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LEGAL & FINANCE: Dispute partners may have fee shock.

The expectation of 96 per cent of dispute resolution partners in UK law firms that their fees will increase or stay the same over the next three years may be ill founded.

Two thirds of in-house counsel from leading listed firms expect them to stay the same or decrease, according to a report from Grant Thornton's Forensic and Investigation Services Practice.

"Despite an expectation by over 70 per cent of corporates that the number of disputes will increase over the next three years, this may not result in higher profits for leading law firms," said Robert Kerr, the division's Birmingham managing partner.

"In-house legal staff are likely to handle smaller less profitable work with major law firms receiving a lower volume of cases which are individually more remunerative but which may substantially affect the structures of their businesses.

"Midlands law firms may be restricted to very large claims that cannot be handled in-house. This will require them to reconsider their employment practices and how best to retain talent. It may also mean that less work will be available to generalists, with corporates more likely to be willing to pay for highly specialised advice on specific areas."

Grant Thornton suggests that, with litigation levels in freefall decline following the Woolf reforms, investing in specialist areas such as regulation, IT and employment could go some way to countering the trend.

Red tape in particular is proving a money earner.

"The increase in regulation-based disputes is caused by a variety of factors," said Mr Kerr. "Respondents blame Government and EU regulation frenzy, the impact of Sarbanes Oxley, a growing role for the FSA and the UK being influenced by US corporate practices which tend to be more accustomed to a prescriptive regime and a litigation culture.

"IT is regarded as a strong area of dispute growth by lawyers because of the increasing importance technology has on everyday life, and our over-reliance on it.

"Sources of work may stem from the risks to intellectual property posed by ever-more sophisticated hackers taking advantage of technology such as WiFi, and the fact that without IT some businesses could not operate.

"Employment disputes are also expected to be a growing area thanks to ever more employee-friendly legislation coming from Brussels. We are likely to witness some substantial changes in the dispute resolution market. While the variety and experience of Midlands law firms means that they are well placed to benefit from these changes, it is crucial that they adapt quickly if they are to stave off the threat from American law firms seeking to grow their positions in the UK."

Partnerships and limited liability partnerships with defined benefit schemes could find themselves facing unnecessarily high bills for the new Pension Levy, according to Grant Thornton.

In order to build up the Pension Protection Fund, which is designed to be a central pot to meet defined-benefit pension scheme liabilities in the event of a company's failure, the levy is to be introduced from April.

But partnerships and LLPs may be unfairly disadvantaged if the risk assessment is based on incomplete or inaccurately interpreted information.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Feb 10, 2006
Words:516
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