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Magic Circle (law firms)

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For other uses, see Magic Circle (disambiguation).

"Magic Circle" was an informal term coined in the 1990s describing the five most prestigious London-headquartered multinational law firms, which generally outperformed 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.

Over time, legal commentators and firms included in the definition have increasingly shunned the use of this term.[1] In fact, The Lawyer, who coined the term, declared in 2024 that the Magic Circle had died following the merger of Allen & Overy with Shearman & Sterling.[2] Undoubtedly, the term has continued to be used by some, but as its original members' fortunes diverge and there is a growing emphasis on legacy members to be seen as part of a 'Global Elite', it is likely the term will eventually fall out of use, just as its predecessor, the "Club of Nine", did.

History and evolution

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A&O Shearman, Freshfields Bruckhaus Deringer 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[3] and is generally considered to include the following four law firms: A&O Shearman, Clifford Chance, Freshfields Bruckhaus Deringer, and Linklaters.[4]

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'".[3] The Club of Nine was an informal group of law firms that comprised Allen & Overy (now A&O Shearman), Clifford Chance, Freshfields (now Freshfields Bruckhaus Deringer), Herbert Smith (now Herbert Smith Freehills), Linklaters, Lovells (now Hogan Lovells), Norton Rose (now Norton Rose Fulbright), Slaughter and May, and Stephenson Harwood.[3] The members of the Club of Nine had an informal "no-poaching" agreement and the firms' senior partners would meet.[3] In 1996, Stephenson Harwood was asked to leave the Club of Nine due to its stagnant performance, and the Club was disbanded in 2000.[3]

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.[5] At the time, these firms were Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters, and Slaughter and May.[3] Generally, the Magic Circle firms have among the highest earnings-per-partner and earnings-per-lawyer of UK-headquartered law firms.[6]

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."[3] 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."[3] 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."[3]

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.[7][8] 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.[4] 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 Bruckhaus Deringer and Linklaters would be inaccurate, and to say it is in a class of its own is frankly showing the firm too much deference."[9][10] Nonetheless, other commentators still consider Slaughter and May to be a member of the Magic Circle.[11][12][13][14]

Firms not included

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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.[3]

Slaughter and May, whilst once universally considered a member is now at best 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.

Relationship with the Silver Circle

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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.[15] 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[16][17][18] (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.[15]

Impact of globalisation and relevance of the term

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See also: List of largest European law firms, List of largest United Kingdom-based law firms, and List of Hong Kong law firms by size

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.[19][20][21]

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.[6]

In 2014, it was reported that Freshfields Bruckhaus Deringer wished to discard its Magic Circle designation in the US in favour of being part of the Global Elite.[22] 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".[23]

Barristers' chambers

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The following barristers' chambers in the United Kingdom are occasionally, by analogy, described by commentators as the Bar's Magic Circle:[24][4]

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.[25]

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  • Big Three law firms, an informal term for leading law firms in New Zealand.
  • Big Four law firms, an informal term for leading law firms in Japan.
  • Big Five law firms, an informal term for leading law firms in South Africa.
  • Big Six law firms, an informal term for leading law firms in Australia. In 2012, three of these firms merged with overseas firms, and one other began operating in association with an overseas firm. As a consequence, it has been proposed that the term is no longer applicable to the Australian legal profession, displaced by the concept of Global Elite law firms or International Business law firms.[26]
  • Offshore magic circle, an informal term for leading law firms in offshore financial centers.
  • Red Circle law firms, an informal term for leading law firms in the People's Republic of China coined by The Lawyer magazine in 2014.[27] For further information, see also the list of the largest Chinese law firms.
  • Seven Sisters law firms, a collection of seven leading Canadian law firms with offices in Toronto.
  • White Shoe law firms, an informal term for leading law firms in the United States.

See also

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References

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  1. ^ Tribe, Meghan (21 April 2021). "Freshfields Resists 'Magic Circle' Tag as U.S. Growth Rolls On". Bloomberg. Retrieved 25 November 2024.{{cite web}}: CS1 maint: url-status (link)
  2. ^ "The day the magic circle died: A&O Shearman combine". The Lawyer | Legal insight, benchmarking data and jobs. 2024-05-01. Retrieved 2024-11-25.
  3. ^ a b c d e f g h i j Hickman, Lucy (21 May 2004). "It's a kind of magic". The Law Gazette. Retrieved 9 May 2011.
  4. ^ a b c Rogers, Alexandra (14 December 2017). "One Essex Court is the 'go-to' set for litigation heavyweights". The Lawyer.
  5. ^ "Next City Lawyer". www.nextcitylawyer.com. Retrieved 2023-05-07.
  6. ^ a b Byrne, Matt (2 September 2013). "2018: The magic circle will be no more". The Lawyer.
  7. ^ Byrne, Matt (2 October 2014). "Is this the end of the 'Magic Circle' brand?". The Lawyer.
  8. ^ Byrne, Matt (27 October 2016). "UK 200: Record 11 firms join the £1m PEP club". The Lawyer.
  9. ^ Simmons, Richard (19 September 2017). "The silver circle". The Lawyer.
  10. ^ "The long read: How the silver circle shattered". lawyers4law.com.
  11. ^ "Magic circle law firms". Chambers Student.
  12. ^ "Magic Circle Law Firms: The Ultimate Guide". The Lawyer Portal.
  13. ^ 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.
  14. ^ "Guest post - The Magic Circle is doomed. Here's why". Legal Business. 16 May 2017. Retrieved 15 September 2018.
  15. ^ a b "The silver circle - Chambers Student Guide". Chambers Student.
  16. ^ "Ashurst, Herbies ride out tough year; BLP, Macfarlanes, SJ Berwin succumb". The Lawyer. 14 July 2008. Retrieved 25 October 2010.
  17. ^ "Silver Circle". The Lawyer. 3 September 2007. Retrieved 25 October 2010.
  18. ^ 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.
  19. ^ Geffen, Charlie (8 August 2017). "Can the magic circle ward off the challenge of the US firms?". The Lawyer.
  20. ^ "Gaining ground on the magic circle". The Lawyer. 9 June 1999.
  21. ^ Bruch, Nicholas (October 2, 2016). "Losing the Magic". Law.com. Retrieved 2 January 2018.
  22. ^ "Freshfields in the US: Don't call us magic circle". The Lawyer. 29 September 2014.
  23. ^ Beioley, Kate (28 November 2014). "Linklaters' Simon Davies: "The magic circle isn't what it used to be"". The Lawyer.
  24. ^ 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.
  25. ^ Taylor, Alex (6 August 2018). "Revealed: The magic circle's barristers chambers of choice". The Lawyer.
  26. ^ 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.
  27. ^ 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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