Liberalization and Cravathism: How Liberalization Triggered the Reorganization of the Legal Profession in Germany and Japan

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I. INTRODUCTION

Transnational legal practice has grown dramatically in the last twenty years as U.S. law firms expanded overseas. (1) This expansion has invariably affected targeted nations' legal professions as previously insulated native lawyers were exposed to U.S. legal techniques and must compete against U.S. firms for corporate business. One of the most evident effects of this process is the emergence of foreign corporate law firms that appear to mirror the ever-expanding U.S. law firms. Following the example of British law firms, German and Japanese firms have grown in size and reorganized themselves along Cravathist principles in the past two decades.

In 1994 David Trubek, Yves Dezalay, Ruth Buchanan, and John Davis (hereinafter TDBD) theorized that the European offices of U.S. Cravathist firms knew how to manipulate the new vertical and horizontal dimensions of Euro-law to their clients' advantage. (2) In addition, their ability to provide comprehensive legal services was ideally suited to develop the contractual relationships businesses needed to adapt to the changing European market. (3) Combined with the Big Six accounting firms that entered the European legal market offering even more comprehensive services (4) and in-house corporate counsel demanding a broader array of legal services, (5) these competitive advantages forced top European law firms to respond. They transformed themselves from small-scale operations into large, full-service multinational law firms patterned after U.S. law firms. (6) Competitive pressure had forced convergence toward Cravathism.

The legal profession certainly plays an integral role in shaping a nation's legal field, (7) but did the U.S. firms' experience-based competitive advantage actually serve as the catalyst for the convergence towards Cravathism in Europe as TDBD argue? As this paper shows, their explanation fails to account for the fact that the convergence towards Cravathism in Germany (and later in Japan) began before U.S. firms began exerting competitive pressure.

Mary Daly has put forth a related argument as to why U.S. firms had a competitive advantage based on the common law-civil law divide between the United States and Continental Europe. (8) She argues that "the legal profession in the civil law system was ill-prepared for competition. Hamstrung by functional divisions, territorial and jurisdictional limitations, and ethical norms ... it lacked the ability to respond quickly and efficiently to changes in the demand for legal services and to new [U.S.] entrants." (9) This explanation fails to account for the similar transformation that the legal profession in the United Kingdom, a common law country, underwent in the 1980s, which is briefly described in Part IV as a necessary precursor to describing the changes in Germany.

Competitive advantage, either based on experience or on common law origins, cannot adequately explain the organizational transformation of the legal profession in Germany and Japan. By outlining the timeline of convergence in these two countries, I advance an alternative explanation based on the work of Daniel Kelemen and Eric Sibbitt. They argue that:

   [T]he shift toward U.S. legal style is the product of similar, but
   primarily uncoordinated responses by governments to
   analogous economic, political and social developments.
   Increasing economic liberalization, including the catalytic
   spread of U.S. law firms to foreign jurisdictions, and political
   fragmentation have been the primary forces encouraging the
   spread of U.S. legal style .... As other jurisdictions liberalize
   [their economies], they subject themselves to many of the
   same economic conditions that stimulated the emergence of a
   formal, transparent, and adversarial legal system in the United
   States years earlier. (10)

Kelemen and Sibbitt, however, also give the competitive pressure exerted by U. …