While opening an office in Israel is a sensitive issue for magic circle firms, the country has become quite a magnet for individual lawyers – many from the UK – who are relocating in their droves. By James Swift

Thanks largely to advances in the technology sector, Israel’s economy has grown significantly over the past decade. The country now has the most companies listed on the Nasdaq after the US and Canada, and in May 2010 Organisation for Economic Cooperation and Development (OECD) members voted ­unanimously to invite Israel to join the organisation.

It’s a state of affairs in stark contrast to 15 or so years ago, when virtually all the investment into the country came from wealthy Jewish families and ­philanthropists who put up cash out of support for the state as opposed to any expectation of ­generous returns.

“The economy has mushroomed,” says Alan Sacks, senior partner at Herzog Fox & Neeman. “Before, in the 1980s, most of the investment into the country was ­sentimental, but now Israel is a major R&D [research and development] centre for most technology companies.

“If you have voicemail on your telephone, it’s Israeli. If you have a stent in your heart, it’s Israeli. If you have a CT-scan, you’re using Israeli technology. Israel punches far above its weight for a country of its size.”

Following the modernisation of its ­economy, Israel has taken steps to open up its legal market too. In July 2009 the ­country finally permitted foreign lawyers and firms to practise the law of their ­country in Israel. Though it showed the country’s desire to modernise, it is expected to be a watershed moment.

“We’re not expecting to see a herd of magic circle or Wall Street firms banging on the door,” says Herzog Fox & ­Neeman ­partner Mark Phillips. “There are high ­barriers for them. For example, our fee structures make it hard to compete with local firms because we can provide the same level of service cheaper.”

According to Clifford Davis, a partner at S Horowitz & Co, the charge-out rates of a junior partner in Israel are roughly the same as an articled clerk in the UK. The low rates are almost certainly linked to the intense competition in the market: Israel has more lawyers per capita than any other country.

But it’s not just the economics of the ­situation keeping the big firms out. It’s the politics too. For global firms with a lot of clients in the Middle East, opening an office in Israel is still a delicate issue.

“There is sensitivity to opening a formal office in Israel,” admits Joshua Kiernan, head of White & Case’s Israel practice.

Though Kiernan adds that this is just one ­factor preventing international firms expanding their presence in Israel, other factors include the economic crisis and “the fact that the country has such a large ­number of highly qualified lawyers that worked at big firms”.

Mutual attraction

Israel may not hold much attraction for UK and US firms as the latest destination, but its magnetism for individual lawyers is stronger than ever. After the deepest ­recession since 1929, when opportunities at New York and London firms are thin on the ground, it should come as no surprise that the top Israeli firms are being courted ­furiously by US and UK lawyers.

“I can see what the situation is in other jurisdictions from the CVs I’m getting,” says Sacks. “When the market is strong in New York or London, I don’t get interesting CVs.

ut over the past few years I’ve taken Israelis at the top US and UK law firms who are thinking about how they’re going to bring up their family. And when the financial crisis hit it made them think harder,” explains Sacks.

“I moved to Israel in 2000 and there weren’t many UK lawyers here, although there were a few US lawyers,” says Simon Marks, a partner at Epstein Rosenblum Maoz.

“But over the past two years there’s been a huge push of lawyers who are ­English – such as myself – who want to come here. And it’s really high-calibre ­people who are moving back. We’ve taken on lawyers from Allen & Overy (A&O) and ­Freshfields [Bruckhaus Deringer].”

As well as furnishing Israel’s top firms with talent trained by the magic circle, the past decade has also witnessed the rise of boutique firms, established by UK-qualified lawyers harnessing the links between the two ­countries. A trend likely to perpetuate the migration of UK and US lawyers to Israel.

“My grandfather set up Great Portland Estates and his brother in-law was Nathanson of Nabarro Nathanson, so I always felt like I wanted to do something entrepreneurial,” says David Cohen, founding partner of UK/Israeli corporate finance boutique Cohen Legal Partners.

“I felt the UK was in a depression and I wanted the challenge of building ­something in Israel, even though it was a difficult ­jurisdiction. I didn’t think the UK was at an age of entrepreneurialism. But also, being Jewish, I wanted to do something here – I wanted to build something that linked my two worlds.”

Some enterprising US and UK lawyers have even capitalised on Israel’s unique draw, for which top lawyers are willing to forego the big pay packets they could earn practising in the US or UK to live in the country, creating a model of firm that could not exist anywhere else. In effect, they are ­outsourcing firms, practising UK or US law, but staffed by lawyers from top UK and US firms.

One such firm is Asserson Law Offices (ALO). Established in 2005 by Trevor Asserson, former head of litigation at Bird & Bird, the firm represents sovereign states, multinationals, public companies and SMEs in corporate, commercial, employment, real estate, private client and litigation matters.

“What we’ve done is to take qualified lawyers and say, ’by the way, they’re half-price,’” says Asserson, now name partner at ALO. “That’s a pretty attractive prospect for clients looking for conveyancing work. But for litigation, where clients are billed by the hour, it’s incredibly attractive.”

This model of firm is particularly alluring for more senior lawyers moving to Israel, for whom the prospect of retraining and starting at the bottom is an unattractive one and ALO has brought in lawyers from A&O, Baker & McKenzie and Shearman & Sterling.

“Although the trend is usually for lawyers to come to Israel and retrain, a lot of ­English lawyers find that to be a problem because they have to learn the language and compete with locals,” says Asserson, “and also because they are throwing away the benefit of years of experience. More and more lawyers hear about the fact that they can do this and call me. I’ve got ­equity partners at major firms talking to me.”

Dual qualifications

Outside Counsel Solutions (OCS) has a ­similar remit. Established in 2003, the firm started life as a subsidiary of telecoms ­company IDT. But when the company began divesting its non-core assets last year, lawyers at the firm took over.

OCS is both an Israeli firm and a US firm. The Israeli side is owned by the dual-­qualified lawyers at the firm, while the US side is owned by the solely US-qualified lawyers. Head of corporate at the firm, Tuvyah Aronoff, admits that OCS’s model is made possible by Israel’s ability to lure ­talent away from top firms for reasons that transcend financial gain.

“Because of the way Israel is, and the type of population it attracts, we end up with very sophisticated lawyers that are willing to take less [money] because they want to be here,” says Aronoff.

Indeed, OCS has attracted lawyers from US firms such as McDermott Will & Emery, Wachtell Lipton Rosen & Katz, and Paul Weiss Rifkind Wharton & Garrison. Try finding an outsourcing firm with talent like that anywhere else in the world.