24 November 2008
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Despite having officially entered into recession before the UK, the inbuilt flexibility of Germany’s lawyers across practice areas means firms are still willing to put a brave face on things.
Although the German market has appeared to be more resilient throughout the recent crisis than the rest of Europe, the recession has surprisingly hit the country before the UK: on 13 November it was announced that Germany’s economy had experienced two consecutive quarters of negative growth.
Despite the lack of a significant housing bubble and the relative stability of its financial institutions, the world’s biggest exporter has been hit particularly hard and rapidly by the shrinking demand for its products outside its borders. With many international firms having banked on Germany to soften the fall, the question arises: how are its lawyers faring?
Generally, according to German legal magazine Juve, the German legal industry still has to catch up with the facts elsewhere in the local and world markets after another year of record profits, with nary a slowing down in sight (The Lawyer, 6 October).
About the future, most German firms are putting on a brave face – but then again, so did most UK firms six months ago. Much of the rhetoric, too, echoes the mantras of UK managing partners back then.
The top tier of German corporate firms are invoking the proverbial but largely unproven ‘flight to quality’ during downturns.
Rainer Krause (pictured top left), a partner at Slaughter and May’s best friend in Germany Hengeler Mueller, says that what clients require from legal advice more than ever is simply that the advice is absolutely spot on, and that the demand for complex advice has risen in the current climate.
Freshfields Bruckhaus Deringer joint senior partner Konstantin Mettenheimer (pictured middle left) agrees and adds that there will be further differentiation in the legal market, with the three most important factors enabling a firm to survive set to be the quality of advice, the versatility of practices and the right mix of practices.
Shearman & Sterling German managing partner Hans Jürgen Meyer-Lindemann is optimistic too. “This year is one of our best years so far,” he says. “We’re really well set up and have been working on all the big mandates.”
Allen & Overy (A&O), which has traditionally not been in the corporate top tier in Germany, has in recent years beefed up considerably in the country with a series of targeted lateral hires. German managing partner Neil Weiand is a tad more pragmatic. “Of course clients are seeing difficulty,” he says, “and that will ultimately mean law firms will get coloured by that too.”
But he also says he sees new opportunities in the consolidation of banks, adding: “The disappearance of some types of business will get substituted by other areas.”
Most of the larger players are united in expecting the mid-market to suffer, with commercial advisory work being hit especially by the decrease in international trade to and from Germany. Conversely, most of the smaller mid-market-orientated firms pity the transactional behemoths.
“I think that primarily the finance-orientated firms will be hit, and have been already,” says Barbara Mayer, managing partner at mid-size firm Graf von Westphalen. “Insolvency is really busy, employment law is really busy and litigation is going well – and these are areas that will profit. I remember previous crises and firms like us were never hurt by them.”
“We’ve had far less transactional business than other firms, so we’ll not be affected as much,” says Klaus Hubert Görg, senior partner at German commercial firm Görg, “although business will decrease.”
Görg has an insolvency practice that draws in around a quarter of the firm’s revenue. However, the automotive industry, which is widely expected to be the worst affected by the export slump, will draw consequences for firms such as Görg.
One of the trends in recent years has been for corporate boutiques comprising several partners spinning off from large international firms – some by choice, others less so. Their futures are uncertain, says one German managing partner, although he does not expect much consolidation to take place sooner than within a year.
Several smaller firms are also reporting that they have been receiving floods of applications from associates at top-tier firms worried about their job prospects. This is perhaps unsurprising, as transactional work has slowed, partnership promotion is becoming ever-more remote and rumours about future redundancies in the German market abound. So far, none have been made public.
But the legal flexibility of German lawyers could mean that they have it slightly easier once the depressing reality does fully hit and some practice areas experience hard landings. CMS Hasche Sigle managing partner Cornelius Brandi (bottom left) says young German lawyers in particular have such a breadth of training that they can be redeployed to busier practice areas with relative ease.
“German lawyers have a very long training, ;with ;two ;staatsexamen [government licensing examinations], long practical training and very strong judiciary experience,” asserts Brandi.
He adds that insolvency, restructuring, litigation and employment work have been very strong, although no resources have yet been moved across departments.
However, UK lawyers have the trump card of the English law up their sleeve, which enables them to be transferred to places such as the Middle East, Asia and the US with relative ease.