Ireland hopping in the North and South

Ireland boasts Europe's fastest-growing economy and Northern and Southern firms are cashing in. Ryan Dunleavy visits an island which could make British firms green with envy.

Northern and Southern Ireland's economy grew by 8 per cent last year - making it the fastest-growing in Europe - and law firms are adjusting their strategies to stay on top of the vast amount of legal work.

One lawyer says that if Ireland does not slow down, in five years it will be richer than Bahrain - and he is not joking.

The rapidly expanding economy is creating an unprecedented increase in work for Irish lawyers.

Dublin dominates the Republic of Ireland's legal scene. It has the equivalent of a magic circle, with far larger practices than Northern Ireland. These handle most of the Republic's international referral work.

McCann FitzGerald is the biggest firm with 47 partners. In descending order of size, the other major firms are A&L Goodbody, Arthur Cox, Matheson Ormsby Prentice, William Fry and Mason Hayes & Curran. There are other firms with a strong hold on the South's legal market, but most of them have only between three and 10 partners (see box).

Northern Ireland has 10 leading players. Tughan & Co is the largest with 12 partners. Other major firms include McKinty & Wright, Elliott Duffy Garrett, Cleaver Fulton Rankin and L'Estrange & Brett. In this market, a dominant firm may have only six partners (see box).

Until recently, the separate jurisdictions of Northern Ireland and the Republic have generally kept their lawyers apart. But this is changing. As Ireland takes its place as a major commercial centre in Europe, its legal practices are adapting to offer sophisticated seamless cross-border services.

Six firms have cross-border alliances. Northern firm Elliott Duffy Garrett is associated with Southern firm A&L Goodbody; Northern L'Estrange & Brett is allied with McCann FitzGerald; and Kennedys, an English firm in Northern Ireland, has an exclusive referral agreement with O'Connor Walshe in Dublin. Arthur Cox is the only firm from the Republic with an office in Northern Ireland.

The latest partnership, between northerners Tughan & Co and southerners William Fry, is due to be announced this month.

Brendan Cahill, a partner at William Fry, says: "For years there was little economic co-operation between the North and the South. For a small island like this there were very few links. The business sectors did not have much to do with each other, but the political situation has opened the landscape to a large extent.

"There will be a lot more work of a cross-border type over the next few years. Soon we will have an all-Ireland economy. When it comes down to it, the economies in the North and the South are not very different.

"We see an increasing need, if we are to keep up with our Irish clients, to service them on an Ireland basis. We also feel that, internationally, clients see Ireland as one jurisdiction.

"There was very little [cooperation] there for many years but it is starting to happen. There are businesses that are interested in doing things in the North and the same goes for people up there."

Many industries are ceasing to distinguish between the North and the South. Irish companies, such as Southern-listed Fitzwilton, and banks, such as Allied Irish Bank, which recently acquired First Trust Bank, are cross-border. Tourism is also moving across the boarder - Belfast-owned hotel company Hastings Group recently went South.

One of the great drivers for the unification of the economies is the increasing number of international companies creating a foothold in Ireland. More than 80 per cent of companies in Ireland are from abroad, and inward investment from the US, UK and Germany has increased substantially in recent years. Two examples of foreign clients operating on an all-Ireland basis are Boots and Tesco, which are on an expansion drive across both areas.

Many of the international companies in the South have set up in Dublin's International Financial Services Centre (IFSC) (pictured right), where they face corporation taxes of only 10 per cent.

The rest of the Republic is subject to a corporation tax of 28 per cent. But the Irish government decided this year that the standard rate will be lowered to 12.5 per cent by 2005. Later this year tax within the IFSC will be raised to this standard rate. The UK's standard rate is 30 per cent.

Northern Ireland has also become a more attractive place for foreign companies to invest since the Good Friday Agreement of 1998. The agreement created the framework for a Northern Ireland Assembly, led to a cease-fire and in one lawyer's words: "It has given people hope."

Celia Worthington, a partner at Wilson Nesbitt, says: "There is no doubt that the ongoing peace process has attracted a great deal of new business into the province, which has boosted the work of commercial practices."

But Alan Hewitt, senior partner of L'Estrange & Brett, thinks that prosperity is linked to deeper economic trends. He says: "The upturn in the Northern Irish economy started before the peace process. It almost had a life of its own before the first cease-fire.

"It has also been helped by an upturn in the economy in the South. We view it as a one-Ireland economy. Businesses are spreading between the jurisdictions.

"The commercial property market, for example, went so hot in Dublin that investors started to look north.

"The Celtic economy in general has taken an upturn. There is a new confidence."

This all gives Ireland's firms the opportunity to work on larger deals, on a wider geographical scale. But with prosperity comes competition, mainly from foreign lawyers who also see Ireland's new prosperity as a great opportunity for business.

British firms have acted for international clients in Ireland for years. They usually handle the work from Britain and refer it on points of non-domestic law to Irish firms in the North and the Republic. The traditional position of British firms is summed up by a spokesman at Allen & Overy in London. He says: "A&O has done a number of deals in Ireland and will continue to do so. These have been successfully handled by teams in the London office and have not required a presence there. We have no plans to open an office in Ireland."

But smaller British firms are starting to consider competing with Irish firms on their own ground. They are tempted by the prosperous economy, which they see as less competitive than the British legal market.

The number of British firms with an Irish presence at the moment is still limited and few have attempted to crack the South. Masons has an office in Dublin, and Kennedys has an alliance partner in the Republic.

But there are signs that some British firms see Northern Ireland as a gateway into the whole of the Irish legal market.

British personal injury and trade union specialist practice Thompsons is partnered with McClure & Co in Belfast (The Lawyer, 9 August 1999). But the Northern Irish Law Society is strict on formalities attached to foreign firms opening in the North.

Thompsons partner Tom Jones says: "We couldn't officially merge with them. We have a separate partnership. But we will offer the same things. It should be a seamless service for our clients. It is like an American hotel where the steaks should taste the same no matter where you are.

"We act for a number of clients that operate in the South as well. There is an overlap there. There are obvious opportunities for our business in the South. But we would not open there until we established a presence in the North. It would be a natural progression."

Travers Smith Braithwaite also carries out a lot of work in Northern Ireland. It has no formal office there, but three of its partners who are qualified in Northern Irish law regularly visit the North to conduct business and build up relationships. They are such a regular feature that they are members of local golf clubs and societies. The firm boasts an impressive list of Northern Irish clients, including Ulster Bank, Lombard & Ulster, Diageo, Belfast Harbour Commissioners, and Harland and Wolff Holdings.

Andrew Barrow, a Travers Smith partner qualified in English and Northern Irish law, says: "Northern Ireland is a very busy market. I should think more English firms will set up in the North. They will try to grab their share.

"There is a commercial single Ireland if not political. People in the South are interested in investing in the North. But this works both ways. Dunloe Ewart, an Ulster property development company, is going into the South. They call themselves a pan-Ireland company.

"The more peace there is, the more business that will develop. Money will flow in if peace stays. But if there is peace or not, money will flow in, because the economy is so strong."

However, it is Scottish firms that are planning the latest forays into the Irish legal scene. McGrigor Donald and Dundas & Wilson are both considering opening offices in Northern Ireland.

McGrigor Donald's plans are the most advanced. A spokesman for the firm refuses to say when or where in the North the firm plans to open. But insiders say it is negotiating a lease on a property in the Scottish Provident Building at Donegal Square in Belfast and that the office should be open at the beginning of next year.

Kirk Murdoch, managing partner at McGrigor Donald, says: "We are in a good position to set up in Northern Ireland. It is not a new venture for us because our clients and projects are already there." He adds that the firm has a 10-year history of advising clients in Northern Ireland.

Murdoch says geographical and traditional links make it easier for Scottish firms to set up in Northern Ireland than for English. He says: "Getting from Glasgow to Belfast is sometimes easier than going from Glasgow to Edinburgh. There has been a regular flow between Ulster and Scotland." And he thinks that more Scottish firms will follow.

Iain Doran, a partner at Dundas & Wilson, says that his firm is also hoping to capitalise on the economic wave in Ireland. He says: "Ireland is doing a lot of deals. We are looking very carefully at an operation in Belfast.

"We think there is sufficient activity there to be attractive to us. Now there is peace, there is a big aura of confidence in Belfast. Investment is flooding in. This is investment from international companies. There is also investment in property business people looking at the Province.

"Being Scottish, we like to think we have a closer affinity than the English with the people there. I don't know how big our office would be. But we are keen because of our clients. Our Scottish and English clients have told us we should have a look at going into Northern Ireland.

"We would also hope to spread into the South. It has done so well economically that it is also ripe for law firm expansion.

"But our plan is to look first at Northern Ireland because it is part of the UK. It has its own legal system but it is very similar to UK law. The commercial impetus is very much the same. Company law is also much the same. The difficulties are superficially different in the same way as Scotland and England."

Because so many British firms see Northern Ireland as a good entry point into the whole of the Irish market, the top firms in Southern and Northern Ireland are strengthening their links with clients by offering cross-border representation. All of the top six Southern firms have formed alliances with Northern practices except Matheson Ormsby and Mason Hayes. Declan Moylan, managing partner of Mason Hayes, says the benefits attached to North-South alliances are not as great as some say.

Moylan says: "We do not have a North-South alliance but that does not mean doors are closed to it.

"But my current thinking is that an alliance would be more beneficial for a Northern Irish firm than a Dublin firm.

"I think there are more referral opportunities from Dublin because we have a more vibrant economy. If my firm was in Belfast I would be seeking a quality relationship and would be seeking to look for referral opportunities from Dublin and to capitalise on international links that a Dublin firm may have.

"Northern Ireland's economy is really very small. I don't think there are tremendous opportunities there.

"It would not justify the amount of management time. It would be better used in another jurisdiction.

"But clients are crossing the North and South more and more. If the peace process comes good there will be some positive arrangements but as long as that is shaky I have reservations.

"We have a number of relationships in Belfast, but we don't have any offices abroad. But like every Dublin firm we work hard on international connections."

Worthington of Wilson Nesbitt, which has links with a number of Dublin firms and Eversheds in England, believes that informal referral relationships are more effective for keeping hold of cross-border clients than opening an office. This is because if the firm makes a formal arrangement with one firm it may lose its informal links with the others.

Neil Faris, managing partner of Cleaver Fulton Rankin, agrees. He says: "We don't have a formal alliance partner but we still regard ourselves as a player in a global market. We are available to worldwide companies for services in the North. We are world class.

"We have extensive and active links with firms in Dublin, England and elsewhere and we want to expand and develop them. But we think that an exclusive arrangement with a Dublin firm would exclude us from that work."

Another threat to Irish firms in the South is the country's shortage of skilled workers. The Republic's economy is expanding at full throttle but its population of 3.5 million is too small to fully service it.

The population slightly increased last year by 44,000 Irish people who returned from the UK, continental Europe or the US to take on work in the Republic.

But there is still a hole for foreign lawyers and other professionals to fill. Moylan says: "A difficulty in the [Southern] Irish economy is the restriction of workers. There may be some difficulty in attracting new projects because we may not be able to attract enough workers."

But rather than setting up offices in Ireland, it seems that foreigners are being added to the staff lists at Irish law firms. Frank O'Riordan, managing partner of A&L Goodbody, says: "We are looking to take on more foreigners.

"Over the last couple of years we have taken on lawyers from Australia, New Zealand and Singapore. We will continue to see more foreign lawyers."

James O'Dwyer, chairman of Arthur Cox, says: "I think it is more difficult than it was to attract people. We are recruiting from abroad. We are recruiting people from the UK and US."

But O'Dwyer thinks it is unlikely that a large number of British firms will set up offices in Ireland.

He says: "I think English law firms keep a close eye on Ireland but it is a small economy. The environment is very competitive. The major firms here are already well placed to do a lot of the vibrant work people are talking about."

That, he argues, is the greatest barrier for foreign firms' entering the Irish legal market.

Through a system of North-South alliances, high standards, and employment of foreign lawyers, Irish firms are well placed to hold on to the legal work in their booming economy, despite the problem of labour shortage in the South.