Firms still rising in the East
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24 March 2014
Law firms based in the former Eastern Bloc face an ultimatum following the economic crisis. "A decision to pull out now means a decision to pull out forever," claims Elena Kirillova, head of Cameron McKenna's Russia and Commonwealth of Independent States (CIS) practice group.
Moscow remains a prestige location for international firms with a CIS practice, says Kirillova. Although senior US lawyers have been pulling out of the city, as reported in The Lawyer last month, it clearly intends to make its offices hang on in there and "wait and see".
Lawyers at leading international firms in the CIS agree the market remains competitive despite the economic crisis. While US outfits, that mainly focus on oil and gas, are scaling down their operations, commercial litigation firm Herbert Smith is planning to open an office.
Before the crisis, size was considered vital, and it continues to be an issue. But Kirillova does not believe that size alone will guarantee success in today's economic climate. "You have to add value to be retained," she says.
Firms have been forced to adapt by diversifying their practices. Bruce Bean, who last year joined Clifford Chance in Moscow from Coudert Brothers' office in the city, says: "Our financial markets and banking lawyers have been redeployed, so our activity level has remained almost constant.
"Ten to 12 lawyers have been converted from banking and financial markets to litigation."
Litigation is not the only area of expansion for foreign lawyers. Loan recovery, insolvency and workouts have become growth areas following a dramatic fall-off in investment.
Lawyers in Poland, Hungary and the Czech Republic point out that because these countries are next in line for European Union admission they are considered "safer" by investors.
"The emerging market funds are no longer so keen on Russia and the CIS," says Bill Shelford, senior partner at Cameron McKenna. "Poland, Hungary and the Czech Republic are Western-looking. They have turned around their economies."
Cameron McKenna, which already has offices in Warsaw, Budapest and Prague, is set to open another in Bucharest, while Freshfields and its German partner Deringer Tessin Herrmann & Sedemund also have plans to expand in the region. They are joined by Austrian firm Wolf Theiss, which recently opened an office in the Czech Republic.
The Polish market is described by Salans Hertzfeld & Heilbronn managing partner Robert Starr as "very buoyant". He says: "Poland has given a clear commitment to a market economy along European lines. There is enough work for all of us."
Starr also describes it as an "opportunistic time" for the Ukraine legal market. "The problem is that the Ukraine is perceived to be a country that hasn't quite got its financial house in order. The commitment to the development of its economy is half-hearted and the state is still a very significant player."
City firm Lawrence Graham is set to become the new kid on the Ukrainian block in opening a new office there. Managing partner Bill Richards says it is a client-led decision following an upturn in commercial and shipping work.
Leading local lawyer Dmitri Grischenko of Grischenko & Partners says Lawrence Graham's move indicates either an improving market or that its clients are having increasing problems establishing a greater local presence.
Lawrence Graham's move coincides with the UK Department for International Development's decision to fund a scheme to develop a modern education system in the Ukraine to support the legal system.
The Baltic legal market is one of the more developed in the region since independence in 1990. Denton Hall senior partner Robert Finney says his firm has undertaken law reform and privatisation work in Estonia and Latvia.
But Western firms face strong competition from strategically located Scandinavian practices. Thomas Lindholm, managing partner at top Finnish firm Roschier-Holmberg & Waselius, says: "We are increasingly doing transactional work, often involving international acquisitions. The Russian crisis doesn't seem to have affected the Baltics. There is still finance work, international initial public offerings and bond loans.
"Northern Europe is becoming a market area," says Lindholm. "This is a new development. From Sweden, Finland and the Baltics, down to St Petersburg - it is increasingly viewed as one market. There are signs this will affect the nature of transactions and the firms being selected."