Monday, 06 Feb 2012
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Doing business in Germany
06 February 2009
Although Germany is one of the world's largest and most sophisticated economies, lawyers' fees lag behind London and New York. With the influx of foreign law firms, noticeably those from the US and UK, charge-out rates are being hiked up to fall in line with global firms' profit expectations. That said, with so many firms competing for business in Germany it naturally keeps fees in check.
German firms tend to operate a low gearing structure with fewer associates to every partner. This means direct comparisons with the UK are rather unwieldy. In the UK, partners take a management role on instructions dealing with the more complex elements of the instruction and delegating more routine aspects to associates or assistants. In Germany, partners will handle much more of the mandate and will often work alongside one assistant. This means partners in Germany are unable to charge the same premiums as UK-based contemporaries.
German firms tend to operate a low gearing structure with fewer associates to every partner. This means direct comparisons with the UK are rather unwieldy. In the UK, partners take a management role on instructions dealing with the more complex elements of the instruction and delegating more routine aspects to associates or assistants. In Germany, partners will handle much more of the mandate and will often work alongside one assistant. This means partners in Germany are unable to charge the same premiums as UK-based contemporaries.
Furthermore, a ruling last year leaves law firms in Germany a step closer to being able to charge success fees under some circumstances. The move would allow firms to agree a protion of their fees based on success - but only if a client could not pay by any other means.
Hourly rates for partners at international law firms are now often significantly more than €300 - although in the current economic climate, global firms are reducing rates and generally trying to become more competitive. Local firms generally charge significantly less. Anecdotal evidence from clients suggests that the billing procedure should be negotiated before a firm is instructed. With the advent of competitive pitches and legal panels, law firms will normally set out a fee structure before taking on work.
The German legal profession was until recently driven by personal relationships, but firms' marketing and business development efforts are driving clients to make decisions based not only on the individual but also the reputation of the institution. Individual recognition still plays a significant role. Since the massive influx of foreign law firms at the turn of the century, Germany's legal market has stabilised in the past two years. Much of the turbulence has occurred within firms looking to restructure their partnerships.
Due to the German Government’s reluctance to introduce liberalising employment law reforms, the market has been affected by immense corporate restructurings and some of the country’s largest workforce cuts in post-war history; these trends are intensified by some employers’ outsourcing and closing down of operations.
Hourly rates for partners at international law firms are now often significantly more than €300 - although in the current economic climate, global firms are reducing rates and generally trying to become more competitive. Local firms generally charge significantly less. Anecdotal evidence from clients suggests that the billing procedure should be negotiated before a firm is instructed. With the advent of competitive pitches and legal panels, law firms will normally set out a fee structure before taking on work.
The German legal profession was until recently driven by personal relationships, but firms' marketing and business development efforts are driving clients to make decisions based not only on the individual but also the reputation of the institution. Individual recognition still plays a significant role. Since the massive influx of foreign law firms at the turn of the century, Germany's legal market has stabilised in the past two years. Much of the turbulence has occurred within firms looking to restructure their partnerships.
Due to the German Government’s reluctance to introduce liberalising employment law reforms, the market has been affected by immense corporate restructurings and some of the country’s largest workforce cuts in post-war history; these trends are intensified by some employers’ outsourcing and closing down of operations.
US retail chain Wal-Mart experienced difficulties establishing itself in the German market, after losing litigation related to its attempt to introduce US-style codes of behaviour, including a ban on workplace relationships. In August 2006, the retail enterprise gave up on the German market and sold all of its 85 domestic supermarkets to national retail giant Metro, leaving hundreds of jobs at stake.
