23 April 2012 | Updated: 23 April 2012 10:23 am
3 April 2013
28 October 2013
2 September 2013
22 April 2013
25 November 2013
Anglo-Saxon firms may not want to practise Swiss law, but with WTO work and changing tax regulations they would be foolish to stay away
As an international legal market, Switzerland is unlike any other in Europe. Despite the country’s status as a corporate hub, only one major Anglo-Saxon law firm - Baker & McKenzie - has a sizeable local presence there, although many international firms have small outfits. Domestic practices dominate and are flourishing, thanks to healthy referral relationships with US and magic circle firms, and the number of major transactions with a Swiss element.
But that has not stopped international firms from looking at what they can do in the jurisdiction. The difference between Switzerland and other countries is that strategy is generally focused on a distinct practice area and concentrated in a small workforce, backed up by other offices in the firm’s network.
In the past few months several firms have announced moves into Switzerland or the expansion of an existing Swiss practice. Speechly Bircham and Farrer & Co have both established a presence in Zürich, while US firm Quinn Emanuel Urquhart & Sullivan is also intent on moving into the city following the October 2011 hire of former Novartis general counsel Thomas Werlen.
Meanwhile, Holman Fenwick Willan (HFW) picked up Akin Gump lawyer Matthew Parish as an arbitration partner in Geneva, adding to the firm’s Swiss commodities practice. Akin Gump opened in Geneva in 2010, taking what was previously Hogan & Hartson’s Swiss office, and the firm has also been hiring in the past couple of years.
The three key practice areas for foreign firms in Switzerland are arbitration, international trade and private client work, although pigeonholing practices is never clear-cut. Private client, for example, covers a multitude of areas including wealth planning, investment management and tax, while trade work is both contentious and non-contentious.
International firms remain divided on whether or not to have a Swiss law capability. A handful employ a small number of Swiss associates, while others prefer to rely on the relationships they have with domestic firms.
Trade work is one of the most established areas to practise in for international firms in Switzerland, mainly out of Geneva where the World Trade Organisation (WTO) has its headquarters. US firms have led the way in setting up offices in the city, with Sidley Austin and White & Case arguably having the most success.
Sidley’s Geneva office co-head Scott Andersen explains that the firm launched in the city with just two people; 12 years on, the office employs 35 professionals and in 2010 expanded from just trade work into arbitration too.
Andersen says the firm began its Swiss venture by acting mainly for governments on trade issues, but has developed its practice to add corporate clients. Sidley’s Swiss trade client list includes global names such as Airbus, AT&T, SAB Miller and Budweiser as well as governments such as Brazil, China, Japan, Norway and the Philippines.
“We’ve been able to maintain this lead and this high volume of work since we started,” Andersen says.
He thinks a secret of the firm’s success has been its ability to hire a team of mainly senior associates with experience in academia or the WTO, bringing the sort of knowledge valued by the clients the firm is seeking to attract.
The links between Sidley’s Geneva trade practice and the rest of the trade team, based predominantly in Washington DC and Brussels, are key to the Swiss office’s success. The same can be said of other US firms with trade practices in Geneva, such as White & Case.
The firm’s Geneva executive partner Brendan McGivern recalls: “When we set up we were kind of a subsidiary of the Washington office, but it was so successful that in 2008 the firm converted us to a regular office.”
McGivern says the practice is as much advisory as contentious, and has grown revenue by 500 per cent in the past six years.
“It’s almost a recession-proof practice because the companies that are trying to use trade rules to access foreign markets haven’t been affected by the downturn in the market, and we don’t rise and fall depending on the number of disputes in the WTO,” he says.
Both Andersen and McGivern say being in Geneva is vital.
“A large number of firms have tried to do trade work from other places,” says McGivern. “We’ve found it beneficial to be here in Geneva. We know everybody we should at the WTO and can ’take the pulse’ of people. That’s tough to do from Brussels or London.”
King & Spalding has also been building a trade practice in Geneva, having hired Daniel Crosby from Swiss firm Budin & Partners in 2010. Crosby explains that the firm is using its Washington DC trade practice as ’back-office’ support for Geneva and, instead of hiring a number of more junior lawyers, wants to build a senior team.
Like Sidley, King & Spalding’s practice is a mixture of private and government work - Crosby estimates that around 60 per cent of advice is provided to corporates.
He says trade work is the province of international rather than domestic firms because the support of a global network is vital. Crosby set up a trade practice at Budin, having previously practised at White & Case. He says multinational clients did come to him for advice while at Budin, but the size of the team and the limited jurisdictional scope of the firm meant he had to refer a large amount of work to international firms.
A handful of Swiss firms, including litigation powerhouse Lalive, have tried to establish trade practices, but none have the weight of the US firms. Crosby points out that the Swiss government itself is not heavily involved in WTO disputes, although it is a participant in non-litigation aspects of the organisation.
“The Swiss government has a tradition of resolving disputes in a different way,” he says. “Also, Swiss business has always been watching from the other side of the lake.”
“The types of companies and sovereign governments that want to pursue WTO issues feel they need to go with large international firms, particularly firms that have a large presence in Washington,” says McGivern. “In some cases, it may be difficult for multinationals or governments to go with Swiss firms that don’t have this global footprint. It’s less to do with Swiss firms and more to do with what clients are looking for.”
McGivern adds that White & Case’s trade practice is likely to diversify away from its core area of energy into new areas of trade law such as agriculture or technical barriers to trade.
The link between trade work and international arbitration is something other firms have been seeking to exploit.
In September 2010 Sidley hired Winston & Strawn partner Marc Palay and his team to kick-start an arbitration practice in Geneva. Palay became co-managingpartner of the office alongside Andersen, and also co-chair of the firm’s international arbitration team.
Palay and his team brought a mixture of experience, including Swiss-qualified lawyers and a number of advocates. He says this sets the group apart from rivals.
“We have a combination of common law advocacy skills and good local civil law sensibility plus understanding,” Palay says.
He reports that in the 18 months since the team’s appointment the firm has advised on a number of hearings and substantive cases, mostly for major corporates with a presence or headquarters in Switzerland, including arbitration for clients of Sidley’s trade practice.
The general health of the disputes and arbitration market has meant that Palay’s replacement at Winston & Strawn in Geneva, partner Ricardo Ugarte, is also optimistic about where his office is going.
“The story for Winston & Strawn is that we’re trying to expand our disputes practice in Europe, Asia and globally as much as possible, using places like Geneva as a foothold,” he says. “We’re definitely headed in the right direction. We’ve continued with our plans and it’s about the chemistry of the team and making sure we’re working together. We’re rebuilding successfully.”
Ugarte says the team has acted on recent disputes for clients such as the Kingdom of Jordan. The fact that tobacco giant Philip Morris - a key client for the firm as a whole - has its international operations centre in Lausanne is also important.
Akin Gump’s Switzerland managing partner Charles Adams is similarly upbeat, reporting a “very, very busy” beginning to 2012. Although the firm lost Parish to HFW, it has been hiring and promoting for the office recently. Our principal problem is that we’ve pretty much run out of physical space,” says Adams.
Much of the work coming into Akin Gump in Geneva is flowing from Moscow. The firm took on a team from Hogan Lovells in Russia shortly after the completion of the Hogan & Hartson and Lovells merger, and this was the catalyst for bringing Geneva on board. Adams says the flow of work between Russia and Switzerland has expanded substantially since 2010.
“It’s mostly Russian disputes translated into international arbitration or litigation in the High Court in London,” he adds. “It’s been our experience that Russian parties on both sides will outsource to international arbitration in the case of any disputes simply because of the absence of the rule of law in Russia.”
Last year, some 8 per cent of the arbitrations run by the Swiss Chambers’ Court of Arbitration and Mediation involved parties originating in Eastern Europe and Russia, compared with 6 per cent for the total 2004-11 period (see graphic, page 31).
Some of those involved in arbitration outside Switzerland have voiced the opinion that Geneva has been somewhat left behind other major arbitration centres - particularly London - in recent years.
But lawyers based in the city disagree. Not only is Geneva still home to the arbitration centres for the World Intellectual Property Organisation and the Court of Arbitration for Sport, they also feel it continues to play a role in commercial arbitration.
Zürich also has a sizeable arbitration presence. But in both Swiss cities international firms are competing with domestic outfits, especially when it comes to being appointed as arbitrators.
“My sense of the market is that the Swiss firms pick up a ton of the litigation work,” observes Ugarte.
Winston & Strawn and Akin Gump both supplement their arbitration work with small Swiss law practices, accounting for around 20 per cent of revenue at Winston and a bit more at Akin Gump.
“We help our multinational clients with whatever issues come up,” explains Ugarte. “We’re not trying to compete for pre-eminence in those areas. Basically, to the extent that our clients have Swiss law problems, they can come to us.”
Adams says corporate, tax and private equity matters make up the non-arbitration side of the practice. He is keen to reinforce the Swiss corporate and commercial offering, although he does not see the firm wanting to employ hundreds of lawyers out of the Geneva office.
However, not every firm sees the need to have either Swiss capability or an arbitration team in the country. Crosby reveals that the prospect of establishing an arbitration capability in Geneva is under consideration by King & Spalding’s arbitration group, but for now they serve Swiss arbitration cases from Paris and London.
The other area of expansion at present is in private client work, galvanised by Switzerland’s efforts to reduce banking secrecy and tax changes across Europe. Even firms that do not specialise in private client work are considering ramping up their capabilities in Switzerland, while the specialists are busy.
“We’d used the office to develop our private client work in Switzerland but saw the advantages of having somebody on the ground here to continue that,” explains Badcock. “I think with private client work in particular, it’s helpful to have someone who can have face-to-face meetings with clients and intermediaries.”
The need to be on the ground in Switzerland was also the prompt for Farrers when it announced last year it was sending partners Robert Field and Nick Dunnell to Zürich. Dunnell and Field both split their time between Switzerland and the UK, and there are no Farrers lawyers based permanently in the jurisdiction.
“We took the view as a firm that we were going to adopt a softly-softly approach,” Field says. “Bearing in mind Swiss sensitivities, we weren’t going to open an office here with 50 staff and invite everyone to a grand opening. We had a network of people and businesses we had connections with before we started this exercise, and we’ve been able to build on that.” He is keen to emphasise that Farrers is not aiming to do solely private client work in Switzerland.
“What we’re trying to achieve in Zürich is introduce people who have only ever met a private client lawyer to other people in the firm,” he says.
The venture into Zürich began so successfully that in December Farrers began to explore the Geneva market too. “We concluded that we’d rather neglected Geneva, and there’s just as much opportunity there,” Field adds.
The Swiss project is constantly under review and Dunnell and Field admit there will come a time when the firm will have to decide whether or not it wants to have a permanent office in either Geneva or Zürich.
They point to the range of work generated by clients based in Switzerland, or who have their wealth and investments in Switzerland, as an example of why there is potential in the country. Much of this comes from UK residents who are ’non-domiciles’ and need advice on tax management, among whom Switzerland is a popular place to establish investment structures.
Dunnell says another source of work recently has been Middle Eastern clients looking to use Swiss vehicles to purchase property in London, which has been given impetus by the Arab Spring.
“It’s not just the purchasing of these properties, but the structuring of purchases in a tax-efficient manner,” he says.
Badcock reports that Collyer Bristow is seeing requests for similar advice. Through non-domiciled clients seeking help on their Geneva banking matters, for example, the firm is also developing a closer relationship with the bankers.
“A developing area is helping UK clients make tax disclosures related to assets they have in Switzerland,” Badcock adds. “A catalyst for that has been the UK-Swiss tax agreement because it’s forcing people to think about it, but it’s also clients who have been paying their tax but might not have had good advice or done planning. The changes in the law are causing them to think for the first time that maybe they should get some advice.”
Badcock says that when it comes to matters such as estate and tax planning, being in Switzerland is crucial.
“You realise that within tax and estate planning there’s a particular type of problem that comes up in Geneva,” he says. “Clients have something similar about them. It’s helpful once you realise that, because your know-how of dealing with these clients accelerates at a much greater rate than if you’re only coming across them occasionally in London.”
While lawyers based in Switzerland are confident that the investment in being in what remains a fairly expensive country is worth it, they believe that many years of hard work must be put in to make the investment pay.
“Lots of law firms have become more interested in Switzerland,” says Badcock. “The big question is how you develop that. The challenge of the Swiss market is that people don’t trust you overnight and they don’t take you seriously until you’ve been around, showing what you can do, for a long time.
“If you really want to grow your practice in Switzerland the best way is to establish a permanent office. If you don’t do that you really have to put in considerable effort to make visits over a long period of time and be patient.”
For all practice areas, there remain uncertainties about where Switzerland will be in the future.
“Switzerland as a financial centre is changing before our eyes out of all recognition,” Field points out. “We can’t tell what the future holds for Switzerland as an economy and a financial centre. The fact is that Swiss banking secrecy is pretty much at an end and the Swiss are having to compete on a playing field they’ve not been on before.”
However, the jurisdiction’s long history as an international financial centre is likely to stand it in good stead - while the regulations governing investments managed out of Switzerland may have changed there are still many incentives for businesses and private individuals to use Swiss structures.
The arrival of more firms from overseas to practise in areas such as arbitration or private client is likely, as is the continuing expansion of those already present in Switzerland. But local firms clearly have little to fear in terms of significant competition from overseas, and the friendly referral relationships between Swiss and international lawyers will certainly continue.
Click for bigger image
Port in a storm
Switzerland has remained immune from foreign firms muscling in on local work, but international outfits are still flocking to Geneva and Zürich in search of opportunities in trade, arbitration and private client work. So what are the attractions and challenges of setting up an office in Switzerland, given the changing economic climate?
Annual inflation (Jan 2012)
Life expectancy at birth
Unemployment rate (2011)
Source: World Bank, Swiss Federal Statistical Office
Swiss Firms from The Lawyer Directory