Freshfields Bruckhaus Deringer, the City law firm, has rebounded from one of the most difficult years in its prestigious history to break the billion-pound revenue mark for the first time.

A week after its "magic circle" rival Clifford Chance announced a record turnover of £1.33 billion, Freshfields today revealed that it had earned £1.17 billion in the financial year to April 30, up from £986 million — a rise of 19 per cent.

Its profit per equity partner — a widely used measure of law firm profitability — was even better than Clifford Chance, rising almost 40 per cent to £1.44 million.

Despite the impressive results, Ted Burke, the firm's chief executive, struck a cautious tone, warning that the coming year would be considerably harder.

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Mr Burke said: "Expectations for the coming year are reduced. Law firms tend to lag behind the broader market and a significant part of our results are attributable to the robust business environment of the first half of 2007. The current market challenges are affecting us all."

Nevertheless, Freshfields will take this year's results as a vindication of a painful and public £40 million restructuring that turned its traditionally stable partnership on its head.

In July, Peter Bloxham, its former head of restructuring, sued the firm for £4.5 million for age discrimination claiming an overhaul of the pension fund was a clandestine means of forcing out older partners.

Although Freshfields eventually won the case, the negative publicity came as a shock to a firm that made its reputation as a trusted adviser to the Bank of England.

In August, Freshfields suffered another high-profile embarrassment when Barry O'Brien, its respected former head of corporate finance, was fined £9,000 by the Solicitors Disciplinary Tribunal over his conflicted role in Philip Green's aborted takeover of Marks & Spencer. He also agreed to pay £50,000 in costs.

Since then, after much soul-searching, the firm has begun to regroup under the leadership of Mr Burke. Tim Jones was handed strategic control of the London office and Mark Rawlinson, another star fee-earner, was elevated to succeed him as head of corporate finance. Maurice Allen and Mike Goetz were lured from White & Case to bolster the finance department.

Externally, Freshfields has also been working hard to present a kinder face, establishing an expanded recruitment panel, holding a rare drinks reception for journalists and becoming the first City law firm to publish an independently-assessed accounting of its corporate social responsibility initiatives.

Freshfields is the fourth global law firm to report turnover in excess of £1 billion in 2007, joining Clifford Chance, Latham & Watkins and Skadden. Linklaters is expected to retain its membership in that elite club when it releases its figures later this month.

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