Litigation Reform Across The Pond

Ed. note: This is the latest installment in a series of posts on lateral partner moves from Lateral Link’s team of expert contributors. Today’s post is written by Michael Allen, the Managing Principal of Lateral Link, who focuses exclusively on partner placements with Am Law 200 clients.

A day in the life of an English litigator just got considerably more complex. Lord Justice Jackson’s year-long appraisal of English litigation ended in 2009 and culminated in a set of new rules dubbed the Jackson Reforms. These eponymous reforms are being heralded as revolutionary, yet the full impact of the reforms has yet to be ascertained. While opinion is divided on the impact of these reforms, we have seen a very tangible ripple in the frequency of U.K.-based movement from litigation partners over the last few years.

As you are all aware, the U.S. legal system is based on British Common Law. While many facets of our systems are congruent, litigation financing diverges significantly between the two countries.

Previously, lawyers in England were able to charge a success fee (of up to 100 percent of their standard fee), which they were able to recoup from the losing party. However, since the Jackson Reforms were implemented on April 1, 2013, lawyers of the winning party may no longer recoup these surcharges from the losing party.

“ATE” (after the event) insurance policies are another popular method of mitigating risk in litigation. In England an individual or party might take out an insurance policy to lessen their responsibility in the event that they lose the case. Traditionally, the premiums for this insurance would be deferred until after the judgment and, if victorious, collected from the losing party. The Jackson Reforms now prohibit this method as well.

The news is not all doom and gloom. “DBAs” or damages-based agreements are now allowed in England. The system will be similar to the one already in place in the United States and will allow litigators to receive a percentage of the damages awarded, as long as they do not excessively exceed their usual fee. These percentages will be capped at 50 percent for commercial matters, 35 percent for employment matters, and 25 percent for personal injury matters.

It is likely that English litigation will remain anemic while both attorneys and clients adapt to these changes. Our data reflect this sentiment, as the number of lateral partner moves in a year by litigators has dwindled from 29 to 14 to 2 since 2011 (a 93 percent decrease). While it might be suggested that the number could uptick by the end of the year, in the previous four years, a vast majority of litigation partners moved within the first six months of the calendar year (including 100 percent for 2012).

These reforms come at an extremely tumultuous time for English law in general. Of the top 100 firms in London, about one quarter of them merged last year. The year before that, 21 of the top 100 firms also merged. The Jackson Reforms could serve as an impetus for further mergers in 2013 as firms attempt to compensate for lost revenue in litigation.

Nonetheless, the full extent of these reforms will not be fully felt until the end of the 2015 fiscal year, after the rules of the Jackson Reforms are clarified, the market has time to adjust, and insolvency proceedings are included under the purview of the reforms (starting April 1, 2015). It is difficult to forecast the full impact of these new reforms, but it is clear that these firms are preparing to carry the weight of these new rules to an unknown end.

Disclosure: This series is sponsored by Lateral Link, which is an ATL advertiser.

Lateral Link LLP is one of the largest legal recruiting agencies in the world, with 13 offices in the United States and Asia. Lateral Link has been recognized by the Wall Street Journal, The American Lawyer, the ABA Journal, the Daily Journal, and the National Law Journal for its innovative approach to legal placement. Lateral Link recruiters are former practicing attorneys who have consistently succeeded in placing partners, associates, general and corporate counsel into some of the most reputable law firms and organizations in the world.