Time to follow the UK flow?

Benelux firms are facing a crisis of conscience and identity as the need to link with UK firms becomes more pressing. Richard Tyler reports.

Do I want to be part of a UK-led firm? That is the question that partners in leading Dutch and Belgian firms are asking now that 76-partner Dutch firm De Brauw Blackstone Westbroek and 42-partner Belgian firm De Bandt van Hecke & Lagae have joined up with Linklaters & Alliance.

Partners at De Brauw and De Bandt have a reputation for academic excellence and – at least until the deal with Linklaters – a desire to defend their independence and local influence at all costs. Their decision to join a UK-dominated European firm suggests something fundamental is happening to the Benelux market.

“Lawyers have come to realise that law firms are a business and not a group of individuals,” says Diederik van Wassenaer, resident partner of Dutch-firm Nauta Dutilh's London office.

Lawyers from both countries acknowledge that the UK City model of practising is influencing the way that they practise. But it is a battle of professional culture described by one Amsterdam-based senior partner as: “The old-fashioned brain surgeon type of lawyer who is quite autonomous, against the plumber type of Anglo-Saxon practice with the emphasis on standard quality and speed of transaction, rather than the intellectual challenge.”

As such, De Brauw and De Bandt's rivals report that they are impressed by the Linklaters & Alliance vision. But they also see weaknesses in the deal that the two firms have struck with Linklaters.

One is the size of the undertaking. It is already rumoured that partners at De Bandt and De Brauw are baulking at the lengthy Linklaters-led weekly meetings. And the delicate profit sharing agreement is certain to come under strain as the firms increase the percentage of profits they pay into the central pot over the next year or two.

Linklaters partners may soon be scrutinising the earning capacity of their Dutch and Belgian colleagues. A market insider says that De Brauw partners earn on average 1m guilders (£312,000) – although the firm declined to confirm this. The earnings compare with The Lawyer Top 50 figure for Linklaters of £460,000 average profits per partner.

If Linklaters introduces A and B streams to the partnership – with each partner receiving a different level of profit share from Linklaters & Alliance – there could be an exodus of local partners from De Brauw and De Bandt. “If one in 10 partners become international partners, then the local partners that were once big fish may move to another firm to restore that position,” said one Dutch senior partner.

But seeing the possible flaws in what De Bandt and De Brauw have done is easier than coming up with and implementing a better strategy. The consultants believe there are two options – get a strong base in London and go international, or sign on with the accountants.

Firms like Loeff Claeys Verbeke or Stibbe Simont Monahan Duhot say they are sticking firmly with the first option. And despite reports that the national Bar associations are relaxing their rules on multidisciplinary practices, the Big Five have as yet only managed to entice small regional practices into their fold.

One lesson that the partners at De Bandt and De Brauw have served on their rivals is that the era of Continental-European co-operatives is over. This was given added strength by the recent disintegration of the five-firm Punder Group.

Loeff Claeys Verbeke is the one Benelux firm that looks set to suffer most from this trend. It has been allied to Allen & Overy and leading Paris firm Gide Loyrette Nouel for almost 10 years. During that time Loeffs has referred much more work to A&O than vice-versa – primarily because of its client list of Flanders-based medium and small sized enterprises – but Loeffs has benefited from the transfer of banking expertise from A&O to its own growing practice.

But since May the alliance has been in turmoil. Gide publicly protested at A&O's hiring of French-qualified banking lawyers, claiming that its City ally was now in direct competition in France.

The Lawyer revealed in August that A&O is in negotiations to merge its French law practice with 10-partner banking and finance firm De Pardieu Brocas Maffei & Associes (formerly of the Punder Group).

Loeffs' rivals say it has invested so much time into the relationship with A&O that it would be a disaster if the City firm rejected Loeffs as a future merger partner. Loeffs has already been through one aborted merger attempt when in December last year it broke off talks at the last minute with Hague-based Buruma Maris due to “differences of culture”.

Loeffs claims it does not feel under any pressure to make a snap decision over Gide and A&O at the moment – but there is uncertainty over the future. One partner says: “We are not sure whether we have to choose one or the other [Gide or A&O] as in a broken marriage.”

Loeffs' rivals have chosen a different route. Dutch firm Stibbe Simont Monahan Duhot has expanded into Belgium and France by merging with small firms and growing organically. In April 1997, it merged its existing 70-lawyer Paris office with respected 23-lawyer Giroux Buhagiar & Associes.

But in June this year it announced that it was in merger talks with 140-lawyer Stuttgart-based Gleiss Lutz Hootz Hirsch. If the deal goes through – and sources at Stibbes say there are a few technical difficulties to sort out at the moment – the new firm would be a significant European player and a very interesting merger prospect for a City firm.

Stibbes' rivals say that while the firm has been successful merging with small firms to expand into new jurisdictions, Gleiss could be a different matter.

For a start Gleiss is a much larger firm. And while Stibbes perhaps has a more business-like approach to its internal organisation, one Brussels-based source thought it would not be long before partners at Gleiss demanded that the newly-merged firm be run from Germany rather than the Benelux countries.

Stibbes partners could then face the prospect of implementing decisions made by a Gleiss-led management committee – something rivals De Brauw and De Bandt have already accepted as inevitable at Linklaters & Alliance.

Another firm that will soon hit the headlines is 280-lawyer Dutch-Belgian practice DSH Derks Star Busmann Hanotiau. The general commercial firm is in talks with Cameron McKenna to form an alliance that will lead to a merger along the lines of Linklaters & Alliance.

Derks will join with the other members of Cameron McKenna's Hansa Law Group – which includes Stuttgart-based Sigle Loose Schmidt-Diemitz, Copenhagen-based Schluter & Hald and Stockholm's Tisell & Co – to create a northern-European powerhouse.

Name partner Bernard Hanotiau says if the talks were successful the alliance would probably include a French firm as it was an important market for the firm's existing Belgian practice.

Derks has worked closely with Paris-based Falque Carpenter Barbe & Associes in the past, but Hanotiau says: “The French remain terribly individualistic – it's always very difficult to have a real durable alliance.”

Richard Taylor, partner in charge of Cameron McKenna's western alliance, says: “Discussions are taking place and where one is talking to a number of firms, an alliance leading to integration is an option.”

To say that all these moves are a knee-jerk reaction to Linklaters & Alliance would be too simplistic. Dutch and Belgium firms have had informal and formal agreements with foreign firms for years. But the speed with which De Brauw and De Bandt's rivals are now re-examining their strategy is startling.

Dutch-firm Nauta Dutilh has brought in consultants Bain & Co to set out its options and Loeffs has set up a standing committee to examine the implications of Linklaters & Alliance. And if Stibbes and Derks pull off their separate merger negotiations, the Benelux market will soon look significantly different.

As one consultant puts it: “Everybody is talking to everybody about the future shape of the industry”. If partners are honest the two big questions that they will be asking themselves are: “Do I want to be part of a UK led firm?” And then: “How far will I bow?”