8 December 2008
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While Anglo-Saxon firms remain ensconced in the upper reaches of the French legal market, their domestic rivals are aiming to capitalise on the opportunities presented by the global economic downturn. By Nicola Laver
President Nicolas Sarkozy’s charisma, as well as his recent private and political activities, have brought France to the fore internationally.
But whether his attempts to bolster his country’s economy will prove successful remains to be seen. International law firms in France have for decades enjoyed rich successes, with Paris making use of its location in Europe both geographically and economically.
The country’s legal landscape is characterised by the sheer volume of Anglo-Saxon firms. A table of financial results of top law firms in France in 2008, published by the French independent legal publication Juristes Associés, revealed that more than half of the top 20 firms are headquartered in the UK or US. Competition for the best legal work in the country is intense, with the legal market split between large international firms, independent French firms and traditional boutique firms.
But it is the large and established national players such as Gide Loyrette Nouel, Fidal and CMS Bureau Francis Lefebvre, plus French niche firms Bredin Prat and Darrois Villey Maillot Brochier, who battle it out with Anglo-Saxon firms – who imported the concept of branding – for the best work.
Gide, for example, has beaten off competition from global giant Clifford Chance to win its first French instruction from defence company EADS in five years in respect of an M&A deal, while Bredin Prat has been taken on as lead legal counsel on a private equity powerhouse’s multibillion-dollar public offering.
Clifford Chance, the winner of this year’s Financial Times award for Most Innovative European Law Firm, has been in Paris for 50 years. Yves Wehrli, managing partner of the Paris office, attributes the firm’s success to ambition and modesty, and a “solid, in-depth” practice, adding: “Our coverage is quite global, but with a degree of sophistication in our service. We offer depth and quality, coupled with access to our global market, which makes a big difference.”
New York-based White & Case is another international firm that has conquered the French market. Vincent Morin, managing partner of the Paris office, says (less modestly): “Among the first US-based law firms to establish a truly global presence, White & Case is the only one to bring together such global coverage in Europe, Asia, the Middle East and Africa with such a high quality level of legal services.”
A broad reason for the global success of Anglo-Saxon firms lies in their unique ability to advise on large, complex and sophisticated work. The French business model has tended to be oriented towards a strong presence in France and reliance on domestic law such as tax and employment. But the demarcation between French firms and international firms is not necessarily clear cut, partly because the lawyers in the majority of the latter are French.
According to Arnaud de La Cotardière, co-managing partner in Linklaters’ Paris office, there are two types of overseas firms in France. “First, there are those that just want a presence only, and therefore have a small office,” he says. “Second, there are those with more than just a presence – the category Linklaters falls into. We’re not English firms – we’re the French offices of integrated international firms. We have the same kind of clients, the same quality of lawyers and the same qualifications as the other top firms in France, but we also have an international presence. It’s a positive thing and helps us to get the best work.”
The firm recently advised Suez on the merger between Gaz de France and Suez
– the largest statutory merger and privatisation ever in France.
French market leader Bredin Prat, which has topped the French M&A league tables for the past five years, poses serious competition for international firms in Paris competing for both high-end domestic and international work, despite being much smaller than Gide and Fidal.
According to Bredin Prat M&A partner Patrick Dziewolski, the largest transactions on the French market almost always involve one or several of the top French law firms. “Because of their sheer number and the fact that UK and US firms have hired many top French lawyers, it is, of course, true that UK and US firms are also very frequently advising on those kinds of transactions,” he adds. “It would be very difficult to say whether the role of these firms on those types of deals has increased recently. We would think that it hasn’t.”
In contrast to the large Anglo-Saxon firms, while international firm Gide is big by French standards, it has just a small office in the US. And French giant Fidal has an enormous presence across Paris and is arguably the leading business law firm in the country, with its practice spread between the tax, corporate and employment sectors.
François Bon, who heads Fidal’s international division, acknowledges that the larger UK and US firms are “probably a threat”, but adds: “Anglo-Saxon firms are very successful in their own excellent niches because of their excellent lawyers and their brand is quite well known. They are also probably more focused on the biggest companies, whereas we are focused on the higher end of the mid-market.”
Some domestic lawyers view their Anglo-Saxon counterparts positively, like Arthur Dethomas of Cotty Vivant Marchisio & Lauzeral, which has quickly forged itself an excellent reputation in the French market, particularly with its expertise in advising on matters relating to the financial markets.
“We were founded five years ago, at a time when most large international firms were already present in Paris and had very strongly modified the French legal market, making it one of the most competitive in continental Europe,” says Dethomas. “The arrival of those large international firms has been a terrific opportunity for smaller firms like ours, as we aim to offer the same quality of service to our clients. Large international firms have created a strong challenge for smaller purely domestic firms which do not have the same ability to provide advice in an international environment.
“We decided very early on as a strategic priority to concentrate on two main objectives – create a firm with a strong entrepreneurial spirit, capable of generating a genuine ‘firm personality’, and internationalise to mobilise teams capable of progressing in an international environment. We spend a large amount of time at international job fairs in the US, France, and Japan to attract young talent and demonstrate that we’re an alternative to large international firms.”
Alexander Marquardt of Paris-based Kramer Levin Naftalis & Frankel believes Anglo-Saxon firms are so successful because “they have managed, on average better than their competitors, to be firms with consistent branding and quality control”.
That being so, what can domestic firms offer clients that the big international ones can’t? “We enjoy the combined advantages of an international firm – consistent branding and quality control – with those of local autonomy and expertise and the hands-on involvement of partners – lower leverage than typical in large international firms,” says Marquardt.
Negotiating the downturn
But how will firms in France fare in the face of a global economic downturn? The big international firms are already suffering reduced workloads – particularly those with strong transactional and financial practices. Richard Parolai, finance partner at Clifford Chance Paris, describes how acquisitions and finance matters have virtually gone and M&As have almost stopped.
Likewise, domestic firms are also experiencing a lack of demand in sectors such as banking and finance and M&A because of their reliance on the global financial industry.
The knock-on effect is most likely to affect the smaller French firms as the larger ones start to compete for middle and lower-end work as top-end work diminishes.
“So far, we’ve been fortunate to be spared by the economic downturn,” says Cotty Vivant’s Dethomas. “However, the global economic climate has a clear impact – visibility. We used to be able to determine approximately what our activity would be for the next three to four months at any given time, and this is definitely not the case any more today, with all economic forecasters being on a ‘wait-and-see’ mode. We have been careful to practise counter-cyclical activities at the firm – such as social law, for instance – where one may project stronger activity during an economic downturn. We have always maintained the ability of all the members of our team, regardless of their legal expertise and activity, to practise both in consultancy and in litigation.
We have also preserved our profitability by reasonable expenditures. On a general note, we feel that the global crisis we’re entering will prove to be a great opportunity for those firms that will have succeeded in growing at this time and we hope to be successfully armed to be one of those firms.”
Firms across the board agree that the survival of law firms rests on their management strategies rather than their international bias – or otherwise – or the strength of sector areas per se. Some are having to rethink their business model.
“We’re less affected than we thought we could be because we have lawyers who are able to adapt across practices,” says Linklaters’ de La Cotardière. “We hope we’ll be able to keep the momentum up. The firm also has a lot of work in their litigation and restructuring departments. Some firms may be affected in Paris, but the good lawyers from these firms will still be around.”
Observers say most French law firms have the cash and the strength to survive the global economic crisis, particularly given that the past two years have been good. There is no doubt the majority of law firms in France and internationally will be forced to adapt to the new economic climate.