Switzerland report: Mutual appreciation

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Clik here to view.At The Lawyer’s recent Global Collaboration Summit, law firms of all sizes expressed the growing strategic importance of referrals within their own firms as well as with other law firms in the region.

Collaboration is especially relevant for European firms, which are experiencing consistent growth in cross-border and referral work.

Constructing valuable relationships in order to preserve a strong pipeline of high-quality work has never been more important. But how firms implement quality checks – whether evaluating each relationship based on their last deal or pre-selecting law firms depending on the nature of the work – can make the difference between success and failure with clients.

In Switzerland, referrals make up a large pipeline of work for firms. As demonstrated in the Thomson Reuters data in this report, the value and volume of outbound cross-border work plummeted in 2013 to 271 total deals worth $10bn (£7bn), and has since remained stable at 338 deals worth a combined $81.3bn in 2014 and 337 deals worth a combined $46.6bn in 2015.

Inbound work increased in 2014 to a total of 153 deals worth $34bn, but last year the number of completed deals dropped to match the 147 deals in 2013. The value of those 147 deals doubled in value collectively last year, worth $12bn compared to $6.8bn in 2013.

The firms shortlisted for Swiss law firm of the year at The Lawyer’s European Awards, which are featured in this report, have invested in their global footprint.

Whether through opening own-offices or collaborating more extensively with both international and European firms, these six firms are taking steps to improve their brand recognition abroad.

Q: How important is collaboration (with other firms) to your firm’s strategy?

Catrina Luchsinger Gaehwiler, managing partner, Froriep: Collaboration with foreign firms is crucial for Froriep. An exceptionally high share of Froriep’s clients are multinational companies with a need for multi-jurisdictional advice. Being an independent firm, Froriep maintains a large informal network of leading firms all over the globe in order to provide its clients with high-quality advice on the full range of their cross-border issues.

Daniel Daeniker, managing partner, Homburger: The firm is a ‘national champion’ in Switzerland and has an office in only one location. Nonetheless, the team advises enterprises and entrepreneurs on transactions, tax matters and disputes in Switzerland and abroad. We also advise foreign clients doing business in Switzerland.

More than half of our large transactional and disputes work is cross-border. This forces us to cooperate with excellent law firms around the globe and also indicates that collaboration with other firms is a high priority item in our strategy.

In practical terms, we apply a ‘best in class’ approach. We are not allied to any best friend firms, Lex Mundi or similar networks, nor do we consider ourselves to be the Swiss satellite of a magic circle firm. When doing business abroad, we are guided first and foremost by the preferences of our clients. If asked for a recommendation, we can select the firm, or firms, best suited to take on a particular matter.

Sometimes this means recommending a magic circle firm, particularly in the case of multi- jurisdictional transactions. Sometimes, we recommend niche firms.

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“We rely on the extensive experience of our lawyers and the wide personal networks they have built working with foreign colleagues in their fields”

Q: Benjamin Borsodi, managing partner, Schellenberg Wittmer: The traditional legal industry is undergoing tremendous changes, including waves of successive mergers leading to ever-larger global legal giants. More than ever, independent regional firms need to be recognised by their clients as international, and by their peers abroad as go-to firms as well as good team players.

Collaboration is therefore of paramount importance for such firms. This is even more relevant for countries such as Switzerland, which, because of its size and specific legal nature, is more a receiver than a source of legal work. When an opportunity for reciprocation arises, one must look first and foremost for the best counsel for the client, but also be able to integrate strategic information. To achieve this beyond a certain firm size, a good grip on referral data is necessary to complement each individual lawyer’s contact base, as extensive as it might be.

Having doubled in size from 77 lawyers to 165 between 2000 and 2014, our strategy over the past few years has made a better understanding of our collaborative network one of its priorities. This has led to several initiatives, among which is the set-up of systematic referral recording and an increase in our international visibility as a full service Swiss firm.

Today, the breadth of our network (over the past year, we have worked with over 200 foreign firms from 60 countries on new cases), the speed at which we are able to team up with foreign correspondents in multiple jurisdictions, the quality of the multi-jurisdictional advice rendered, and the fee transparency demonstrate the credibility of our ‘more than Swiss’ nature.

Daniel Eisele, partner, Niederer Kraft & Frey: We are working closely with numerous law firms, inside and outside Switzerland, on specific cases. When choosing a law firm, we try to select the best firm for the particular case and the particular client. Because we are not integrated into an international network, but are a truly independent firm, we are able to collaborate with the best firms in each country, which is clearly beneficial for our clients.

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Q: What are the measures that law firms can put in place to ensure quality across their referral system?

Luchsinger Gaehwiler: We rely on the extensive experience our lawyers have gained and the wide personal networks they have built working with foreign colleagues in their fields. In reality, there is no substitute for personal contacts and quality control.

Eisele: Personal contacts and personal work experience on past cases are the best way to ensure that the quality of the work meets our expectations. In smaller jurisdictions and in continents that are further away from Switzerland, where we may not have any established contacts, we often rely on directories.

Daeniker: As a matter of principle, we never make ‘cold’ recommendations. In other words, we only recommend to team up with firms that we have worked with in the past. Given that our large clients have an existing preference for international firms, we normally have a network available with whom we have long-standing working experience.

With that in mind, the quality measuring process is simple: a firm will only get the next referral if they worked well in the last referral.

This does not, however, solve quality issues in an ongoing mandate. Here, the key to success lies in careful monitoring of those firms which are not up to standard in terms of quality or efficiency of service. At times, this may involve a degree of extra work for the firm coordinating activities. But over time, it works.

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“It is our responsibility to ensure that the quality of the work provided will match the trust our client has put in us in the first place”

Borsodi: Whenever we refer a colleague to our client, or request assistance from foreign correspondents, it is our responsibility to ensure that the quality of the work provided will match the trust our client has put in us in the first place. But as quality includes not only the technicality of the legal advice provided, but also aspects such as responsiveness, fee transparency or even plain soft factors such as communication, it can get very difficult to measure.

Therefore, in our view, the best proxy for quality is past positive experience. The happier a client is with the work provided by one of our correspondents, the more likely we are to send this person work next time the occasion arises. Seeking and providing feedback is therefore paramount to assess the satisfaction of both parties. In addition, while no set of referral data will ever replace the truly human nature of collaboration, used carefully and in combination with feedback experience it can help to build, grow and strengthen existing relationships.

But quality also matters for inbound work. Waiting for sophisticated matters to ‘knock at our door’ is not enough; it is our job to actively ensure that we keep getting the best possible mandates.

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Q: What are the challenges and benefits of creating a network?

Daeniker: The challenges are finding the right people, who are worth performing assignments with, and who you can safely recommend to clients. Again, what matters most is positive experience in the past.

The benefits are to find like-minded people who have chosen to work together of their own free will, not because it was imposed on them by some international organisation. Over the past 20 years, in my personal experience, this has helped me to find personal friends in places as far apart as Washington, London, Helsinki and Mumbai.

Borsodi: Being part of a prestigious formal network of independent firms, or a ‘best friends’ alliance with large international firms, can certainly help regional firms to attract mandates that would not have come their way otherwise, boost their network contact base and provide opportunities to share know-how. The notion of responsibility is also diverted to the network, rather than the firm, which could be seen as an advantage.

However, most firms that are part of a network note that the benefits are not automatic (nothing comes at no cost), and that maintaining a sustained flow of mandates requires significant effort and time in any case. Joining a formal alliance might also create a glass ceiling in revenues generated by referrals, as the amount of work received from alternative networks, or even other firms, will likely shrink as a result.

At Schellenberg Wittmer, we have made the choice of remaining truly independent, which has its costs and challenges. But being able to rely on our extensive and flexible network of firms around the world also has immense benefits as it un­leashes the freedom of choice of the ‘best fit’ for our clients and allows us to best deal with possible conflicts of interest in any single jurisdiction.

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“We apply a ‘best in class’ approach. We are not allied to any best friend firms, Lex Mundi or similar networks”

Eisele: Having a network of international firms to work with is of key importance for our practice. We have also initiated a foreign associate programme to further strengthen our links to foreign law firms. Under this programme, we will have up to six foreign lawyers a year working with our firm for a limited period of time (up to six months). In addition, we have started to hire purely foreign law qualified lawyers, which proves very helpful for keeping close relationships with leading foreign firms in England, the US, Ireland, Italy, etc.

Q: How are you tackling price pressure from clients?

Luchsinger Gaehwiler: Our firm is well-known for cooperating closely with its clients to find solutions that meet their budgetary restraints. By comparison, our hourly rates are moderate and we are very cautious when charging the contributions of our junior associates. We generally accommodate our clients’ wishes for flat fees and fee caps. We also offer subscription-based services but demand from our clients has been limited so far.

Borsodi: With respect to price pressure, flexibility in the fees’ structure is key. We always engage openly and transparently in discussions with clients when it comes to setting up a solution that is both acceptable for our clients and profitable for our firm. We strive to understand up-front the type of work expected in each assignment, notably whether the advice sought pertains to ‘higher value’ partner’s input (strategic decisions, for example) or more common activity where lower hourly rates must be agreed upon.

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“Personal contacts and personal work experience on past cases are the best way to ensure that the quality of the work meets our expectations”

Daeniker: A rigorous quote system, accompanied by constant monitoring of costs, is the key to success here. The most important thing is managing client expectations both in terms of how much service you can deliver at a certain price, and how much service the client is willing to ask for. In this connection, we see no fundamental difference between network firms and others.

Eisele: Price pressure is, of course, an issue. However, if the work is of first-class quality, the clients usually have no problem accepting the fees. We aim to deliver first class quality and work as efficiently as possible for the client’s benefit. Fee discussions with clients are, in our practice, an exception rather than a rule. Our strategy is to be the law firm of choice in the most critical cases, where the fees are of less relevance to the clients.