Foreign lawyers started flooding onto the Brussels market at the end of the 1980s. Several years on, many are wondering what they are still doing there. The eternal question remains: is a Brussels office necessary?
From a purely commercial viewpoint, the answer would seem to be no, especially if, as one Brussels-based lawyer believes, only one third of the Brussels branches of foreign firms operate profitably.
Most of the firms arrived between 1989 and 1992 when, as Howard Liebman, resident partner at US firm Morgan Lewis & Bockius observes, Brussels was seen as Eldorado. The Single European Market was nearing completion and directives from the EU were beginning to impinge on every aspect of commercial life.
But the anticipated flow of work never happened and, because of the large number of firms on the ground – more than 100 at the last count – competition has been intense. This is particularly so in the areas of EU practice where good profits can be made, most notably competition matters and trade work such as anti-dumping.
“It is a tough market,” says Keith Hendry, resident partner at Clifford Chance, who recalls acting on one file where a rival firm had offered to do the work for nothing. “There are a lot of people here,” confirms Claud Eley, resident partner at US firm Hogan & Hartson, “and the work is spread thin.”
But, curiously, not hard enough for firms to shut down altogether. Of the large UK contingent, only four firms – Frere Cholmeley Bischoff, the now defunct Turner Kenneth Brown, Payne Hicks Beach and Edge & Ellison – have departed. “Downscaling” is a more common response to the problem.
But in terms of monitoring EU developments and, perhaps more importantly, client perception, a Brussels presence is still considered a necessity regardless of the limited scope for making money.
Moreover, firms may be taking the long-term view – for a good reason, says Liebman, a Brussels veteran with 18 years experience in the city: “You see more and more that Brussels will be the Washington of Europe”.
The arrival of foreign rivals has contributed to the reshaping of the local legal profession which over the past five years has seen numerous mergers and international alliances. Cross-border mergers involving Dutch, Belgian and French firms have been particularly popular.
Two of the largest commercial players – Loeff Claeys Verbeke and Stibbe Simont Monhan & Duhot – are products of such mergers; another major player, De Bandt van Hecke & Lagae, was hotly tipped for marriage to the Dutch practice De Brauw Blackstone & Westbroek before the Alliance of European Lawyers, of which the two firms are founding members, pre-empted a merger.
The merger option is still seen as a viable strategic move. In 1995, Hanotiau Bruyns & Partners merged with Dutch firm Derks Star Busmann to create Derks Star Busmann Hanotiau.
How much such moves were influenced by the rapid influx of Anglo-Saxon law firms – and to a lesser extent by the accountancy firms which were also looking to enter the legal services market – depends on who you speak to.
Although some lawyers argue that the moves were defensive, Chris Sunt, a De Bandt partner, is not one of them. Belgian firms, he believes, were simply catching up with developments in Europe. They needed to specialise to meet client demands.
But the local market offered few growth opportunities. “Belgium is a small country and there is a limit to how far you can grow,” says Sunt. The only real scope for domestic expansion in recent years came after the Brussels bar allowed mergers between firms from different localities. This enabled the creation of national practices covering Antwerp, the centre of maritime and transportation work, and Brussels, the main commercial centre.
Beyond this, there was little scope for expansion except beyond borders, and the Netherlands and France were the obvious choices.
The result of these manoeuvrings has been twofold. First, as Sunt points out, there has been a concentration of lots of work with the larger firms. Medium-sized firms in particular have felt the squeeze and have looked around for ways to respond. Burlion Bolle, for example, sought to tie up with accountants Arthur Andersen.
Firms have also been scrambling to improve their international connections to bolster their market positions. Coppens Van Ommeslaghe Horsmans & Faures joined the Punder Group, a network of continental European firms spearheaded by German firm Punder Volhard Weber & Axster.
In the latest move, Liedekerke Wolters Waelbroek & Kirkpatrick, a well-regarded firm which resisted the merger trend, has set up the Conference of European Lawyers, a tripartite alliance with French firm Simeon & Associes and German practice Wessing-Berenberg Gossler Zimmermann.
Another effect of the changes in the market, according to Sunt, is that the existence of strong, internationally oriented national practices will make it more difficult for foreign firms to make inroads in the Belgian legal market
At the start of the decade, only a few firms, such as Baker & Mckenzie (which is effectively a local firm) and Cleary Gottlieb Steen & Hamilton, which had been in the city for many years, practised local law. But the opportunities in this area have increased significantly as the Belgian economy has opened up and the government has embarked on privatisation.
Over the past four years, a number of foreign law firms have sought to build up viable Belgian legal practices. Hogan & Hartson decided three years ago to enter the local market and now has five Belgian lawyers. Clifford Chance had a long-established local legal practice in property work, but the emphasis changed radically five years ago when it took on a Belgian banking and finance lawyer. Today, the firm acts for a number of local financial institutions.
Overall, the foreigners have notched up some notable successes, especially as advisers to foreign multinationals investing in Belgium. Clifford Chance, for example, acted for Ameritech in its purchase of an equity stake in Belgacom, the recently privatised telephone company.
But building up credible practices will not be easy. The chances of advising large Belgian corporations are limited as this is virtually tied up by local firms. Eley also notes that the market for capable younger lawyers is very tight. His firm, for example, has been looking for a two-to-three-year qualified lawyer for the last year.
Recognising the difficulties, some firms, most notably US firm Skadden Arps Slate Meagher & Flom, decided to scale back their Belgian legal practice plans.
The way forward, Eley argues, is to build up multi-jurisdictional practices, and he points to Cleary Gottlieb Steen & Hamilton as a model. That firm has been in Brussels since the late 1970s and its practice is built around three main areas: EU work, Belgian law work and cross-border work with a special emphasis on eastern Europe.
Whatever strategy they adopt, foreign firms in Brussels face an uphill struggle.