Just read the brief report issued by the world’s largest consulting company about the impact of Covid-19 on the performance of law firms in the United States (US). Interesting. The report basically illustrates that the current conditions are different from the financial crises in 2008 and 2009, which tend to only hit law firms dealing with financial transactions.

Covid-19 this time made almost all sectors experience a decrease in performance. Inevitably has a significant impact on the performance of law firms. Interestingly, the report explains that the litigation (dispute) sector is less affected, because it seems that the market is not directly related to the economic situation or financial markets.

Then the market litigation (commercial disputes) is predicted to remain stable or even experience an increase. Its niche market is in the potential for disputes between shareholders, suppliers, labor conflicts, and related to force majeure.

The situation is slightly disadvantaged indeed predicted to occur in corporate lawfirm, because commercial transactions will be reduced considerably. But there is still a growing “captive market”, such as ‘distressed M&A’, restructuring to ‘regulatory compliance’.

With such a sluggish market situation, in order to survive, in addition to being advised by law firms to be more attentive to the client’s legal needs, it also takes efficiency measures, for example reducing partners’ earnings, etc.

How about in United Staete OfAmerica? We don’t have the data. But in my opinion it is relatively the same.

Corporate law firm (meaning law firm that focuses on handling inter and inter company transactions, not involving the court) feels the same as the law firm in the US, still has a ‘captive market’ Even though the overall possibility has decreased.

Its niche market for corporate firms at present seems to be in labor advisory issues, force majeure, contract renegotiation, corporate restructuring, financial product engineering, to the acquisition of financially depressed companies.

Litigation markets tend to be stable. Potential disputes (very likely) grow in a worsening economic situation, because of default conditions rife.

In US, seeing that almost all corporate law firms also work on litigation (although there may be a limited scale), income inevitably occurs. The degree is different between law firms. To survive, one of them is by cross-subsidizing income (litigation subsidizing corporate for example).

But again, analysis for our markets is difficult to test. We never know for sure. Because it is different from the US law firm informing the amount of income (including the salaries of its lawyers), in our case it is a protected “kitchen secret”. Maybe only tax people know about it.

In us, I expect employment disputes, termination of contracts, defaults, cancellation of agreements, liquidation, restructuring through the courts, until bankruptcy will increase. Although until now we have not captured data of this increase in the SIPP Court.

Logical too, maybe because our business people are still busy mitigating risks, maintaining cash flow, doing efficiency and so on. Maybe later if “new normal” is truly formed, then sue each other. It could be litigation that began to be crowded in the final quarter of this year or just crowded in early next year.


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