US firms Skadden Arps Slate Meagher & Flom and Seward & Kissel have pulled out of Budapest, marking the start of what many think will be an exodus of foreign law firms from the city.
New York firm Seward & Kissel has transferred its two lawyers in Budapest, Blaise Pasztory and Peter Komaromi, to Squire Sanders & Dempsey in the city.
Skadden Arps was unavailable for comment.
Joseph Markoski, Squire Sanders' European practice managing partner, said: "A lot of firms came in for the big privatisation transactions, but when these dried up, they pulled up their tents."
Another foreign lawyer in Budapest added: "Many foreign law firms didn't move into any other areas of practice, so with privatisation coming to an end, there wasn't enough work."
A further factor for some US firms like Seward & Kissel was that Budapest was often their only foreign office, creating few synergies with head office.
Markoski stressed that Seward & Kissel's closure was unrelated to the new law governing foreign lawyers, which was passed by the Hungarian parliament last month.
However, the law makes it less attractive for foreign firms to practise in the country. Although many US firms lobbied hard for the law to be dropped, they won few concessions and, under the law, are obliged to form an association and share premises with local lawyers.
Another US firm, Debevoise & Plimpton, had previously told The Lawyer that the future of its office depended on what happened with the law. However, a spokesman for the firm said the office was still operational.
Clifford Chance and Cameron McKenna, among others, have already set up local associations in Budapest.