Set in stone – testing time for mid-tier sets as elite London sets tighten their grip

The demise of 11 Stone Buildings last summer sparked claims within the Bar that others would face the same fate. As the gap between the haves and have-nots widens, can second-tier sets survive?

‘If you don’t stop gossiping about the collapse of this set, you will make it happen. You’re scaring people. Things are not as bad as they seem.’
A staff member to a junior barrister at 11 Stone Buildings, summer 2015

‘Unfortunately, there’s an incentive to leave before the crash. If people think the set isn’t going to last they’ll start leaving. It’s then that the set starts shredding at the edges. Nobody wants to be left behind.’
Michael Furness QC, co-head of chambers, Wilberforce Chambers

In early autumn 2015, members of London commercial and chancery chambers 11 Stone Buildings (11SB) voted to dissolve. Having operated for more than 40 years and rated highly across a number of dispute specialisms, the set comprised 40 members, including four Queen’s counsel (QCs). Ironically, those there at the time say it was performing well financially and had a healthy pipeline of cases.

While there has been widespread speculation throughout the Bar on 11SB’s demise it is clear that the set was brought to its knees by a combination of factors. Ebbing confidence in chambers management coupled with a lack of strategic direction precipitated the exit of several star barristers in quick succession, which evoked nervousness among remaining members.

Departures that precipitated the collapse include Charles Samek QC, who returned to Littleton Chambers in May 2015 followed by barrister Jamie Riley. Finance disputes specialist Peter Head moved to Blackstone Chambers in July, while civil fraud barrister Ian Smith went to 33 Chancery Lane. Civil fraud and insolvency specialist Philip Hinks moved to 3 Verulam Buildings in August.

‘Sets which have practice development managers and PR people employed… I don’t think could do anything for me.’

John McDonnell QC, Three Stone

Says one former tenant: ‘There was a particular member who was actively telling people we were falling apart, scaremongering and trying to get people to leave. There was definitely a sense of panic after certain barristers left, coupled with the lack of confidence over the set’s strategic direction and poor communication.’

Just weeks before its official dissolution date of 30 October, another staff member told Legal Business: ‘The clerks are being kept in the dark. At first we were hoping to be carried across with a group of barristers but to be honest, I can’t see another clerking team needing any extra support.’

The fall of 11SB is indicative of how quickly a set can become vulnerable if it loses one or more of the three core pillars supporting a thriving chambers – infrastructure, investment and transparency. The commercial Bar has become even more elitist with a premier league rank of sets – and then the rest. These super sets have an iron grip on the referrals network from leading law firms, thanks to brands they have been building for decades. The peer group includes Essex Court Chambers, Brick Court Chambers, Fountain Court Chambers, One Essex Court and Wilberforce Chambers (see box, ‘At a glance: the leading sets’, opposite) – with Essex Court making around £65m in revenue in 2015/16.

As such, the threat to mid-tier sets has never been stronger. Says Ted Greeno, partner at Quinn Emanuel Urquhart & Sullivan: ‘The gap between leading sets and other sets has become considerably wider over the last 20 years and I do expect it to get wider. That is simply because they attract the best people. It’s all about having the best people; and the best people attract the best work. Like any law firm, it’s a virtuous cycle.’

‘A schizophrenic state’

Since 11SB’s demise another high-profile set, 3 Stone Buildings, announced in March that it was merging with Thirteen Old Square following a string of senior and junior barrister exits. Rumours as to which set could follow next are now rife at the Bar and the business model – a collective of the self-employed operating under the same brand – is under scrutiny and once again raises the question of its sustainability.

‘A particular member was actively telling people we were falling apart. There was definitely a sense of panic after certain barristers left.’
Former 11SB tenant

The Bar is still going through a process of evolution, in much the same way law firms did shortly after the financial crisis. However, a key differentiator is the relatively robust position of elite sets contrasting with the law firms that were forced to significantly re-evaluate the ways in which they provide legal services. The gap between the leading commercial sets and the rest has widened to the extent where the elite have created financial and recruitment problems for the mid-tier and forced consolidation among lower-ranking sets.

Movement from mid-tier sets has been prevalent, with Stone Chambers in particular seeing a spate of departures since 2014, including its former head and leading silk Steven Gee QC who went to disputes boutique Joseph Hage Aaronson; Singapore regional head of chambers Andrew Moran QC, who was appointed to the Singapore International Arbitration Court panel of arbitrators; and Tim Hill QC, who joined 20 Essex Street alongside shipping barrister Karen Maxwell. Other notable juniors to depart included Henry Ellis, Peter Stevenson and Joseph England to Quadrant Chambers.

Stone Chambers currently has two silks remaining – its joint heads Elizabeth Blackburn QC and Vasanti Selvaratnam QC – and states it will continue to operate as a shipping specialist.

There are several factors that can put a set under stress. These include: lacking a critical mass of silks and juniors; a lack of practice diversification; and the departure of star members upon whom chambers has become overly dependent and who hold a disproportionate amount of work.

John Flood, a professor of law at Griffith University School of Law in Queensland and honorary professor of law at UCL, comments: ‘The marriage of barristers and chambers requires a huge commitment. To run it as a business you need to know what everyone is doing, set targets, plan your business strategy and hold a great deal of trust and confidence. That process is quite fraught but what is necessary for chambers to be successful. The elite are able to rely on their history and brand. The British government can sell its steel and go to Slaughter and May immediately. Who will Slaughters call? Essex Court Chambers.’

The success of super sets accentuates a perception that the others are unstable and lack strategic focus – creating a sour internal culture. Says Flood: ‘In a law firm there’s stronger ties where the money is going into a pot and divided but in a set, the profits are tied to the individual. Chambers are in a schizophrenic state at the moment – they try to appear corporate and build up specialisations while grappling with being made up of individualistic, self-employed barristers. That disjunction will continue as long as they continue to practise in the way they do. You cannot tie a set together the way you can a law firm.’

Core pillars

The world-class advocacy in the UK means the demand for top-quality commercial barristers has never waned. Although law firms are interested in acquiring these skills and, on a part-time level, have considered housing an in-house capability as a useful value-add to mitigating cost, none can compete in court with the top silks – and would not realistically expect clients to ask them to either.

Stephenson Harwood head of international arbitration Louis Flannery says: ‘People have said for the last 25 years that the Bar is in trouble. But that’s just not true. The standard of advocacy here is so high you need to instruct London barristers. Not even your best American attorney can come close, because they’re so steeped in jury trial tradition – they can cross-examine a witness to pieces but don’t understand the subtle nuances – while European lawyers are inquisitorial by training and don’t have impressive advocacy.’

Ensuring that what the commercial Bar had to offer was properly marketed became an imperative in the 1990s due to the rise of solicitor-advocates. Firms including Herbert Smith Freehills, Skadden, Arps, Slate, Meagher & Flom, Clifford Chance, Freshfields Bruckhaus Deringer, Stephenson Harwood and Allen & Overy brought advocacy skills in-house, much to the bemusement of the Bar.

Certain sets realised they needed to re-evaluate the way they operated their businesses in response to a market need – particularly the rise of direct access. Clients started to view law firms as a very expensive postbox in certain instances where they should from the beginning have been referred to the Bar directly.

Essex Court Chambers senior clerk Joe Ferrigno says: ‘The commercial Bar effectively saw the establishment of “Magic Circle sets” after a period of expansion through lateral hiring and expanding areas of practice. The clerk’s role changed from what it was in the 1980s when there was no formal marketing, no brochures or websites, and you couldn’t proactively seek out new business. The Bar modernised and there became more of a business partner relationship between barristers and their clerks. Chambers recognised that you have to value clients and that you couldn’t wait for work to come through the door or always rely upon your clerk to get it for you. Barristers at leading sets recognise the value in being proactive and working with your contacts to find more opportunities to interact.’

Those at the top-end of the commercial Bar illustrate how it can be done well with smart infrastructure and proper investment in administrative staff. Not an easy feat to achieve considering a set is run by reliance on self-employed, self-confident, conservative individuals.

Wilberforce Chambers’ Michael Furness QC lauds the value his practice director Nicholas Luckman brings to the set: ‘Historically, your senior staff were not valued enough. Barristers are good at law but clueless about running a business and marketing practices. I often have to tell staff: “Nick knows best. Follow his advice.”’

The investment in infrastructure extends to housing efficient, innovative internal governance and administration, particularly experienced, business-savvy clerks.

John McDonnell QC, who heads Three Stone (renamed after the merger of Thirteen Old Square and 3 Stone Buildings), says: ‘Sets which have practice development managers and PR people employed… I don’t think could do anything for me. I don’t see it is an option compared with a set run in the traditional way and I’m confident our clerks can manage the separate practices of our 40 members. You need a totally reliable IT system and getting things the court requires printed and distributed in the right place at the right time. The rest looks after itself.’

Says one City lawyer of clerks: ‘The Magic Circle clerks negotiate enormous fees, and fair play to them. There are cases that only certain mavericks can do and they know that. Some won’t get out of bed for less than £1,200 an hour.’

In his heyday 20 Essex Street’s then head of chambers Iain Milligan QC was said to be earning up to £2,000 per hour and at one point, up to £3.5m annually. With the exception of a few names commanding £1,200 per hour, today’s top-tier silk charges around £850 per hour while the average silk earns £500 per hour. The average mid-tier junior barrister charges between £275 and £325 an hour.

The financial power of the leading sets comes from very lucrative fees where the business model is typically operated on either a flat-rate contribution fee or a fee relative to a proportion of a barrister’s earnings, with a discretionary room charge on top. The contribution typically ranges between 12% and 20%. A common base rate is 15% – if the set is charging less from its barristers then it is either extremely profitable or more likely not investing in marketing initiatives, business development or recruiting talent. It is therefore even more likely to lack strategic focus.

The elite at the commercial Bar, for all their success, also need to get better at planning for succession and retaining talent. Some operate in ways to counter the problem (Essex Court for example, only charges fees proportionate to workload – so a junior starting out with no cases pays nothing). Additionally where good clerking can be most effective is when barristers feel they are supported enough that they can concentrate on building their careers. That way chambers can then turn the natural individualist instinct on its head and enable a buy-in to the direction and strategy of the set. Having a transparent business strategy showing the direction of travel for the set means barristers will be able to gauge whether the set is best suited to their career.

And, lastly, high standards in recruitment and a focus on specialist fields are critical to creating lucrative practices. Magic Circle sets have earned world-class reputations in trusts, employment, arbitration, construction, corporate and financial work.

Collective will

With a question mark hanging over two or three sets, there are lessons that those struggling in the mid-tier can learn – and have to learn from the super sets. Ultimately, making sure you operate with the right infrastructure is critical. Many clerks at the Bar complain there are sets that simply do not understand this message and expect to see more fail. No set can escape this especially with the existing tension where chambers try to marry strategic ambitions with the agendas of individualist, portfolio-wielding barristers. And they are often not the easiest characters to drag along.

‘Chambers are in a schizophrenic state – they try to appear corporate and build up specialisations while grappling with being made up of individualistic, self-employed barristers.’
John Flood, UCL

Essex Court head of chambers Graham Dunning QC concludes: ‘The members of chambers like ours are good at being dynamic and responding quickly to the market environment. With so much potential change and new opportunities in the air, you have to remain agile and be aware of what’s going on around you.’

Hardwicke Chambers chief executive Amanda Illing, who was involved in the hire of a team of barristers from 11SB, argues that without strategic planning, chambers cannot avoid the dangers of operating as a collection of individuals. ‘Chambers are unusual in the way they are set up but as a collection of people it’s important to manage risk, market collectively, plan for the future and have a business plan. We always fall back on our plan. You can’t ignore the fact that you have to market yourself – whether it’s the name of a dead white man or an address on Fleet Street – there has to be a collective will.’ LB

sarah.downey@legalease.co.uk