So, 2008 — how has it been for you so far?

Pretty mellow by all accounts. Many City lawyers took last week off and work resumed in earnest only yesterday. And, in the curious way that the legal world is never quite in sync with what is going on around it, there was an odd sense of the good times still rolling despite the credit crunch.

“The legal world trails about six to eight months behind what is happening in the business world,” Peter Martyr, chief executive of Norton Rose, says. “So I think the remainder of this financial year will hold up pretty well. What’s not so clear is what will happen from the summer onwards.”

David Childs, the London managing partner of Clifford Chance, admits that there were fears last August that the mergers and acquisitions (M&A) and private equity markets would collapse among the sub-prime wreckage. But, although some of the bigger deals were pulled, there was a surprising amount of activity. As a result, come year-end in the spring, the results should be looking pretty good. It is what lies beyond that is the puzzle.

“I can’t recall a new year when there has been so much uncertainty \,” Childs says. And this was endorsed by many other folk around the City. “I think it is going to be the most unpredictable year that we have seen for some time,” Garry Pegg, of Hogan & Hartson, says.

“What worries me most is London,” Martyr says. “It’s looking a bit like an immature market in the aftermath of over-frothing.” Jonathan Blake, of S J Berwin, meanwhile, is concerned that Gordon Brown’s ineptitude may trip London up just when it needs to be more robust than ever. “The Government seems to be trying to stall \ through unnecessary tax changes and a failure to lead. If hedge and private equity fund managers and entrepreneurs react to the planned changes by leaving the country as many are anticipating, this \ surge in London’s fortunes might look more like a blip than a sustained change.”

Even so, for firms with well-established international practices there seems not to be too much to worry about. The old economies of the US, the UK and Western Europe may be showing their age but the emerging economies are as bright as a button. “Our Moscow is growing by 50 per cent year on year and we expect that to continue in 2008,” Childs says. “Among other things this creates exceptional opportunities for associates because although we recruit local staff we also want to send out people from London.”

So while the UK may slow a little, the wider world is still full of possibilities. China in the Olympics year will be busier than ever. And as for the Middle East, well, there are petrodollars by the barrelful ready for investment.

One consequence is that we can expect to see Sharia (Islamic) finance increasingly important and those firms that have opened in the Gulf will enjoy good returns on their investment. Meanwhile, as Martyr points out, areas such as Singapore, Malaysia and Indonesia are likely to be of increasing significance to London-based law firms.

What this highlights is that while the traditional hedge for lawyers against an economic downturn was a strong corporate recovery or insolvency department, the goal now is to have a balanced global practice so that the regional risk can be spread.

Moreover, the fallout from the sub-prime debacle will breath life into litigation activity. As David Gray, head of the UK litigation and arbitration group at DLA Piper, says: “The impact of the credit crunch and the financial instability that this has revealed across a wide range of businesses will inevitably return the litigators to the fore in 2008 as those who have had their fingers burnt embark on a damage-limitation exercise.”

Martin Bakes, insurance partner at Herbert Smith, adds that because banks laid off the risks associated with the securitisation of complex financial products via products that may well have contained significant sub-prime components the chance of a claim being made is now much greater than had originally been envisaged.

Underlying the sub-prime debacle, of course, was fraud and the pursuit of fraudsters may turn into one of the hot practice areas. Steven Philippsohn, of PCB Litigation, says: “Traditionally frauds come to light and clients are more anxious to prosecute them when there is a downturn in the economy. However, many firms have had little experience of dealing with fraud cases given that the economy has been strong. Hence, in the same way that the cyclical nature of the economy resulted in a recent shortage of experienced corporate associates, there may soon be a shortage of experienced fraud litigators. Other law firms are approaching us to act on a consultancy basis and I expect that we and other specialist firms will see this trend continue.”

So the poster boys (and girls) for the legal profession in 2008 look like being the fraud specialists — which says a lot about this new year.

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