Law Firm Network - History of Law Firm Networks

History of Law Firm Networks

There were two distinct and different reasons for networks developing in the legal profession. The first was internationalization which became globalization in the 1990s. Law firms simply needed international connections. The second was expansion of a number of large United States firms to become “national”. Smaller firms or firms with a niche practice required this same expertise in other states. The networks provided them this expertise.

The internationalization of the legal profession began much later than in the accounting profession. There was no real need because, unlike accounting firms which conducted worldwide audits, law firms in each country were able to deal with client matters. This changed in 1949, when Baker & McKenzie began to expand to non-United States markets to assist U.S. clients that were expanding overseas following WWII.

Internationalization was slow to start because the legal profession was much more restrictive than accounting in allowing foreign firms to enter and practice in their countries. There were rules requiring that the names of the partners be present in the name of the firm. The forces of the international community converged in the late 1980s. U.S. and English firms began establishing branches in the primary commercial centers. This new competition in local markets had the immediate effect of forcing local firms to evaluate alternative ways of providing services to their international clients.

The first international networks, called clubs, generally consisted of ten firms in different countries. The typical format was to hold several meetings a year among managing partners, to compare notes on management related issues. They were secretive networks because the members feared losing business from other firms. On the other hand, they would advertise to their clients that they had foreign connections and correspondents. Today the clubs are commonly known as “best friends networks.” Examples today are: (1) Leading Counsel Network and (2) Slaughter & May.

The clubs evolved into networks in the 1980s. The new networks were not as secretive and even published directories, materials and brochures (Interlaw being one of the first examples). The members met annually. Some focused on specific practices, such as litigation, while others were more generic. Because networks were not thought of as strategic models, the membership selection process was not particularly rigorous. This selection process is reflected in today in the networks which have firms with a wide range of sizes i.e. small firms in locations were there are firms that are three and four times the size the country.

Lex Mundi was formed in 1989. It was the first network where each member had to be among the largest and most established firms in a state or country. It was a business that provided members with many alternatives to expand their resources. Lex Mundi is a network organized around strategic objectives, rather than objectives being defined after the network was established. While different from the accounting network, the concept was that of an entity which provided services to members and should also have an established brand. The staff, board, councils and members collaborated to achieve the objectives.

Other networks like TerraLex, Meritas also known as the Commercial Law Affiliates and ij INTERNATIONAL JURISTS, soon followed. These networks were not secret and operated also as businesses. Their stated objective was to create a branded alternative to the large United States and English law firms that had expanded into their countries.

U.S. national networks also developed in the 1980s. The first as ALFA which was a network that focused primarily on insurance litigation. The second was the State Capital Law Firm Group which began as a national network of firms that had government affairs practices. To qualify for membership, the firms needed to have a former governor at the firms. Both of these networks became international, changing their names to State Capital Global Legal Network and to ALFA International.

Law firm networks are here to stay, with more than 170 already in existence. However, networks in the legal profession do not have the same level of respect as is found in the field of accounting. The reason could be that the large New York and London firms were the first to proactively globalize. The networks were simply a reaction to this globalization. Additionally, the large law firms have much larger marketing budgets than networks. Perhaps legal networks remain tarnished because they originated as clubs or even franchises. However, in the light of day, it is now possible to argue that many of the elite law firms are themselves no more than networks. The world is coming full circle.