In May, The European Lawyer wrote a blog on Orrick Herrington & Sutcliffe’s decision to stop reporting its average profits per equity partner figure to the press. We said at the time: “Historically few [European law firms] have dished out profit figures because of the discrepancy between what top partners earn and what junior partners do. Even so, a move away from profits figures would not have that much of an impact.”
The profits issue cropped up again recently, from another angle, following our story on the UK LLP accounts of Garrigues. The firm was displeased because it does not break down its financial data by office, so focusing on the numbers of just one office does not provide the whole picture.
A fair enough observation but this does not factor in the major aspect of the UK LLP; the detail and disclosure. On a general level, European law firms are not the most open when it comes to financial information. The bulk of them though, including Garrigues, will provide the overall revenue figures for publication in national or Continental law firm turnover tables. When it comes to profits and other more “sensitive” data though, firms get a lot twitchier.
There are even sections of the market that will not provide turnover. A handful of firms will do it begrudgingly or provide “steers” (usually a guesstimate along percentage changes). Practices in Portugal and Austria are notoriously secretive when it comes to such data and stonewall requests for financial information. In Norway, firms are obliged to report their numbers so do so willingly.
The crux of the matter though, and why the London numbers of for Garrigues, Bonelli Erede Pappalardo and Gide Loyrette Nouel are so interesting, is that UK LLPs provide in-depth disclosure of all the juicy information for the first time. It may only be for one office but the fact that it is not just the headline income but a full breakdown is new and interesting.
Yes, turnover is in there but, more importantly, so is profit. Not the profit suggested by the law firm itself but cold, hard gross and operating profits. There is also information on debt obligations, running costs, liabilities and how much the highest paid partner received.
Would European practices provide such firm-wide data willingly? Perhaps some might, although – if experience is anything to go by – most tend to ignore the profit question when quizzed. That is fair enough. They are not obliged to. However, they are if they register their office as a UK LLP.
The scrutiny that a UK LLP leaves law firms open to has become par for the course for the English outfits. They are now comfortable with the transparency that they are obliged to provide and have accepted the change. If a European law firm registers as a UK LLP, it too is open to having the same such inspection of its accounts. Granted, the numbers may only relate to London but it still gives an unprecedented insight into traditionally reserved law firms. English law firms went through exactly the same process from introspective and secretive to full and frank financial disclosure.
While Orrick has decided that profits are no longer the key figure for clients, such information does remain a major factor in recruitment and marketing. Revealing such intimate transparency in public is something new to many Continental firms. Even so, the UK LLP accounts provide an invaluable snapshot into Europe’s premier practices.
Those European law firms thought that have provided a quick glance behind the curtain via their London LLP accounts have shown not only very sturdy figures but proved that they are well-managed, top-quality businesses. And the proof is there in black and white.