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CCCA_V4No4_ClientRevolution-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 10/27/10 3:19 PM Page 31 You’re the only one for me Feature Is the exclusive arrangement between Tyco and Eversheds the wave of the future? Billing on value Eversheds has been remarkably adept at monopolizing major clients around the world. The question isn’t whether the Famously, in 2007, it struck a £10m deal with Tyco, the engineering conglomerate, to act as billable hour will die.The ques- its sole provider of legal services, excluding major projects such as M&A files. Tyco tion is whether law firms can dropped a remarkable 285 firms with which it had been doing business. continue to price their work in The groundbreaking exclusive deal initially met with skepticism that Eversheds could ways that are entirely divorced handle the workload generated by a company like Tyco. The initial arrangement from clients’ sense of value deliv- included bonus awards targeting diversity, client satisfaction and reduced lit- ered. Alternative fee arrangements igation, and the firm agreed to reduce its legal spend by 20% in year one and are emerging that create a whole 35% in year two. new pricing paradigm. Many of the incentives were later removed, after Eversheds and Tyco “Let’s say I have a commercial renewed the agreement in 2009 but overhauled its terms after a rocky start. In transaction,” says Derbyshire. “It’s exchange, however, Eversheds succeeded in negotiating a significant hike in rev- extremely important to have the deal enue from major M&A and litigation projects, billed at a simple discounted hourly rate. done well and closed as quickly as pos- “It was pretty challenging, and it was pretty well documented that we had a honey- sible, because it’s a significant driver for moon period and then the wheels started to shake a little," said Paul Smith of Eversheds. the growth of the business.Well, alterna- ”The reason for that is that no one had done this before, where we had effectively taken tive fee arrangements, outside of the typ- over the work of 285 other law firms and agreed to do the everyday work, the employ- ical hourly bill, can be deployed.You can ment law, the commercial law, the real estate work, on a fixed fee, covering 29 coun- provide a premium if someone has tries. That was fairly ambitious.” exceeded the milestone, or conversely, if Today, Eversheds carries out legal work for Tyco in 65 different countries. Better the law firm has missed the deadline, then yet, since hitching its wagon to Tyco, the international firm has convinced other fee rebates or fee credits are imposed.” giants, namely Samsung and Akzo Nobel, to adopt a similar partnership model. Litigation files aren’t spared either, no But some issues still remain, such as quality control and potential conflicts of matter how much trial lawyers argue that lit- interest, when dealing exclusively with one firm. “Within a single law firm office, igation cannot be budgeted because of its let alone an entire firm with offices around the world, quality can vary quite a inherent unpredictability. Derbyshire explains lot,” says Daniel Marion, vice-president, general counsel and corporate secre- his approach: “Let’s look at the major mile- tary at Thales Canada Inc., a defence technology company. stones in the litigation, and let’s look at the “If your company is dealing in matters of a sensitive nature and is operating estimated timeline associated with each of in a number of countries around the world, it can be very risky to hand all your those milestones, and then let’s budget an esti- mandates over to the same firm. There are inherent conflicts — not necessar- mated amount for fees against each of those ily between firms, but with our own clients that work with that firm elsewhere milestones. If you’re on track, or you’re ahead of in the world. Everything might be fine in Canada, for example, but there could the milestones, then we track the budget against be issues with a direct competitor in China or Europe.” that accordingly.” And in emerging markets, “the lawyer you know” still goes a long way. Jasmine Karimi, senior corporate counsel with retail support services com- Going global pany Braiform (Spotless Group) in Hong Kong, told the CCCA World Summit An important feature of today’s legal marketplace that while many Western-based global law firms are doing excellent work is the extent to which law firms are competing in the Far East, corporate counsel in Asia remain selective about who globally, with U.K. firms such as Eversheds, they use. Linklaters and CMS Cameron McKenna leading “When it comes to issues in New York or in London, it’s easy and I know the way in adapting to the new order. Firms like who to deal with — I know we’ve got a panel of lawyers,” says Karimi. these have gone out of their way to create innovative, “But in Bangladesh and El Salvador, I’m not going to be able to call upon client-focused services for general counsel, changing the usual external counsel to be my eyes and ears and adviser. We’re the expectations of the corporate counsel market- quiteselectiveaboutwhoweuse,becauseFirmAmighthaverenowned place. (See sidebar.) expertise in certain issues in China, but might not be as strong with cer- If NorthAmerican firms want to compete in that mar- tain issues in Indonesia. And we want reliable expertise.” ket, they’ll have to show they can adapt their service HIVER 2010 CCCA Canadian Corporate Counsel Association 31