Magic Circle (law firms)

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"Magic Circle" is an informal term describing the five most prestigious London-headquartered multinational law firms, which generally outperform the rest of the London law firms on profitability. The term has also been used to describe the most prestigious barristers' chambers in London. All of the 'Magic Circle' law firms and barristers' chambers specialise primarily in corporate law.

Contents

History and evolution

A&O Shearman, Freshfields and Linklaters are headquartered in the City of London. Slaughter & May's headquarters lie just outside the boundary of the City, in the Borough of Islington. Bank junction - 2020-09-20 (2).jpg
A&O Shearman, Freshfields and Linklaters are headquartered in the City of London. Slaughter & May's headquarters lie just outside the boundary of the City, in the Borough of Islington.

The term was coined by legal reporters in the 1990s [1] and is generally considered to include the following five law firms: A&O Shearman, Clifford Chance, Freshfields, Linklaters, and Slaughter and May. [2]

Clifford Chance is headquartered in Canary Wharf. Canary-wharf-one.jpg
Clifford Chance is headquartered in Canary Wharf.

The Magic Circle has been termed a "journalistic device, coined by legal reporters in the wake of the break-up of its predecessor, the 'Club of Nine'". [1] The Club of Nine was an informal group of law firms that comprised Allen & Overy (now A&O Shearman), Clifford Chance, Freshfields, Herbert Smith (now Herbert Smith Freehills), Linklaters, Lovells (now Hogan Lovells), Norton Rose (now Norton Rose Fulbright), Slaughter and May, and Stephenson Harwood. [1] The members of the Club of Nine had an informal "no-poaching" agreement and the firms' senior partners would meet. [1] In 1996, Stephenson Harwood was asked to leave the Club of Nine due to its stagnant performance, and the Club was disbanded in 2000. [1]

In contrast to the Club of Nine, the Magic Circle is an informal grouping of law firms. Initially, the Magic Circle's membership was described by commentators as comprising the UK firms with strong corporate practices or international work. The term "Magic Circle" denoted that the firms within it had outperformed the other Club of Nine counterparts. [3] At the time, these firms were Allen & Overy, Clifford Chance, Freshfields, Linklaters, and Slaughter and May. [1] Generally, the Magic Circle firms have among the highest earnings-per-partner and earnings-per-lawyer of UK-headquartered law firms. [4]

In 2004, Slaughter and May's then senior partner, Tim Clark, said: "It's a funny concept. I don't know where the term came from or who founded it. It's mainly something that comes up when we talk to journalists or they talk to us. We don't describe ourselves as a Magic Circle firm in any of our marketing material." [1] Linklaters' then head of corporate, David Cheyne, said: "City law firms years ago used to provide information to each other so they could keep in touch with what was going on, but that ended yonks ago... It seems to be a term to describe the leading City firms and there is some truth in it." [1] Then corporate partner at Herbert Smith Freehills and former investment banker Henry Raine said: "The phrase was coined by a legal magazine and referred to firms which were very strong in corporate or international work. At the time, Herbert Smith was languishing in the corporate stakes, and so was consigned to the outer darkness." [1]

In 2013, The Lawyer argued that Clifford Chance and Slaughter and May should no longer form part of the Magic Circle. It argued that Clifford Chance's profitability did not match the other Magic Circle firms, and that Slaughter and May operated a different (UK-focused) model, with revenue less than half that of the other Magic Circle firms. [5] [6] In 2017 The Lawyer magazine stated that it no longer considered Slaughter and May to form part of the Magic Circle due to its lower revenues and UK domestic focus. [2] It wrote "Slaughters fits the silver circle bill in every respect. London-centric, sky-high PEP, top-tier work, an aura of prestige: Slaughter and May is far more like Macfarlanes than the Magic Circle quartet it is commonly lumped in with. To put it in the same category as Allen & Overy, Clifford Chance, Freshfields and Linklaters would be inaccurate, and to say it is in a class of its own is frankly showing the firm too much deference." [7] [8] Nonetheless, other commentators still consider Slaughter and May to be a member of the Magic Circle. [9] [10] [11] [12]

Firms not included

Among the large firms not included in the term are Herbert Smith Freehills; Hogan Lovells; Norton Rose Fulbright; and Stephenson Harwood, which are less profitable.[ citation needed ] Also, at the time the term was coined, the corporate practice at Herbert Smith (as it was known pre-merger) was focused on privatisation work, which had dried up. Arguably for this reason, it was not included in the initial Magic Circle. [1]

Relationship with the Silver Circle

The Silver Circle is an informal term for perceived elite corporate law firms headquartered in the United Kingdom that are the main competitors for the Magic Circle in the United Kingdom. The term was coined by The Lawyer magazine in 2005 in response to the pre-existing term, Magic Circle. [13] These firms have a lower turnover than the members of the Magic Circle, but consistently have an average profits per equity partner (PEP) and average revenue per lawyer (RPL) far above the UK average [14] [15] [16] (and, in some instances, higher than members of the Magic Circle). Contrary to what the term Silver Circle may suggest, there is no Golden Circle. [13]

Impact of globalisation and relevance of the term

UK law firms, including Magic Circle law firms, have experienced increased competition from US law firms both domestically (from US law firms with a UK presence) and internationally. [17] [18] [19]

In 2013, The Lawyer argued that the term Magic Circle would lose its relevance, becoming "outmoded": "It will remain an easy shorthand to denote the UK-heritage firms with the biggest revenues, the most international work and which consistently outperform the rest of the [UK] market on profitability." It was argued that by 2023 global law firms would rather be split between the Global Elite law firms, International Business law firms and Super Boutique law firms.

The Global Elite law firms comprise[ when? ] Cleary Gottlieb Steen & Hamilton; Davis Polk & Wardwell;Kirkland & Ellis; White & Case; Latham & Watkins; Simpson Thacher & Bartlett; Skadden, Arps, Slate, Meagher & Flom; Sidley Austin; and Weil, Gotshal & Manges.

The International Business law firms comprise[ when? ] CMS; Ashurst; Baker McKenzie; DLA Piper; Hogan Lovells; Jones Day; King & Wood Mallesons and Norton Rose Fulbright.

The Super Boutique law firms comprise[ when? ] Cravath, Swaine & Moore; Sullivan & Cromwell; Paul, Weiss, Rifkind, Wharton & Garrison; Slaughter and May; and Wachtell, Lipton, Rosen & Katz. [4]

In 2014, it was reported that Freshfields wished to discard its Magic Circle designation in the US in favour of being part of the Global Elite. [20] Similarly, in 2014, Linklaters' then managing partner, Simon Davies, said "The Magic Circle isn't what it used to be in the context of the US market or any market. I don't think it's going to gain power or momentum and I don't think it's a strengthening brand in itself." and "At the end of the day we see ourselves as one of the leading global law firms, not one of the leading Magic Circle firms". [21]

Barristers' chambers

The following barristers' chambers in the United Kingdom are occasionally, by analogy, described by commentators as the Bar's Magic Circle: [22] [2]

In August 2018, research from The Lawyer, however, showed that South Square Chambers received more instructions from the Magic Circle law firms than any other chambers. Barristers from it worked on 64 matters for the Magic Circle law firms since 2015. [23]

See also

Related Research Articles

Linklaters LLP is a British multinational law firm, headquartered in London, England. Founded in 1838, it is one of the four prestigious "Magic Circle" law firms known for their corporate and financial expertise. It currently employs over 3100 lawyers across 31 offices in 21 countries.

Clifford Chance LLP is a British multinational law firm headquartered in London, England, and a member of the "Magic Circle", a group of leading London-based multinational law firms.

Allen & Overy LLP was a British multinational law firm headquartered in London, England. The firm has 590 partners and over 5,800 employees worldwide. In 2023 A&O reported an increase in revenue to GBP2.1 billion and is the second largest law firm headquartered in the UK by revenue.

Freshfields LLP is a British multinational law firm headquartered in London, England, and a member of the so-called "Magic Circle". The firm has 28 offices in 17 jurisdictions across Asia, Europe, the Middle East and North America. It advises national and multinational corporations, financial institutions and governments.

Slaughter and May is a British law firm headquartered in London, England. Founded in 1889 as an offshoot of Ashurst Morris Crisp, Slaughter and May is considered to be one of the most prestigious British law firms and is a disputed member of the "Magic Circle", with many legal commentators no longer considering it a member. The Lawyer in particular have noted that "Slaughter and May is far more like Macfarlanes tha[n] the magic circle quartet it is commonly lumped in with" and believe that Slaughter and May should rightly be considered part of the Silver Circle. In addition to London, it has offices in Beijing, Brussels and Hong Kong.

Kramer Levin Naftalis & Frankel LLP is an American law firm headquartered in New York City with branch offices in Silicon Valley, California; Washington, D.C.; and Paris, France. The firm has 324 lawyers.

The offshore magic circle is the set of the largest multi-jurisdictional law firms who specialise in offshore financial centres, especially the laws of the British Overseas Territories of Bermuda, Cayman Islands, and British Virgin Islands, and the Crown dependencies of Jersey, Guernsey and The Isle of Man.

Herbert Smith LLP was a multinational law firm headquartered in London, United Kingdom. The firm was founded in the City of London in 1882 by Norman Herbert Smith and merged with the Australian law firm Freehills on 1 October 2012, forming Herbert Smith Freehills. At the time of the merger it had 13 offices across Europe, the Middle East and Asia, around 240 partners and 1,300 fee-earners. It was regarded as forming part of the "Silver Circle" of leading British law firms.

The Silver Circle is a group of elite corporate law firms headquartered in London that has evolved significantly as the UK legal market has been affected by globalisation and mergers. The law firms generally described by The Lawyer magazine as comprising the Silver Circle were historically Ashurst, Herbert Smith, Macfarlanes, SJ Berwin and Travers Smith.

Freehills was a commercial law firm operating in the Asia Pacific region. It was one of the Big Six Australian law firms. In 2012 it merged with Herbert Smith to become Herbert Smith Freehills.

The Big Six is a term that has traditionally referred to the six largest Australian law firms, as assessed by revenue and lawyer head count. From the mid-1980s, the phrase was in regular use to distinguish the largest Australian firms, collectively, from their smaller competitors. While informal, it was a widely-used descriptor, appearing in news items, industry commentary and scholarly articles.

Travers Smith LLP is a corporate law firm headquartered in London, United Kingdom. It advises national and multinational companies in the UK and internationally across the full range of corporate and commercial matters.

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<span class="mw-page-title-main">Big Five (law firms) in South Africa</span> Group of leading law firms

The Big Five law firms is a term informally used in South Africa to refer to those law firms which, collectively, are perceived to be the leading law firms based in South Africa.

Macfarlanes LLP is a London-based law firm.

<span class="mw-page-title-main">Herbert Smith Freehills</span> Multinational law firm

Herbert Smith Freehills (HSF) is a global law firm with headquarters in London, England and Sydney, Australia. HSF has been widely acknowledged as one of the world's most elite and selective law firms, and, as of 2024, was the 33rd largest by revenue. It was formed on 1 October 2012 by a merger between the United Kingdom-based Herbert Smith founded in 1882, then a member of the Silver Circle of leading UK law firms, and Freehills founded in 1852, one of the Big Six Australian law firms.

The legal services sector of the United Kingdom is a significant part of the national economy; it had a total output of £22.6 billion in 2013, up from 10.6 billion in 2001, and is equivalent to 1.6% of the country's gross domestic product for that year. The sector has a trade surplus is £3.1 billion in 2013 and directly employees 316,000 people, two-thirds of whom are located outside London. The UK is the world's most international market for legal services. It allows virtually unrestricted access for foreign firms, resulting in over 200 foreign law firms with offices in London and other cities in the UK. Around half of these are US firms, with the remainder mainly from Europe, Australia and Canada. The UK legal market has a strong global position due to the popularity of English law. Some 27% of the world's 320 legal jurisdictions use English Common law.

Allen & Gledhill LLP is a Singaporean law firm with a regional network of associate firms and offices. As the largest of Big Four law firms in Singapore, the firm is a regional market leader in many practices, particularly banking and finance, capital markets, corporate law, M&A law, and other transactional and advisory matters. The firm provides legal services to local companies and MNCs, financial institutions, and individual clients.

In 2019, the top 50 Dutch law firms had around 4,476 attorneys and the top 30 law firms had around 183 notaries and 527 candidate notaries. According to the Chambers and Partners legal directory, the top five law firms in the Netherlands are Allen & Overy Netherlands, De Brauw Blackstone Westbroek, Houthoff, Loyens & Loeff and Stibbe. Every year advocatie.nl publishes a list of the 50 biggest law firms in headcount.

References

  1. 1 2 3 4 5 6 7 8 9 10 Hickman, Lucy (21 May 2004). "It's a kind of magic". The Law Gazette. Retrieved 9 May 2011.
  2. 1 2 3 Rogers, Alexandra (14 December 2017). "One Essex Court is the 'go-to' set for litigation heavyweights". The Lawyer.
  3. ↑ "Next City Lawyer". www.nextcitylawyer.com. Retrieved 2023-05-07.
  4. 1 2 Byrne, Matt (2 September 2013). "2018: The magic circle will be no more". The Lawyer.
  5. ↑ Byrne, Matt (2 October 2014). "Is this the end of the 'Magic Circle' brand?". The Lawyer.
  6. ↑ Byrne, Matt (27 October 2016). "UK 200: Record 11 firms join the £1m PEP club". The Lawyer.
  7. ↑ Simmons, Richard (19 September 2017). "The silver circle". The Lawyer.
  8. ↑ "The long read: How the silver circle shattered". lawyers4law.com.
  9. ↑ "Magic circle law firms". Chambers Student.
  10. ↑ "Magic Circle Law Firms: The Ultimate Guide". The Lawyer Portal.
  11. ↑ Lockhart, Keely (February 2014). "The magic circle: meet the City's top commercial law firms". The Gateway. Archived from the original on April 2, 2016.
  12. ↑ "Guest post - The Magic Circle is doomed. Here's why". Legal Business. 16 May 2017. Retrieved 15 September 2018.
  13. 1 2 "The silver circle - Chambers Student Guide". Chambers Student.
  14. ↑ "Ashurst, Herbies ride out tough year; BLP, Macfarlanes, SJ Berwin succumb". The Lawyer. 14 July 2008. Retrieved 25 October 2010.
  15. ↑ "Silver Circle". The Lawyer. 3 September 2007. Retrieved 25 October 2010.
  16. ↑ Fletcher, Martin (28 August 2005). "'Silver circle' firms upset the legal order". The Times. London. Archived from the original on June 12, 2011. Retrieved 25 October 2010.
  17. ↑ Geffen, Charlie (8 August 2017). "Can the magic circle ward off the challenge of the US firms?". The Lawyer.
  18. ↑ "Gaining ground on the magic circle". The Lawyer. 9 June 1999.
  19. ↑ Bruch, Nicholas (October 2, 2016). "Losing the Magic". Law.com. Retrieved 2 January 2018.
  20. ↑ "Freshfields in the US: Don't call us magic circle". The Lawyer. 29 September 2014.
  21. ↑ Beioley, Kate (28 November 2014). "Linklaters' Simon Davies: "The magic circle isn't what it used to be"". The Lawyer.
  22. ↑ Bar Magic Circle, AllAboutLaw; Glossary of Law Terminology, University of Exeter; "Set Point", The Lawyer, 30 October 2000; The Modern Bar: diverse and open to all, fn 7.
  23. ↑ Taylor, Alex (6 August 2018). "Revealed: The magic circle's barristers chambers of choice". The Lawyer.
  24. ↑ Dobrjanski, Jarek (October 31, 2012). "An obituary for the term 'Big 6' law firms in Australia". Beaton Research & Consulting. Archived from the original on November 7, 2012.
  25. ↑ Dowell, Katy (25 March 2014). "Elite 'red circle' firms Zhong Lun and Jun He plot merger as consolidation grips China legal market". The Lawyer. Retrieved 2016-04-09.
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