By hiring foreign lawyers Switzerland’s firms are playing the long game for cross-border deals

Switzerland’s law firms are not known for their overseas forays. Yet a quiet revolution is emerging in the market as the country’s lawyers look to target new sources of work.

Switzerland's law firms - Switzerland_landscape_mountains

Compared with many of their neighbours, Swiss lawyers are not known for their overseas forays. Not for them representative offices in London, New York or Hong Kong; international mergers have been limited to Baker McKenzie, CMS and Eversheds.

Yet a quiet revolution is emerging in the Swiss market as firms look to target new sources of work. Although the traditional client base of financial institutions, corporates and wealthy individuals from the US, UK and Germany remain the key drivers, in the past few years more markets are opening up and Swiss firms are innovating to pick up the instructions.

“No matter how you look at it two-thirds of our work is cross-border, and a large chunk of it is generated by Swiss clients,” notes Homburger managing partner Daniel Daeniker. “The domestic client base is still important – there’s almost always a Swiss angle to our work.”

Inbound M&A is the key to this cross- border work and this has not changed as the net for instructions has widened. Although several Swiss companies are major global corporations – Crédit Suisse, Glencore, Nestlé, Novartis, and UBS, to name but a few – there remains more opportunity for overseas investors looking into the country than vice versa.

Daeniker says the use of resource is key when it comes to building and maintaining cross-border relationships with clients and firms overseas.

Daeniker_Daniel_Homburger_2016
Daeniker: “We have to spend most of our time keeping up with our contacts in the States, England and Germany”

“We have to spend most of our time keeping up with our contacts in the States, England and Germany,” he points out, 
 adding that these three jurisdictions are still “where the music plays”.

Nevertheless, Homburger, like its peers, also aims to look elsewhere for instructions. Its emerging market strategy focuses on Brazil, China, India, Japan and Russia; Daeniker says the firm used to look at Turkey but with recent turbulence in the jurisdiction’s politics and economics this is no longer the case.

China and Japan, he adds, are the most active in terms of instructions and India is a target for business development.

The Chinese connection

Of all the markets Swiss firms are trying to develop right now, China is top of the list. For Vischer it is the only market for which the firm has established a desk; Schellenberg Wittmer also has a Chinese desk.

“We established a Chinese desk some years ago and that was reinforced last year by hiring a Chinese-qualified lawyer who’s working in with us in Switzerland, and a Swiss lawyer who speaks Chinese fluently and has been working in China for many years,” explains Vischer partner Rolf Auf der Maur.

Schellenberg’s Chinese desk has close connections with the firm’s small dispute resolution-focused Singapore outpost.

“The fact we have a Singapore office is quite important to Chinese and other South Asian clients,” says Schellenberg partner Louis Burrus.

Auf der Maur says Chinese work is predominantly but not exclusively inbound, and across a range of sectors. Chinese investors are looking at mid-sized assets in Switzerland, he adds, including acquiring real estate or hotels.

“Sometimes we’re helping Swiss companies bridge the gap to the Chinese market,” he says. “Then we work with Chinese correspondent firms. Swiss clients are sometimes lost in finding their way around.”

This sense that China remains a tricky market to navigate is echoed by Burrus, who says cultural and linguistic issues are a challenge, although less so than five years ago.

“The Chinese are becoming more used to international ways of doing business, and the Swiss are as well,” he suggests.

Daeniker says Homburger’s Chinese business development really paid off last year when the firm won the mandate to advise the China National Chemical Corporation (ChemChina) on its $43bn (£32bn) acquisition of Swiss agrochemical and seeds company Syngenta. Homburger corporate head Dieter Gericke, who heads the firm’s China focus group, led the work advising ChemChina on Swiss law aspects of the deal as well as its financing. Simpson Thacher & Bartlett gave US, Chinese and UK advice.

Bär & Karrer and Davis Polk & Wardwell advised Syngenta. The transaction, which completed in September 2017, was the largest public tender offer for a Swiss company in history. Homburger’s links to the client remain close: Gericke was elected a non-executive director of Syngenta earlier this year.

The deal is the largest China-related transaction to date in Switzerland, but all firms report a rise in the number of instructions from the jurisdiction in recent years.

Beyond China

The same cannot yet be said for most other jurisdictions. India and Japan are both of interest to several firms, but neither have paid off to the same extent. Daeniker says many years of travelling to India for business development bore fruit when Homburger was instructed by regular client Holcim on the acquisition of a controlling interest in the Associated Cement Companies and Ambuja Cements in 2004/05, and more recently on the amalgamation of Holcim India into Ambuja Cements in 2013.

“India now is very inward-looking,” Daeniker adds, saying that the Swiss business development “spiel” comes across as less threatening in India than the same message would be from a more international US or UK-headquartered firm.

But there are other jurisdictions closer to home where firms see opportunities. A surprising one is France, which in many respects is culturally similar to Switzerland – and the Geneva and Paris legal markets have much in common.

“For some reason we never had a strong relationship with France, even historically,” explains Burrus.

Schellenberg lawyers have been visiting France more often in the past year or so, and building the firm’s profile through business development and entering awards, with the aim of using better francophone relationships as a springboard for work in Africa – particularly in countries such as Algeria, Morocco and Tunisia but also in sub-
Saharan Africa.

Marc Veit
Veit: “There’s potential in Africa that has been underused by most firms”

“Things that Paris can do in the French-speaking world Geneva can do as well,” Burrus argues.
“There’s potential in Africa that has been underused by most firms,” agrees Lalive partner Marc Veit.

Auf der Maur suggests Scandinavia could be another growth market for Switzerland, with a slight pick-up in transactions lately.

A jurisdiction with potential for growth but which is also viewed with caution by many is Russia. Although many Russian oligarchs continue to use overseas jurisdictions to house their assets there is extra compliance involved in acting for these clients. Schellenberg, which is on record as having advised the Russian Federation on a number of arbitrations, is an exception to the general hesitancy to take on Russian work.

European 100

The Swiss market remains relatively opaque when it comes to financial results. Of the nine firms that previously featured in the European 100, only three provided revenue data this year.

Froriep declined to provide figures after previously doing so, but indications are that after losing two large teams to Walder Wyss and Baker McKenzie the firm’s turnover slipped below the level needed to make it into the rankings.

Judging by the financial results we did get 2016 was a fairly active one in Switzerland. Driven primarily by a surge in investigations work, first off the back of the US Department of Justice’s crackdown on holders of Swiss bank accounts and then by the ‘Panama Papers’ leak, revenue was up in most of Switzerland’s big firms.

Walder Wyss had the best year with a 
22.6 per cent hike in turnover, to €76m, meaning it leapfrogs Schellenberg Wittmer – which also said 2016 was good – in the rankings. Meanwhile, NKF, winner of European Law Firm of the Year at The Lawyer European Awards 2017, reported a 14 per cent rise, to €65m.

A notable trend in Switzerland last year was a freeze on recruitment, with few firms recruiting at the junior level. There was some lateral hiring activity in addition to the team hires from Froriep.

A welcome move, although one which is yet to impact data, is for a number of firms to start seriously looking at ways to improve female partnership proportions. Women represent only 12.8 per cent of Swiss ­partners and less than 10 per cent of the partnership in five of the eight firms in the rankings this year.

Bringing the world to Switzerland

The foreign ‘desk’ model has been favoured by Swiss lawyers to target international work for some time. Schellenberg’s Singapore office, Lalive’s Doha base and Froriep’s London presence are the rare examples of a Swiss firm choosing to set up overseas in a small way.

Instead, the vogue seems to be towards bringing the outside world to Switzerland via the recruitment of foreign lawyers.

Lalive was the trailblazer in this respect. The litigation-focused firm was founded by the Lalive brothers, Pierre and Jean-Flavien, who in 1994 relaunched the practice together with German-born lawyer Michael Schneider and Swiss lawyer Teresa Giovannini.

Now Lalive employs lawyers from more than 15 countries with a similar number of languages represented, almost all working in the firm’s arbitration practice.

“The Lalive brothers had the right instincts as to where international arbitration would develop – they had the courage to include foreign lawyers ,” says Veit.

Of the firm’s 17 partners, several are foreign or have dual nationality – such as Finnish partner Veijo Heiskanen, British-Lebanese partner Noradèle Radjai, French-New Zealand partner Domitille Baizeau, Germans Joachim Knoll and Schneider, or Swiss-Austrian Werner Jahnel.
Among Lalive’s non-partner ranks the firm employs lawyers from countries including Argentina, Brazil, Russia and Turkey.

Veit describes the genesis of Lalive’s foreign lawyers as a “chicken and egg” situation. Initially it was a deliberate decision to hire foreigners but as the firm became known as a practice where a non-Swiss lawyer could have a good career people began to apply for jobs.

“It’s the only reason we’re competing with the international global firms for true international arbitration work outside Switzerland,” Veit adds.

South-east Asia is a gap where Veit thinks the firm could develop more of a capability and even, perhaps, a presence. The benefits of this have been demonstrated by Schellenberg’s dispute resolution office 
in Singapore. However, he says it can be difficult to get work permits for non-EU citizens and it is simpler to hire individuals with dual Swiss nationality or an EU passport.

Opportunities

The Lalive model has not been adopted by many other Swiss firms, but one that is moving in that direction – except for a wider range of work – is Niederer Kraft & Frey (NKF). Managing partner Philippe Weber explains the firm now has nine foreign lawyers, none of them Swiss-qualified.
The first foreign hire was opportunistic, when NKF was approached by a US-qualified capital markets lawyer who had moved to Switzerland.

“The opportunity arose and she became a real superstar – we win mandates because of her,” Weber says. “We win capital markets deals because we have these foreign language and drafting skills. She’s shown good traction.”

Philippe Weber
Weber: “The secret isn’t to hire foreign lawyers for the sake of it – they need to be good”

The success of the first hire meant that when another lawyer with experience of working at Jones Day in the US and Hengeler Mueller in Germany came to the firm NKF leapt at the hire.

“From hiring one we got a reputation for hiring foreign lawyers,” explains Weber. “The secret isn’t to hire foreign lawyers for the sake of it – they need to be good.”

NKF now has lawyers hailing from countries including China, Germany, Ireland, Italy, the UK and US. It does not run any foreign law desks but when it is instructed on a transaction involving one of these countries the foreign lawyers play a key role in drafting and, particularly, in relationship-building.

“When they work on transactions with foreign lawyers it helps us bond,” says Weber. “It’s easier to work with us because they find people speaking their language.”

He adds that by ‘language’ he means not only linguistically, but culturally – something that has proved particularly important in China.

When assessing the applications it now regularly receives from non-Swiss lawyers NKF looks for those with a background of working in the world’s biggest firms, those used to leading a transaction.

“These international firms have project management businesses. From the first day you’re trained to manage a transaction. That’s really helped us to credibly quarterback transactions in an international context because we’ve got good people who’ve been trained on this,” Weber says.

That experience means that although the foreign associates cannot provide Swiss law advice they are constantly involved on deals, helping with project management and advising on best market practice.

Weber is now conscious that the firm has to start thinking about how to retain foreign lawyers. Swiss rules do not prevent foreigners becoming partners – as proved by Lalive – and both NKF and Lalive know that an individual’s value must be recognised.

“The litmus test is whether the foreign lawyers have a true career path. Having foreign associates is one thing but you’ll only attract the best talent if you offer them a true career”
Veit

“The litmus test is whether the foreign lawyers have a true career path. Having foreign associates is one thing but you’ll only attract the best talent if you offer them a true career and it’s not just an empty promise,” says Veit.

To date, no other Swiss firms have hired as many non-Swiss lawyers as Lalive or NKF. Homburger’s Daeniker says the firm had more foreign associates in the past and that “from the cost-benefit perspective, what works is the US capital markets stuff”. For other jurisdictions, he thinks secondees are an easier way to manage foreign expertise.

Burrus believes arbitration is the best area to employ foreigners, and praises Lalive’s ability to compete with global firms, but says Schellenberg does not routinely employ non-Swiss lawyers for its own teams.

Auf Der Maur says Switzerland’s long history of working cross-border, and the country’s enduring appeal as a financial centre, means foreign expertise is less required than in other jurisdictions.
“We’re used to doing business cross-
 border without having to conquer a particular market,” he points out.

But both Lalive and NKF are convinced that their overseas lawyers bring not just work but a different culture to the firm.

“It’s just different if you work in a firm with an international mindset and you don’t just claim to be international but you live it,” says Weber, adding that what started as an opportunistic strategy has made NKF more attractive for younger lawyers. He says while the firm will not “indefinitely” increase its numbers, there is a possibility that NKF could use the success of the scheme to start recruiting overseas, particularly in areas such as US or UK M&A.

However Swiss firms manage their international relationships, making the most of any opportunity is key, and lawyers are confident that their reputation on cross-border work will keep the mandates flowing.

“The way we’ve been practising law over the past 20 years has to a certain extent been an opportunities game,” says Daeniker. “In my case it’s brought me to places like Finland, Denmark; a colleague of mine did something in Central Asia; another’s been in Vietnam. I wouldn’t see us opening a Ho Chi Minh City office or even doing a roadshow in Vietnam, but the key is the clients are confident enough to take us with them.”

Global 200

Only 14 international firms in the Global 200 have a presence in Switzerland, collectively housing 126 partners there according to data gathered for the 2017 edition.

The list is topped by international giants Baker McKenzie, CMS and Eversheds Sutherland. The US is represented by Sidley Austin and White & Case with smaller offerings from Akin Gump, King & Spalding, Orrick Herrington & Sutcliffe, Quinn Emanuel Urquhart & Sullivan and Shook Hardy.

UK firms Charles Russell Speechlys, Holman Fenwick Willan and Withers all have offices in Switzerland as does Dutch firm Loyens & Loeff and German multidisciplinary practice Rödl & Partner.

Most Global 200 partners based in Switzerland work in the financial capital of Zurich. In total there are 75 partners in international firms there. However, these 75 are housed in just seven firms: Bakers, CMS, Eversheds, Loyens, Quinn Emanuel, Rödl and Withers. Quinn Emanuel was the most recent entrant, launching in May 2016 by relocating former Novartis group general counsel Thomas Werlen to the city.

In contrast, there are just 46 partners in Geneva but they work in 12 firms. Eversheds is the only firm with any partners outside Zurich or Geneva – it has five in the Swiss capital Bern.
No international firms have offices in the Italian-speaking city of Lugano, in contrast to the domestic practices.

Bakers is the largest international firm in Switzerland, with 34 partners in Zurich and seven in Geneva. Only two of the local firms have more Swiss partners, making Bakers a significant player in the market. The firm has been present in Switzerland for 50 years having opened in Zurich in the late 1950s.

Unlike some of the smaller US-headquartered firms in Switzerland Bakers focuses on local law – while also fielding a team handling World Trade Organisation (WTO) disputes and arbitration, like its rivals.
Its biggest practice area is corporate, with 10 of its 41 partners focusing on this area. A further eight Bakers partners in Switzerland are litigators.

CMS also has a local law practice with 25 partners in Zurich and eight in Geneva. CMS moved into Switzerland when Zurich firm Von Erlach Henrici joined the CMS network, expanding in 2014 to Geneva through a local merger with ZPG Avocats.

Litigation accounts for a third of CMS’s Swiss partnership, with a total of 12 litigation and arbitration partners. The firm also has seven corporate partners and three tax specialists.
Eversheds also looked locally to open in Switzerland. It brought Schmid Rechtsanwälte into its international network in 2008, later merging with the firm. Its largest office is, narrowly, Zurich where it has six partners, with a further five in Bern and three in Geneva. Corporate (five partners) and litigation (four) are the firm’s biggest practice areas in Switzerland.

In Geneva, Sidley Austin ties with CMS as the largest international firm. Sidley’s Swiss offering is centred around two things: WTO disputes and arbitration. Other US firms have similar offerings, with arbitration a major practice area in the city.

UK firms focus more on private client work, with Switzerland – particularly Geneva – still a hub for this despite recent changes to tax rules in the US.

In terms of practice areas, litigation is the most popular for international firms in Switzerland. Over a quarter (35 partners) of all Global 200 partners working in the country are litigators or arbitrators.

A further 27 partners, or just over a fifth of all Global 200 partners in Switzerland, are corporate specialists. Meanwhile, 12 partners specialise in each of private client and tax.

Corporate is the biggest practice area in Zurich, accounting for 18 of the 75 partners there, with 15 partners practising in litigation and dispute resolution. In contrast Geneva houses 19 litigation partners and only six corporate partners. Private client is the second-largest practice area in Geneva, with seven partners.

Withers is the largest private client firm of the Global 200 in Switzerland, with a team of four partners. Bakers is the biggest firm in corporate and tax and Sidley takes the competition crown with four partners.