Safe crossing
It's rough out there. In fact, Michael Fayhee of McDermott Will & Emery's Tax Department thinks the current economic downturn could last till 2010. Meanwhile for companies with extensive cross-border operation, there are strategies to cope, as well as, he also warns, an increasingly large tax burden to prepare for01/06/2009
Economic distress often encourages talk of getting back-to-basics, whether it’s from banks or financial regulators. But some companies have retained the cornerstone of straightforward prudent client practice rather longer than others. Like McDermott Will & Emery, which has a lengthy and distinguished history of providing clients with first∞class legal services stretching back to that other troubled period, the 1930s. That was when, in February 1934, Edward H. McDermott and William M. Emery established their new law and tax practice in Chicago.
However McDermott Will & Emery’s clients demand a rather wider range of services now. “Ours is very much a multi-disciplinary practice,” says Michael Fayhee, a frequent lecturer on tax matters who has also taught in the tax programme at John Marshall Law School. “We run three tax group services that work together, from private clients to employee benefits plus our regular tax practice. Overall this spans 200 lawyers generating $200m in revenue.”
It’s an impressive achievement with much of McDermott Will & Emery’s client base now coming from Fortune 500 companies. McDermott Will & Emery has 115 tax lawyers in total, many working outside US domestic borders in Europe and Asia; it also recently commenced a strategic relationship in Shanghai. “It’s a truly comprehensive offering. Inside our tax practice, for example, we have business planning and restructuring, captive insurance and executive compensation groups,” says Fayhee. “Most of our growth is definitely from our cross-border tax practice.”
Secure guidance in stormy waters
Although current commercial conditions remain difficult, many companies are handling the downturn well says Fayhee. But key concerns remain. Good examples of continued anxiety revolve around restructuring issues he says. One area, for example, is concern about proposed legislation that could add to an increase in the tax burden for clients, particularly those operating in multi-jurisdictions. “A hot issue is the proposed repeal of the corporate deferral rules. Currently we have in the US a system where money earned offshore is not taxed. However there are now proposals that would effectively tax such earnings.”
Such rules, if introduced, could of course damage the ability of some companies’ ability to compete.
Of course, most countries tax income where the profits are made, unlike the US, which taxes overseas profits but defers them. Any repeal with this deferral would be a double-whammy against US competitiveness for many companies.
But such challenges are fortified by a practice that has true cross∞border experience – which extends even as far as China. “We’ve had a close relationship for some time with our Chinese partners, MWE China Law. We deliberately
chose a strategic alliance rather than opting for an office. By going by that route it would mean Chinese lawyers would be forced to surrender their legal licence to practice. By going by this route it means our Chinese lawyers can continue to practice and go to Court – a vital need for us.”
Further down the track
If the current global recession isn’t enough to worry about, then Fayhee predicts that clients need to anticipate an increasingly large tax burden in the future. “Governments increasingly are going to have to focus on how they will pay for these deficits. I think an increase in the general tax burden is inevitable just about everywhere in the world. That means of course that could induce a lot of tax restructuring for tax purposes and the demand for lawyers who offer a sophisticated tax advisory service will increase.”
Clients can plan ahead for these issues. Of course, when finances are tight, they will also want to extract maximum value for moderate cost too. “We are well aware of the budgetary pressure on our clients currently,” says Fayhee.
“That’s one reason why we are prepared to assist them in any way we reasonably can. For example, we offer alternative billing arrangements where our bills are based on fixed project costs and simply on hourly rates. This sort of approach can really assist clients to manage their budgets better.”
Meanwhile McDermott Will & Emery clients often have the chance to learn more and meet each other through regular client workshops. “We constantly offer these,” says Fayhee, “it’s a great opportunity for our clients to network. Continuing education is very important, right across all jurisdictions.”
Dealing with the present
Like just about all multi-jurisdictional legal practices, McDermott Will & Emery have seen revenues dip since the global recession hit. “We are sharing some of the pain with our clients,” says Fayhee. “Our revenues are done somewhat. Some areas are suffering more, of course, than others. Our M&A practice is not likely to recover until 2010. That’s simply being realistic.”
While global financial markets and government regulators respond to economic turmoil in the US and around the globe, business leaders are facing increased uncertainty in virtually every aspect of their organisations’ operations and strategic planning. To address these complex, varied challenges, Fayhee says McDermott Will & Emery recently established their Markets Restructuring Practice Group to assist clients by deploying McDermott Will & Emery’s experience in a number of areas including energy, tax, health care, private equity, government relations, financial services and other areas of law.
“This group is composed of partners in the corporate, government strategies and litigation groups, this team advises on the effects of US and international market∞stabilisation legislation, tightened credit markets, criminal and civil liability relating to securities filings and financial statements, bankruptcies and reorganisations, antitrust, mergers and acquisitions, and other matters affecting the financial services sector and the broader business community.”
More about McDermott Will & Emery
McDermott Will & Emery currently advises more than 60 percent of the Fortune 100 and more than 50 percent of the Fortune 500 companies.
McDermott Will & Emery is the 20th largest law firm globally (AmLaw Global 100, The American Lawyer, October 2007).
McDermott Will & Emery covers the US, Europe, Asia and much of China. It is truly international with 1,100 lawyers who practice from the Firm’s offices in Boston, Brussels, Chicago, Düsseldorf, Houston, London, Los Angeles, Miami, Munich, New York, Orange County, San Diego, Rome, Silicon Valley and Washington D.C.
Through a strategic alliance with MWE China Law Offices, they also connect with clients with the support of more than 25 lawyers based in Shanghai.
Further information: www.mwe.com
