Magic circle law firm
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An excellent issuer of legal opinions, and one of the few international enterprises whose business model was wholly unaffected by the global financial crisis. Magic-circle charge-out rates have been steadily rising since 1985, to the point where it is now more expensive to hire a trainee solicitor for an hour than to fly to Monaco for a weekend at the Grand Prix.
The best way of doing that, therefore, is to arrange for a magic circle law firm to invite you to the motor racing as part of its client entertainment programme.
For their part, magic circle law firms are known to despair at the arms-race amongst them for client corporate entertainment, which has got to the point where they have had to jack up trainee charge out rates —
The rate of increase in charge-out rates and, yea, even law firm revenues, has been so steady as to draw comparisons with the performance of Fairfield Sentry’s investment in Madoff Securities. No-one tell Harry Markopolos.
But it is not just the steady increase in charge-out rates which has the feel of a conjuring trick about it. The Magic Circle’s showpiece is surely how it can make personal responsibility disappear without a trace, simply by waving a legal opinion at it. The lion’s share of the economic interactions that precipitated the dot-com bust, the Russian crisis, Enron’s collapse, the credit crunch, Bernard Madoff’s gargantuan fraud, the global financial crisis, the London Whale, WireCard, 1MDB —all of these will have been done under the watchful eye and diligent documentary assistance of law firms, not one of which has sustained so much as a claim on its professional indemnity insurance policy as far as has been widely reported.
Now it is no part of the JC’s intention to suggest complicity, neglect or even carelessness on the part of these law firms — they are peopled by tireless, astute and upright people, to be sure — but it is to wonder about cause and effect.
For, if every phase of Lehman’s overreach and eventual collapse can have been accompanied by expensively rendered, diligently composed and conscientiously delivered legal advice, and no part of that advice can be faulted, its recipients might pause to wonder what good it did — and, for that matter, does, even when provided to firms which are not in present danger of imploding.
The goods it does, of course, is not to the company’s bottom line, but the bottoms of its responsible risk managers employed by its clients. No-one got fired for hiring Linklaters, much less for relying on its legal advice, after all.
Fun fact: the total revenue of the top twenty global law firms in 2019[1] was over thirty billion dollars.
Now that is a nice trick.