Sharing the pain: another year of tough decisions

The theme for 2010, then, is standing by your clients. Our cover feature about the rip-roaring tale that is the record-breaking $100bn claim by the majority shareholders of Yukos against the Russian Federation is a case in point. GML, which was Mikhail Khodorkovsky’s holding company and is bringing the arbitration, was turned away by many of its favoured law firms in the run-up to the dispute as they opted out of a battle with the Russian state. But Shearman & Sterling willingly accepted the role – probably forfeiting the ability to ever open in Moscow – and can now look forward to reaping the benefits. And some benefits they are: fees of around $10m a year are not to be sniffed at in the current economic climes, and demonstrate the gains to be made by putting your head above the parapet.

Such sticky disputes look set to be a feature of the years ahead, and tough decisions will need to be taken by law firm managers, particularly as the prospect of bank-on-bank litigation looms large. Should the counter-cyclical uptick in contentious work materialise, it is likely to only further the cause of legal process outsourcing, as firms face up to increasing document review workloads and decreasing margins. Steve Hall’s feature on the head of steam building up behind the outsourcing of legal services illustrates the way client demand is now pushing the agenda to such an extent that even Slaughter and May can no longer avoid the inevitable. In The Client we interview Leah Cooper, Rio Tinto’s managing attorney, who has led the debate by hiring her own team of lawyers in India to deliver cost savings of $14m in just seven months.

Finally, our round table discussion with some of the country’s top lawyers serves to hammer home the new reality. Freshfields Bruckhaus Deringer partner Tim Jones tells LB: ‘We budgeted for a reduction in overall demand and a reduction in pricing this year, and that’s what we have seen.’ Everyone is feeling the pinch, and only those that are brave enough to move with the times and share their clients’ pain will continue to prosper.