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Trans-Tasman competition too costly

Trans-Tasman competition too costly

WHILE RECENT MEDIA reports suggest Australian corporates are looking to cut costs by outsourcing work to New Zealand law firms, some local firms remain sceptical about the extent to which they…

WHILE RECENT MEDIA reports suggest Australian corporates are looking to cut costs by outsourcing work to New Zealand law firms, some local firms remain sceptical about the extent to which they can compete with Australian firms for this work.

Chris Fogarty, director of business development at New Zealand law firm Bell Gully, said it was “early days” with regard to Australian work going to New Zealand. “There hasn’t really been a trend of that occurring,” he said.

Leading NZ firm Kensington Swan chief executive Chris Heilbronn said that while the firm provides some services to large corporates in Australia in specialist areas of expertise, this is not the norm.

“New Zealand law firms do represent competition to Australian firms for Australian corporate work, but maintaining a viable presence for clients is costly unless a permanent Australian base is established, and that eventually eliminates the cost advantage,” Heilbronn said.

But Bell Gully’s Fogarty argued technology lessens this Trans-Tasman geographical distance. “Obviously what works to their advantage is the currency difference, and I don’t think that distance is such a significant issue with modern technology.”

The increasing pace of regulation and complexity of the law in both countries has also made legal compliance a nightmare for many organisations, according to Heilbronn. He said that the difficulty in actively managing these matters has led Kensington Swan to develop a web-based training and legal compliance product called Compliance Minder.

“We can expect to see more use of this type of technology to help organisations manage their compliance risk,” Heilbronn said. “In that respect, many Australian legal firms may see this as a point of future collaboration rather than competition.”

While Australian firms prepare to defend legal work generated on their home patch, local firms face pressure from another source. The issue of partners from the large firms becoming in-house counsel and taking high fee-generating work with them again came to the fore in recent reports from Australia.

The rapid growth in lawyer numbers moving to in-house counsel roles in New Zealand is also impacting on local firms. “In-house counsel numbers have increased by 40 per cent since the late 1990s,” Bell Gully’s Fogarty said.

The growth of in-house counsel is an increasing feature of large commercial and government organisations and existing legal departments are also growing in size, but the trend does not end there.“A number of smaller organisations are also establishing in-house counsel, particularly in situations where levels of regulation are increasing, or routine aspects of their core business would show cost benefits from using in-house counsel,” Heilbronn said.

“The tendency is for in-house counsel to filter work into three categories: high-end specialist work briefed out to acknowledged specialists, middle-range work completed by the in-house team, and routine work briefed out to low-cost legal providers. This market segmentation creates some issues for the larger law firms, as it reduces the continuity of work opportunities and is usually linked to well-contested tender processes.”

Andrea Ruffell is the Editor of NZ Lawyer,Lawyers Weeklys sister publication

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