As Barclays’ long-awaited review of its global legal panel moves closer to completion, it has emerged that the bank is set to shake up how it interacts with its external advisers with the introduction of corporate value accounts.
With new terms for the panel to take effect from 1 July, the initiative will see law firms allocated an annual sum representing the value of legal services they must provide through various services, primarily legal advice and secondments.
The downside of the arrangement for panel firms is that should they fail to meet their value targets, the account rolls into a deficit which then has to be made up or reimbursed to the client.
After the first year, any deficit will be rolled over and added to the value account for the following year. However, at the end of the panel term, the deficit must be repaid by the panel firm.
‘It’s very much a gamble,’ says one partner at a City firm. ‘If, for example, your value account is worth £200,000 and by the end of the panel term you have only provided £150,000 worth of services, you end up writing a cheque to the client to make up the difference.’
A particular headache will be the task of attributing work, according to a partner at another City firm: ‘It’s a real pain in terms of how to administer resources. It’s always a grey area over what counts towards the value account and what doesn’t. I’m unsure as to why Barclays thinks it’s a good idea.’
With the bank allocating an annual legal spend of around £100m, firms’ proposals were submitted in January for a chance to secure a place on the coveted revised panel. Its current general advisory panel includes Clifford Chance, Linklaters, Allen & Overy and Freshfields Bruckhaus Deringer as well as international law firms Hogan Lovells, DLA Piper and Simmons & Simmons.
The current review took place later than originally planned, with the two-year panel term extended by an extra year in 2013. Its last review saw 117 firms appointed to 13 panels and three UK sub-panels for its investment banking and markets arm.
Barclays declined to comment on its value account plans. Other revisions planned by the bank include splitting its roster of law firms into separate pools of ‘preferred’ and ‘approved’ advisers in a bid to create a simpler panel structure. A small number of firms will be awarded preferred status. Outside that elite list, a large number of firms are still expected to be appointed.
sarah.downey@legalease.co.uk
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