A growing number of leading U.S. law firms are moving to shield European partners and associates from the prolonged slump in the dollar, it has emerged.
Firms including Latham & Watkins and Orrick, Herrington & Sutcliffe are reviewing provisions for partners in overseas offices, while several elite Wall Street firms have already moved to guarantee packages for U.K.-based associates.
Both Latham and Orrick already have hedging provisions in place to offset currency risk but are now reviewing their models in a bid to remain competitive in Europe. Crucially, many firms claim the poor exchange rate has made lateral partner recruitment in London much more difficult.
Latham's existing provisions allow partners to opt into an external hedging program each year. In the past this has allowed individual partners to hedge up to 70 percent of their remuneration at a rate determined annually.
Orrick currently bases its protection for partners' pay around a five-year average exchange rate but is planning to consider a variety of different options as it attempts to expand in Europe.
One U.S. partner told Legal Week: "The biggest impact is for firms in London because it makes it less attractive for potential lateral hires. We have hedges in place but the challenge is that we need to offer more than just modest hedging."
The moves come after Weil, Gotshal & Manges last year agreed to shield its European partners' drawings against the sliding dollar by fixing the exchange rate at a preferential rate -- a deal worth more than £100,000 ($194,200)annually to some partners.
Meanwhile, it has also emerged that New York firms including Simpson Thacher & Bartlett and Sullivan & Cromwell have agreed favorable exchange rates for their London associates, echoing the current policy at Latham.
Both firms decided in the autumn to convert New York-set salaries using a rate of $1.64 to the pound. The change substantially boosts the pay of London-based associates, as the spot rate at the time of going to press was $1.96 to the pound.
This means that a growing band of U.S. law firms are now paying London-based associates more than on Wall Street, with newly-qualified lawyers in line for basic salaries of around £97,000 ($188,400).