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U.S. law firms with foreign offices are watching the slumping dollar exchange rate with a wary eye, but most say they plan to ride out the economic bumps—at least for now—without making major changes to their overseas operations. Even with some recent upticks in the dollar’s value, it has increasingly lagged behind European currency rates since 2002, touching an all-time low last month when it took $2 to buy a British pound and $1.35 to buy a euro. For law firms with significant business in Europe and elsewhere overseas, any persistent underperformance by the dollar could create unrest among attorneys whose compensation may be losing ground. In addition, any long-term decline in U.S. currency may mean less work for foreign offices serving U.S. clients, if those clients begin to pull their flabby dollars from other countries. Sitting tight But at this point, law firms apparently are sitting tight. “We are bearing costs in the local currency,” said Stuart Schaffer, chairman of Baker Botts’ global project group. Since the 25 attorneys who work in the Houston-based law firm’s London office are paid in U.S. dollars, they get less for their lawyering when the dollar value dips. “It means our London-based partners are, in effect, making less money,” Schaffer added. The consequences of a lackluster dollar to law firms are complex, said Hildebrandt International consultant Giles Iubens, who works in London. Much depends on the percentage of a firm’s attorneys who work outside the United States, the type of work those attorneys do, the compensation structure at those locations and more, Iubens said. Many firms pay their London attorneys in pounds, he explained, which means that as the value of the dollar declines, the firm itself may take a hit. But firms may be structured in such a way that each location operates independently with an autonomous budget, which can help to insulate the firm overall from currency-rate losses. Still others allow their overseas attorneys to choose their compensation currency, Iubens said. That means their pay can outpace or lag behind their American counterparts, depending on the exchange rate. Law firms can also enter into hedge agreements with banks through financial instruments that lock in exchange rates. But most fluctuations tend to even themselves out, said Reed Smith partner Michael Pollack. The firm pays the 60 attorneys in its London office in pounds. “Some years, it may benefit the U.K. guys,” Pollack said. “Some years, it may not.”

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