More than 50% of foreign SOEs want fixed fees

A majority of Chinese and Indian-based State Owned Enterprises (SOEs) request fixed fee arrangements for legal advice, according to Perth-based advisors. Squire Sanders Australia managing partner John Poulsen told ALB that the percentage of Chinese based SOEs requesting fixed fees is close to 85 percent. “With the larger Chinese state owned enterprises – for example those who have investments here and elsewhere – we have to provide them with a fixed price for undertaking work, such as a restructure,” he said.

Poulsen and the team at Squire Sanders (previously the majority of partners at Minter Ellison Perth) have been working with Chinese-based clients for a number of years and has found that the clients there are very focused on costs up-front, far more than domestic clients. “A number of clients from South East Asia go for fixed-fee prices,” he said. “It’s probably less than 25 percent across domestic clients, but that is growing whereas the overseas percentage has remained fairly steady.”

Having not had to provide such detailed costs up front previously, Poulsen says the firm had to learn how to scope a project very carefully from day one when dealing with the SOEs. “The biggest adjustment is having to think about every element of the job at the beginning,” he said. “You have to be very specific with what that price includes. You have to work out what every element of the transaction is, then sit down and think about what could be different, how things could change, and then come up with a price that covers that.”

Perth-based Allens Arthur Robinson partner Anthony Patten has also seen a higher use of fixed-fees amongst overseas clients. “It is pretty common for both Chinese and Indian SOEs,” he said. According to Patten, the SOEs don’t consider lawyers to be different to other service providers, such as engineers and builders, and hence demand the same price certainty. “However, this may change as they become more familiar with dealing with foreign lawyers,” he said.

Alternative firms continue to flourish 8 December 2011