The Spanish legal market, once brimming with family-controlled firms run by well-known legal patriarchs, is undergoing a dramatic transformation. The impetus of this change is the same one that has caused a ripple effect among legal communities in many other western European countries – globalisation of capital and trade. International law firms are waking up to what their clients discovered years ago – that Spain is a magnet for investment.
Local clients are crossing borders to expand their business opportunities and they want their firms to go with them. But the transformation of Spain’s legal market is in its nascent stage and this will continue for several years as firms consider their alternatives. Though no one can predict the events that will transpire, what is clear is that the Spanish legal market of the future will not be the same as it is today.
Spain’s rapidly changing legal environment and the interest from the international legal community are largely due to the health of the country’s economy. Spain now exports more capital than it imports. Political stability has fostered a strong investment climate and the rule of law is unquestioned. As well as a healthier economy, Spain’s privatisation programme has fuelled much legal work. Major companies in the telecommunications, energy and financial sectors have been divested and the companies that have emerged are strong, active players both here and in other markets.
Privatised Spanish companies are now candidates for acquiring companies around the world, including the US, as evidenced by the recent takeover of Lycos by Terra Networks, the internet arm of Telefonica.
Spain’s legal community has also been affected by the new economy – globalisation demands lawyers that can offer a complete range of services all over the world. The new economy’s impact on the Spanish legal community has disrupted the status quo. Old-time Spanish firms, once secure in their market positions, are now feeling the effects of competition.
The local firm’s traditional means of doing business has fallen by the wayside. This is not to say that the major Spanish firms will shutter their doors. Clearly, high-quality independent firms will survive in the new world. But international firms will be successful in grabbing more of the high-end work, such as capital markets and international mergers and acquisitions.
Big investment banks coming into Spain want to work with the same lawyers all over the world. This trend creates big problems for firms without significant cross-border capabilities as the banks look to firms with international operations such as Jones Day Reavis & Pogue, Clifford Chance or Freshfields. Top-tier Spanish firms lacking an international partner may evolve into boutiques that serve as local Spanish counsel on international transactions and counsel for their Spanish clients in domestic matters. This process, however, will be a protracted one.
The fundamental reasons for change at the bar are due to structural changes in the Spanish economy, creating a need for international legal talent. The agents of change are the accounting firms, UK solicitors and most recently the increased interest of US firms. The impact made by accountancy firms on the market cannot be overstated. When J&A Garrigues agreed to be acquired by Arthur Andersen in 1997, it stunned the Spanish legal world. Garrigues & Andersen is now Spain’s largest firm. And PricewaterhouseCoopers recently acquired major firm Estudio Legal in Madrid.
The other members of the big five are said to be seeking Madrid firms and already have a base with their own staff lawyers. Most Spanish lawyers regard the inroads made by the big five as irreversible, at least in Madrid.
Bar associations govern the local bars in Spain, and the Madrid Bar Association has not objected to the accountants being in the legal services profession. The Barcelona Bar Association and other local bar groups are opposed to the trend.
The UK invasion will have a major impact on Spain’s legal landscape as more firms look to gain a foothold in this market. And US firms, though quiet for the most part, will not remain on the sidelines for very long.
Juan Tena is a senior partner at Jones Day Reavis & Pogue in Madrid.