The legal sector is under fire again over excessive fees. Allen & Overy has been criticised widely after a scathing High Court judgment highlighted that the firm charged more than £5 million of costs during a five-day trial.

That, in turn, came after criticisms of the legal fees relating to the BCCI and Equitable Life litigations; again the portrayals were of a money-grabbing sector — regardless of the results for clients.

Law firms always will be criticised over the fees they charge. But do they deserve it? Whichever side of the fence you sit on, the principle is the same: firms need to change the way they work and demonstrate that they provide value for money. If they don’t, clients will look elsewhere.

The legal sector is worth a significant amount — an estimated £15 billion in the UK alone and £217 billion globally, which is about twice the size of the accountancy profession. But negative headlines portraying lawyers as fat cats can bring the profession into disrepute. How can law firms prove that they provide an expert service and therefore deserve to charge the fees that they do?

Over the past two years, Eversheds has sought to address the issue of billing and legal fees through implementing more innovative and transparent ways of working. A recent Eversheds study of senior partners of the top 25 law firms and legal directors of 50 prominent companies revealed an interesting contradiction between firms and their clients when it came to proving value for money.

More than half of businesses (55 per cent) thought that the present growth in fees was unsustainable and that any increase — as well as the costs of legal advice — was the key concern for 57 per cent of clients. However, only 21 per cent of law firm partners described the provision of added value as among their big challenges over the next ten years. Some clients also believed that they lacked the power to “bargain down” law firms.

This is a common criticism of law firms; that they hold the power of knowledge over their clients and can therefore charge what they like. Yet feedback from the market suggests that the balance of power may change and that the “magic circle” firms will be the first to experience the effects of clients looking for added value and better service — 34 per cent mentioned plans to buy legal services from other firms.

Tellingly, many felt there was little difference in the standard of advice between firms inside or outside the circle, adding to the level of competition.

While the research shows that client-lawyer relationships are improving, clients increasingly want their legal providers to become more commercial and provide a more transparent approach to billing. They are much less likely to approve quotations or bills that do not give detailed breakdowns of any work or are perceived not to offer added value for money.

Anecdotal evidence also shows that they do not want to be charged for the “learning curve”, one of the big criticisms to come out of the Allen & Overy case.

Clearly, there is a contradiction between providing value for money and how law firms bill. There is, for instance, increasing criticism of the hourly rate and much debate about whether it can survive in the legal model of the 21st century.

A move to fixed budgets and fees agreed in advance is arguably the best alternative. At present many clients believe that firms bill for everything, including time spent in taxis, photocopying and other such basic tasks.

It will take time for firms to change the perception that they do not deserve to charge what they do. To justify the level of fees, top law firms will have to prove that what they do is “premium”, adding real commercial value.

But the worsening economic climate, in which cost controls will become a priority for many businesses, means that all firms must take this kind of approach to how they charge clients — or face losing business.

The author is the chief executive at international law firm Eversheds

Eversheds’ study, The Law Firm of the 21st Century, was carried out by RSG Consulting. You can request a copy from: www.eversheds.com/21stcenturylawfirm

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