The Guardian reports that some City Law Firms are getting away with charging £1,000 per hour. Think about that for a moment. Now if your city lawyer was thinking about it for a moment he would have charged you £16.66. There are only two types of people who would pay that for an hour of legal services: those spending other people's money; and fools.
How on earth can someone justify paying £1,000 for an hour of legal service? Well one of the largest client blocs for the large commercial law firms in any country is the state. And so perhaps the late Milton Friedman's famous analysis on spending money could help us explain the 'how on earth' bit.
Milton said, "There are four ways to spend money. You can spend your own money on yourself. When you do that, why you really watch out for what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well then, I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm going to have a good lunch! (Or if you were previously a FAS executive you might have travelled first class across the Atlantic). Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it costs, and I'm not concerned about what I get. All government spending falls into the last category."
So the answer it seems at least in part is that those buying the services don't care what they get or how much it costs because it's not their money. Or perhaps one of the reasons those law firms' offices usually have so much glass is so that they can see you coming.
Either way there is no excuse for paying hourly rates. It simply cannot be denied that hourly rates promote inefficiency. Solicitors are inherently conflicted between their own interest for profit and their clients' interest in concluding a legal instruction on time and on budget. That conflict will continue as long as the hourly rate remains. "The clock" as it's known in the profession is the driver of this. Solicitors bill on the basis of how long they spend on the instructed matter. Not on how effective the advice, strategy or project management is. Just how long they spend. There's no incentive for solicitors who use hourly rates to be efficient. And litigators are the most addicted to the clock. They are terrified of fixing a fee for fear of losing big. If your litigator can't fix a reasonable fee then they probably don't have the requisite experience.
Leman Solicitors was the first law firm in Ireland to introduce fixed fee arrangements for all our services including complex commercial litigation. We were also the first law firm to allow our clients complete access to their electronic file online. And of course everything on our clients' files are stored electronically because we were also Ireland's first paperless office. And that's why business owner/managers and those who demand efficient, value driven advice come to us.
“The hourly rates for a partner at a top London firm now exceed £1,000 – the highest level ever recorded,” the CPS report states. “In nominal terms the top City of London law firms charge almost the same amount per hour as their American legal cousins except that the UK firms charge their clients in sterling. “Those seeking to comply with UK legal procedure are forced to pay extremely high costs to do so – high enough to restrict access to law, particularly for smaller business clients for whom bills can be prohibitive.