Global dispersion brings increased legal complexity, but higher legal costs?

The larger the business the more global it and its legal department become and thus the greater its need for local in-house counsel.  A commenter on my article about benchmarks and matter-management software wrote, as if it were self-evident, that “global law is more expensive than domestic for a ton of reasons.”  This globalization surcharge, he proposed, explains the larger spend numbers at the high-end companies where matter management is more prevalent, even when those legal costs are normalized against higher global revenue.

 

But even if lawyers’ hourly rates are high, the total cost of local legal services may be less expensive than in chronically legislated, litigious and lawyered countries.  Internally and externally, the additional revenue may come at a lower legal expense.

 

Within the department, salaries may be lower for those lawyers based in the country.  As to external costs, one can well suppose that local in-house counsel, familiar with the next-door firms, choose more cost effectively than distant U.S. lawyers.  No high-cost U.S. lawyers who are “international” specialists would have the touch and feel.  They fall back on a familiar U.S. firm with a branch office in the country, and pay the price.  A recent article in Asian Lawyer, Summer 2012, backs this point: in Korea, “international firms are charging 30-50% more than domestic firms.”

 

The familiar benchmark pattern of higher revenue associated with lower legal spending suggests that global growth does not disproportionately drive up spending by the legal department.  Quite the opposite, and perhaps for the reasons suggested.

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