The Resilience of the Billable Hour

In-House counsel to Nippon Telephone & Telegraph corp., once complained about outside counsel inviting him  to lunch and charging him for the food in a subsequent invoice. In some ways, that story represents the pre 2008. Those good old days, when lawyers could charge for any and every thing ... photocopying, yep. Lunch, yep. Cab fares, yep. First class flight, yeo. Trip to gntle man's club, ditto. That was at least before the financial crisis after which the client's magnifying glass got orders of magnitude bigger. Clients also started to review not only the hourly fees but moved more to the fixed fee and success fee (rate tied to transaction success) neighbourhood.

Some US firms also began to outsource legal work (you know the same way phone companies outsource customer call centres) to Indian firms set up for that purpose. Johnson and Johnson, a US health care products company was even more innovative. It subscribed to legal research sites and asked outside counsel to use its subscribed service rather than charge it for the costs of legal research. Clients were cutting costs aggressively and some thought that this meant the death of the billable hour especially in countries that did not have a long history of it.

Things didn't quite work out that way. While firms like Linklaters and Clifford Chance reportedly increased the number of fixed fees and success fees. Charging by the hour remained the dominant mode of charging.

In Nigeria, top firms including the Gold League firms typically charge at dollar rates, but for (inexplicably, when you consider the value add) somewhat less than what foreign counsel will charge. However, Nigerian firms also face the same cost cutting, with clients asking for lawyers to put "skin in the game". However, in Nigeria like in other countries the billable hour has arguably increased in use and is likely to become more standardized with time.