and most prestigious conference devoted to international arbitration.

34 www.thecityuk.com Contribution to the UK economy

Legal services have wide-ranging economic significance through their close connection with the general institutional architecture of society. Institutions that are stable and credible facilitate economic development and lead to higher levels of economic activity. The quality of legal institutions is also linked to financial sector development, an area which is critical to economic growth.

The direct contribution of the legal profession to the UK economy can be measured in terms of GVA, employment and net exports.

GVA: The output of UK legal services in terms of value added to the economy was £24.1bn, or 1.5%, of total GVA in 2015. This includes legal representation of one party’s interests against another party in civil and criminal cases, whether or not it occurs in the courts. It also includes advice and representation in a range of areas, from corporate transactions of various sorts to labour law, patents, trademarks and copyright as well as activities of arbitrators, notaries and bailiffs. This also includes retail work (including conveyancing and wills), and social welfare work (including immigration, discrimination and human rights). The main exclusions on the Office for National Statistics (ONS) definition are the activities of the law courts, and lawyers employed by non-legal firms whose activity would be credited to the sector of their employer.18

Employment: The number of people employed in legal services in the UK is around 311,000, according to data from the Business Register and Employment Survey. This figure includes self-employment.

Around two thirds of these jobs are located outside London. Solicitors account for 60.5% of this, with barristers and judges generating 16%. Other legal activities, including patent and copyright agents, account for the remaining 23.5% (Figure 15).

Figure 15: Employment in UK legal services, percentage share, Q2 2017 Source: Office for National Statistics

23.5%

60.5% 16%

Solicitors Barristers and judges Other legal activities (including patent and copyright agents)

18 TheCityUK calculations based on Office for National Statistics, ‘UK Non-Financial Business Economy (Annual Business Survey): Sections A-S’, (09 June 2017), available at: https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/datasets/ uknonfinancialbusinesseconomyannualbusinesssurveysectionsas 35 UK legal services 2017

Solicitors in private practice include those employed by law firms and independent practitioners. The long-term trend is one of growth for non-private practice practitioners, particularly for in-house practitioners employed in the private sector. In part, this has seen some in-house legal teams take on more routine legal work as they are able to perform this more cost-effectively than by commissioning external legal advisors.

Data from the Law Society of England and Wales shows that 22.8% of solicitors attached to an organisation, some 26,894, worked in the in-house sector in 2016.19 This was up from 17% a decade earlier. The vast majority of in-house solicitors (67%) work in the private sector, with many concentrated in the financial services sector.

The number of solicitors employed in private practice in law firms in England and Wales totalled over 91,166 in 2016, roughly unchanged from a year earlier (Figure 16). This figure does not include lawyers employed in the UK who are qualified in another jurisdiction, principally US lawyers.

Figure 16: Practising certificate holders in England and Wales20 Source: The Law Society of England and Wales, Annual Statistics Report

Number of solicitors in England and Wales

Total non-private Total private practice Total practice

2006 80,575 23,968 104,543

2011 87,973 33,960 121,933

2012 87,768 41,010 128,778

2013 86,840 40,836 127,676

2014 90,306 40,076 130,382

2015 91,062 42,305 133,367

2016 91,166 45,010 136,176

Law firms in Scotland and Northern Ireland employ 11,000 and around 2,600 solicitors respectively.

19 The Law Society of England and Wales, ‘Trends in the solicitors’ profession, Annual Statistics Report 2016’, (June 2017), p.3. 20 The total number of solicitors in England and Wales in non-private practice includes those working in-house, employed in non-UK law firms, locums as well as those not attached to an organisation. 36 www.thecityuk.com

Traineeships and graduate intake According to the Law Society of England and Wales, trainee solicitor registrations totalled 5,728 in the 12 months to 31 July 2016.21 This was up 5% on the same period in the previous year. The latest The Times annual rankings of the 100 largest graduate employers in the UK show that law firms’ graduate intake will total around 900 in aggregate in 2018. There will be 13 law firms listed amongst the largest 100 UK graduate recruiters list in 2017/18.

Figure 17: Number of training contracts offered by legal firms in the UK, 2017/18 Source: Legal Cheek

Company Nunber of contracts

Linklaters 110

Allen & Overy 90

Clifford Chance 80

Freshfields Bruckhaus Deringer 80

Slaughter and May 80

Pinsent Masons 72

DLA Piper 70

CMS 65

Herbert Smith Freehills 60

Hogan Lovells 60

Clyde & Co 50

Eversheds Sutherland 50

White & Case 50

Ashurst 45

Irwin Mitchell 45

Norton Rose Fulbright 45

Berwin Leighton Paisner 40

DWF 40

Addleshaw Goddard 37

Baker McKenzie 33

Barristers and advocates The number of barristers in independent practice in England and Wales totalled 16,045 in 2016.22 In Scotland there are around 460 advocates, and in Northern Ireland, over 650 barristers.

Number of firms Based on ONS figures, the legal services market in the UK comprised around 32,500 firms in 2016, with 29,685 in England and Wales, 1,805 in Scotland and 1,015 in Northern Ireland.23 In England and Wales, solicitors form the largest single group of providers (around 35% of all entities). These firms compete with a range of other legal professionals to differing extents. Within reserved work, these include barristers, notaries, legal executives, law costs draftsmen, trade mark attorneys, licensed conveyancers and patent attorneys; within unreserved work, these include the wider legal services market delivered by unregulated providers such as will writers.

21 The Law Society of England and Wales, ‘Trends in the solicitors’ profession, Annual Statistics Report 2016’, (June 2017), p.44. 22 Bar Standards Board, ‘Practising barrister statistics’, (12 September 2017), available at: https://www.barstandardsboard.org.uk/ media-centre/research-and-statistics/statistics/practising-barrister-statistics/ 23 Office for National Statistics, ‘UK Business – Activity, Size and Location’, (04 October 2016), available at: https://www.ons.gov.uk/ businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation 37 UK legal services 2017

Exports of legal services Legal services consistently generate a trade surplus, helping to offset the UK’s trade in goods deficit. The sector provides vital support to UK and multinational firms across all sectors, with their services being particularly critical when developing a presence in new international markets and structuring multi- jurisdiction projects.

Legal services exports are generated from a number of sources: law firms, including those originating in the UK and international firms with an office in the UK; barristers and advocates providing services to foreign clients; and legal services provided by lawyers employed by other organisations, which are not themselves legal entities:

• Exports from solicitors firms were estimated at £4,752m in 2016.

• Exports generated by barristers totalled £131m in 2016.

• Exports generated from lawyers in other organisations totalled around £48m in 2016, of which a large proportion was due to activities of patent agents. The remainder is largely attributable to internal billings related to legal services provided by companies to their overseas subsidiaries.24

Taking account of imports (mainly related to billings of UK businesses from law firms based overseas) of £953m, net exports of UK legal services stood at £3,978m in 2016 (Figure 18).25

Figure 18: Net exports of UK legal services (£m) Source: Office for National Statistics

Exports Imports Net exports

2005 2,284 429 1,855

2006 2,702 534 2,168

2007 3,076 533 2,543

2008 3,471 659 2,812

2009 3,590 816 2,774

2010 3,703 777 2,926

2011 4,072 713 3,359

2012 3,925 799 3,126

2013 4,206 845 3,361

2014 4,824 995 3,829

2015 5,098 741 4,357

2016 4,931 953 3,978

24 Office for National Statistics, ‘UK Balance of Payments - The Pink Book time series dataset’, (31 October 2017), available at: https:// www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/datasets/pinkbook 25 Ibid. 38 www.thecityuk.com The UK’s position internationally

Research reports examining the value of the global legal services market indicate a range from around $580bn to $640bn in 2016.26,27 The UK accounts for around 7% of the global market for legal services in terms of fee revenue. It is by far the largest market in Europe, accounting for over a fifth of its revenue. While London remains the headquarters of many international law firms and the principal hub for their commercial and financial services, most larger firms have developed a global network.

The revenue of the world’s largest 100 law firms (ranked by revenue) grew by 3% in 2016/17 to just under $99bn, with this rate of growth being recorded across firms ranked 1-25, 26-50 and 51-100. In comparison to recent years, there was little increase in revenue due to merger activity, meaning that the growth was in the main organic. At the current rate of growth, the world’s 100 largest law firms will break through the $100bn revenue barrier in 2017/18 (Figure 19).28 The total revenue for 2017/18 is also likely to be boosted by merger-related increase on the back of major deals that took place 2017; for example, Eversheds Sutherland which saw UK-based firm Eversheds combine with US-based firm Sutherland Asbill & Brennan.

Figure 19: Revenue and gross profit of the world’s largest 100 law firms (ranked by revenue) Source: Legal Business

120

100

80

60

40

20

0

2012/13 2013/14 2014/15 2015/16 2016/17

Revenue Gross profit

When considering the composition of the top 100, it is worth noting that law firms that account in sterling and euros have suffered on account of exchange-rate movements in terms of revenues being reported in US dollars, despite the fact that many have recorded positive growth in their own currency. For example, for the first time there are no independent European (non-UK) firms in the top 100.

The geographical distribution of lawyers in the top 100 firms shows that 58% are located in the US, followed by the UK 14%, Europe (excluding UK) 13%, Asia (excluding Middle East) 11%, Latin America and Canada 2% and the Middle East the remaining 2%. Cities where international law firms are most likely to establish an office include London, New York, Brussels, Tokyo, Hong Kong, Singapore and Paris.

26 Cision PR Newswire, ‘Legal Services Global Industry Guide 2017’, (10 May 2017), available at: http://www.prnewswire.com/news- releases/legal-services-global-industry-guide-2017-300455465.html 27 TheCityUK calculation based on Cision PR Newswire, ‘Legal Services Market Global Market Report 2017’, (12 January 2017), available at: http://www.prnewswire.com/news-releases/legal-services-market-global-market-report-2017-300390461.html 28 Legal Business, ‘The Global 100 2017’, (11 July 2017), available at: http://www.legalbusiness.co.uk/index.php/analysis/10272-the- global-100-2017 39 UK legal services 2017

Research from TheCityUK’s Independent Economists Group notes that economic liberalisation in developing countries and geopolitical factors “will provide growing opportunities for financial services companies operating in emerging markets, particularly in Asia”, and that “the UK’s role as a leading international financial centre places it in a good position to lead in areas such as offshore renminbi trading, infrastructure financing and provision of services and advisory work for emerging market corporates and sovereigns”.29

Data from the Law Society of England and Wales underscores the significant value of financial services practice areas to UK-based law firms.30 It is therefore anticipated that UK-based law firms and legal practitioners will be well placed to offer a range of enabling legal services in these areas of financial services as emerging market economies continue to evolve.

Figure 20: Distribution of solicitors overseas, 2016 Source: The Law Society of England and Wales

Number of solicitors % share

Hong Kong 955 14%

United Arab Emirates 942 14%

Singapore 721 10%

US 448 6%

Channel Islands 391 6%

Germany 292 4%

Australia 275 4%

France 271 4%

Switzerland 256 4%

Belgium 159 2%

Other 2,186 32%

Total 6,896 100%

These factors are in part driving UK-based law firms to expand into emerging markets, although this is subject to market access conditions. As the data from Jomati MergerLine and Altman Weil Inc. illustrates, the growth of law firm mergers continues apace.31, 32 This enables firms, subject to market access conditions, to grow their emerging market presence and, in the case of international and global firms, to build scale to spread commercial risk across a range of jurisdictions. This also allows firms to better service multi-jurisdictional matters, which are an increasingly significant component of leading firms’ revenues. For example, Allen & Overy reports that around 30% of their revenue is derived from matters involving five or more countries and over 70% from matters involving two or more countries.33

29 TheCityUK, Emerging markets, financial volatility, and financial and related professional services (November 2016), available at: https://www.thecityuk.com/assets/2016/Reports-PDF/IEG-Emerging-markets-financial-volatility-and-opportunities-for-UK-financial- and-related-professional-services.pdf 30 The Law Society of England and Wales, ‘City Legal Index, Data up to end Jun 2017’, (2017), p.16. 31 Altman Weil, Inc., ‘US Law Firm Merger Market Continues to Accelerate’, (2017), available at: http://www.altmanweil.com/index. cfm/fa/r.resource_detail/oid/A73F1BDD-46DE-42B9-9B3C-BA1BD93145DB/resource/US_Law_Firm_Merger_Market_Continues_to_ Accelerate.cfm 32 Jomati Consultants LLP, ‘UK Law Firm Mergers’, (2011-2017), available at: http://jomati.com/uk-mergers 33 Legal Business, ‘Global 100’, (July 2017), available at https://www.legalbusiness.co.uk/ 40 www.thecityuk.com

In addition, barristers’ chambers have also begun to establish in emerging dispute resolutions centres, with permanent presences in Singapore, Hong Kong, Abu Dhabi, New York, Doha and Geneva.

At a market-specific level, both law firms and barristers’ chambers are considering future growth areas and implementing talent mobility and attraction strategies to ensure they can meet their clients’ demands.

Large law firms from Asia-Pacific continue to create a meaningful presence. The top 20 firms in the region employ 14,343 lawyers, including over 7,700 from firms headquartered outside the region. In countries that have more protectionist rules in place, foreign law firms have formed partnerships or strategic alliances with local firms as a way of gaining an entry point. The liberalisation of the legal services market globally should contribute to further globalisation of the sector.

The number of legal professionals worldwide totalled around 6.3m in 2016.34 The number of lawyers employed by the largest 100 law firms increased by 1.8% during 2016/17 to a record 125,000 (Figure 21). The largest 15 global firms accounted for more than half of fee earners from the largest 50 firms, slightly down on the previous year (Figure 22).

Figure 21: Headcount of the world’s largest 100 law firms Source: Legal Business

128,000 7.0

126,000 6.0 124,000

122,000 5.0 120,000 4.0 118,000

116,000 3.0 114,000

112,000 2.0

110,000 1.0 108,000

106,000 0.0

2012/13 2013/14 2014/15 2015/16 2016/17

Total lawyers Total lawyers, % chg, y-o-y

34 Cision PR Newswire, ‘Legal Services Global Industry Guide 2017’, (10 May 2017), available at: http://www.prnewswire.com/news- releases/legal-services-global-industry-guide-2017-300455465.html 41 UK legal services 2017

Figure 22: Concentration of legal services by number of fee earners, and percentage share of Top 50 global law firms Source: TheCityUK calculations based on Legal Business data

100 Top 5

80 Next 10 Next 35

60

40

20

0 2007/2008 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017

Dentons had the most lawyers worldwide (7,445 in 2016/2017), followed by Baker McKenzie and DLA Piper (Figure 23). Latham & Watkins held the top spot in terms of gross revenue (with $2,823m), ahead of Kirkland & Ellis ($2,651m) and Baker McKenzie ($2,620m) (Figure 25).

Figure 23: Largest law firms by number of lawyers, 2016/17 Source: Legal Business

Location Number of lawyers

Dentons International 7,445

Baker McKenzie International 4,582

DLA Piper International 4,141

Norton Rose Fulbright International 3,505

CMS International 3,007

Clifford Chance International 2,999

Linklaters International 2,706

Allen & Overy International 2,697

Hogan Lovells International 2,609

Jones Day National (US) 2,539

Herbert Smith Freehills International 2,509

King & Wood Mallesons Hong Kong 2,397

Latham & Watkins National (US) 2,352

Freshfields Bruckhaus Deringer International 2,191

White & Case International 2,027

42 www.thecityuk.com

The majority of firms among the Global 100 are from the US. Collectively, US firms accounted for 65.7% of the Global 100 fee revenue. The prevalence of US firms in the rankings is due to more than currency-related impacts on non-US firms; it is also a reflection of the size of the US economy and the fact that it is the most litigious country in the world. UK-based firms continue to feature prominently in the rankings:

• Five of the largest 15 global law firms in terms of the number of lawyers had their main base of operations in the UK in 2016/17.

• UK-based firms held three of the top ten places based on revenue. Clifford Chance was the largest UK-based law firm on this measure, followed by Allen & Overy and Linklaters.35

The popularity of English law is an important factor contributing to the strong global position of UK-based law firms. In international commercial transactions, contracting parties are free to enter a clause into their contract which enables them to choose law from any jurisdiction they see fit as the governing law which will determine the outcome of any disputes which arise over contractual obligations.

Many contracting parties favour English law over that of other jurisdictions. It is the most widely-used legal system in the world, covering 27% of the world’s 320 legal jurisdictions (Figure 24). American common law is by contrast used by around 20% of the world’s population. English law is by some distance the most widely-used foreign law in Asia.

Figure 24: Comparison of global legal systems, 2008 Source: The Law Society of England & Wales; Wood

% share

30

25

20

15

10

5

0 Napoleonic Law Other English American Roman Common Law Common Law Germanic

Jurisdictions

Population

35 Ibid 43 UK legal services 2017

For example, a 2016 survey of 500 commercial law practitioners and in-house counsel conducted by the Singapore Academy of Law found that 48% of respondents identified English law as their preferred choice of governing law in contracts, often in transactions with little or no other link to the UK.36

Figure 25: Largest law firms by gross revenue, 2016/17 Source: Legal Business

Headquarters Gross revenue, $m

Latham & Watkins National (US) 2,823

Kirkland & Ellis Chicago 2,651

Baker McKenzie International 2,620 Skadden, Arps, Slate, Meagher & New York 2,495 Flom DLA Piper International 2,470

Dentons International 2,205

Clifford Chance International 2,088

Allen & Overy International 2,059

Jones Day National (US) 1,977

Linklaters International 1,950

Sidley Austin Chicago 1,928

Hogan Lovells International 1,925

Morgan, Lewis & Bockius National (US) 1,860

Freshfields Bruckhaus Deringer International 1,803

Norton Rose Fulbright International 1,686

White & Case International 1,631

Gibson, Dunn & Crutcher Los Angeles 1,606

Ropes & Gray Boston 1,486

Greenberg Traurig National (US) 1,378

Sullivan & Cromwell New York 1,360

Simpson Thacher & Bartlett New York 1,302

Cleary Gottlieb Steen & Hamilton New York 1,272

Weil, Gotshal & Manges New York 1,267

Mayer Brown International 1,260

Herbert Smith Freehills International 1,248 Paul, Weiss, Rifkind, New York 1,222 Wharton & Garrison Quinn Emanuel Urquhart & Sullivan Los Angeles 1,204

Davis Polk & Wardwell New York 1,180

K&L Gates National (US) 1,179

36 Singapore Academy of Law, ‘Study on Governing Law and Jurisdictional Choices in Cross-Border Transactions’, (January 2016), available at http://www.ciarb.org.sg/wp-content/uploads/2016/02/SAL_Singapore_Law_Survey.pdf 44 www.thecityuk.com

Headquarters Gross revenue, $m

Wilmer Cutler Pickering Hale and Dorr National (US) 1,131

CMS International 1,106

Reed Smith International 1,075

Paul Hastings National (US) 1,075

King & Spalding Atlanta 1,060

Squire Patton Boggs International 983

Akin Gump Strauss Hauer & Feld National (US) 980

Cooley San Francisco 974

Morrison & Foerster San Francisco 945

Orrick, Herrington & Sutcliffe San Francisco 929

Goodwin Procter Boston 912

Shearman & Sterling New York 912

Dechert National (US) 912

McDermott Will & Emery Chicago 909

Milbank, Tweed, Hadley & McCloy New York 856

Proskauer Rose New York 852

Baker Botts Houston 847

Covington & Burling Washington DC 839

Winston & Strawn Chicago 823

King & Wood Mallesons Hong Kong 806

Holland & Knight National (US) 803

45 UK legal services 2017 Sources of Information

Data comparing law firms is mainly based on gross fee earnings and the number of lawyers, fee earners and other support staff employed by each firm, which includes an indication of the number of lawyers employed overseas. These figures are published in league tables including the Legal Business 100 and the Legal Business Global 100.

Law firms in England and Wales provide certain information to the Law Society Group. Some of this data is aggregated and made available for publication in the Law Society of England and Wales Annual Statistics Report. This includes a variety of data on employment, according to, for example, type of employer (including where solicitors are not employed in private practice), size of firm and revenue. The Annual Statistics Report also includes a range of other information on, for example, numbers of law graduates, trainees and newly qualified solicitors. Links to sources of information:

Adjudication Society The Law Society of Scotland www.adjudication.org www.lawscot.org.uk Advocate General for Scotland The Lawyer www.oag.gov.uk www.thelawyer.co.uk Bar Council Legal Business www.barcouncil.org.uk www.legalbusiness.co.uk BTG Financial Consulting Legal Services Board www.btgfc.com www.legalservicesboard.org.uk Centre for Effective Dispute Resolution Legal Week www.cedr.com www.legalweek.com Chambers and Partners Lloyd’s Open Form www.chambersandpartners.com www.lloyds.com/the-market/tools-and- resources/lloyds-agency-department/ Cision PR Newswire salvage-arbitration-branch/lloyds-open- www.prnewswire.com form-lof Commercial Bar Association London Court of International Arbitration www.combar.com www.lcia.org International Bar Association London Maritime Arbitrators Association www.ibanet.org www.lmaa.london International Chamber of Commerce Ministry of Justice iccwbo.org www.justice.gov.uk The Journal of the Law Society of Scotland Northern Ireland Assembly www.journalonline.co.uk www.niassembly.gov.uk The Faculty of Advocates Office for National Statistics www.advocates.org.uk ons.gov.uk Law Gazette Royal Institute of Chartered Surveyors www.lawgazette.co.uk www.rics.org/uk The Law Society of England and Wales Scottish Arbitration Centre www.lawsociety.org.uk www.scottisharbitrationcentre.org The Law Society of Northern Ireland The Times Top 100 Graduate Employers www.lawsoc-ni.org www.top100graduateemployers.com 46

UK legal services 2017

TheCityUK Research: For content enquiries, further information about our work or to comment on our programme/reports, please contact:

Anjalika Bardalai, Chief Economist and Head of Research [email protected] +44 (0)20 3696 0111

Mingjie Tang, CFA, Economic Research Analyst [email protected] +44 (0)20 3696 0149

Philip Jones, Head, Africa, Middle East & Legal Services [email protected] +44 (0)20 3696 0126

TheCityUK, Salisbury House, Finsbury Circus, London EC2M 5QQ www.thecityuk.com

MEMBERSHIP To find out more about TheCityUK and the benefits of membership visit www.thecityuk.com or email us at [email protected]

This report is based upon material in TheCityUK’s possession or supplied to us from reputable sources, which we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any guarantee that factual errors may not have occurred. Neither TheCityUK nor any officer or employee thereof accepts any liability or responsibility for any direct or indirect damage, consequential or other loss suffered by reason of inaccuracy or incorrectness. This publication is provided to you for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument, or as the provision of financial advice. Copyright protection exists in this publication and it may not be produced or published in any other format by any person, for any purpose without the prior permission of the original data owner/publisher and/or TheCityUK. © Copyright November 2017

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