Global clients are often flabbergasted by US legal fees.
"Does it really cost more in the US?" clients ask. Well, a new study answers that question -- "Yes, it really does cost more in the US."
There are a few drivers of these differences. First, the US is a litigious market and our litigation is an expensive proposition. Both the threat and reality of litigation drive real cost differences between the US and other jurisdictions.
Another factor is the fee structures of US law firms. US firms, in short, charge more than firms around the world.
As in any market, you get what you pay for, and the market has set the price for top legal talent in the US higher than top legal talent elsewhere in the world.
Now, this does not mean that there aren't ways of managing costs. There are. The most sophisticated US companies partner with law firms to develop alternative fee arrangements and to match the firms they hire with the issues those firms are best suited to address. And, companies also save themselves avoidable costs by thinking through risks before they arise -- by, for instance, making sure that deal teams are documenting properly their work, by monitoring key relationships for signs of potential problems, and by sensitizing management to the legal cost implications for certain risks.
Even with the best risk management, however, this new study shows that global clients coming to the US should be prepared to pay more, perhaps a great deal more, for legal expenses than they usually do in their home country. It is critical, therefore, that clients and their firms openly communicate about expectations so there are no unpleasant surprises at the end of a transaction or case.
Companies in the U.S. spend nearly triple the amount on legal services for every dollar of revenue than counterparts around the globe, but overall spending varies greatly depending on the size and industry of the business, according to a new analysis released Tuesday. In a study of 2,000 businesses around the globe, including in the banking, technology, and real estate sectors, legal research company Acritas found U.S. companies spend on average .40 percent of every dollar of revenue earned on legal services, while the median ratio for the rest of the world is only .15 percent. The higher percentage in the U.S. is driven by higher rates and salaries, as well as a general increase in the amount of legal services required by U.S. companies.