A View from Germany

Despite ongoing struggles arising from the economic implications of reunification, Germany continues to be the strongest economy in Europe and one of the largest economies in the world. The strong domestic market has never prevented German companies being highly export-orientated. For decades the motor for the economy has not been the domestic, but rather the international markets. Nowadays, almost all large German banks and corporations are operating on a global basis and have turned themselves successfully from domestic to international players.

Until a couple of years ago, German law firms had not quite coped with that development. While Anglo-Saxon firms had already successfully converted themselves into internationally operating “corporate” firms, the German firms were still very much an assembly of highly-qualified individuals. However, one didn’t have to be either an admirer of Karl Marx or a follower of Bill Clinton (“It’s the economy, stupid”) to realise that economic factors were causing the model between firms and clients of individual-to-individual relationships to be replaced by a corporate-to-corporate relationship, not only in the US and the UK but also in Germany.

This was not about a German operating model versus an Anglo-Saxon model, but rather a development which happened in the US, the UK and Germany, albeit at different times. Higher leverage, focus on the branding rather than individuals and higher specialisation are as necessary in Germany as in the Anglo-Saxon world. The leading German firms had to change if they did not want to disappear from the landscape, as many leading French firms had.

Today, the German legal market has changed dramatically. All of the leading firms have linked up with UK or US firms, either by way of full integration or by similar arrangements which are supposed to come as close to full integration as possible (Haarmann Hemmelrath can almost be regarded as the exception that proves the rule).

Despite rumours to the contrary, the integration of those firms which have merged with their UK counterparts seems to be going quite well. A high level of business on both sides of the Channel has certainly helped in this positive development. There are still a lot of challenges to face, most notably the tight recruitment market and the further adaptation of the firms to the global legal market. The US firms, which have just discovered the German market for the second time in the last decade, are still struggling to establish themselves, but they have already made an impact on the recruitment market, not least in terms of salaries for newly qualified lawyers. But the recruiting activities do not stop at associate level. While in the past it was almost unthinkable for a partner in a leading German firm to change firms, these days not a month passes without news of another partner moving. But even though loyalty to a firm is not related to the size of the firm, this trend will probably continue.

The majority of the leading German firms have become part of internationally operating law firms, but sheer size and worldwide offices by themselves are no guarantee of success. A common professional approach based on close understanding between the German partners and their fellow partners and colleagues in the international offices will be the key factor. That requires not only the open minds of the UK or US partners, but also a further globalisation in the thinking of the German lawyers. It seems that those German firms which have merged with a UK or US partner on a fully-integrated and equal basis shall be best suited to meet future challenges.

Oliver Felsenstein is deputy managing partner of Lovells Boesebeck Droste