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| James Lavan |
Blue-chip names such as White & Case, Cleary Gottlieb Steen & Hamilton LLP and Davis Polk were in the vanguard. Today, there are more than 100 U.S.-based firms with at least one European office.
Fewer in number perhaps, but their U.K. counterparts nevertheless followed the trend, led by five large corporate law firms that would eventually become known as the magic circle.
The long march of lawyers across Europe continues to this day. A broad spectrum of predominantly U.S. and U.K.-based law firms, together with their transatlantic and multinational hybrid cousins as well as more specialist boutique players, are now seeking fresh opportunities in the 2020s.
This new breed of ambitious firms aims to realize future potential in Europe's fastest growing and constantly evolving sectors: technology; media and telecoms; pharmaceuticals; financial services; intellectual property; and a broad spectrum of information and communication technology applications across multiple industries.
The Impact of Brexit
Despite the political turbulence and economic uncertainty that it provoked for the U.K., Brexit had relatively little impact in Europe. The referendum vote certainly did little to diminish the European ambitions of many U.S. and U.K. firms, nor their appetite to expand.
If anything, the U.K.'s final departure from the European Union in January 2020 provided another reason to consider Europe, since many of those firms with a London office needed to reestablish an EU presence.
Since the Brexit referendum vote in June 2016, U.K. and U.S. law firms have steadily opened for business in Dublin — a trend that shows no signs of slowing down; on the contrary, things have been speeding up.
Of the 40 or so international law firms that now have a Dublin presence, more than half of them have opened since 2020. Numerically, this has served to put Ireland at the top of the list as the EU destination of choice for a new office in recent years, ahead of Brussels, Frankfurt and Paris.
Of course, Brexit is not the only driver behind Ireland's increase in popularity. Ireland has other commercial attractions of note that are major factors for legal business: Dublin is Europe's second-largest offshore funds center after Luxembourg; nine out of 10 of the world's largest tech companies also have their European headquarters in the city; and Ireland itself is a global hub for the leasing and financing of aircraft with nine of the globe's top 10 lessors headquartered there.
The COVID-19 pandemic may have delayed some decisions, but it did not fundamentally alter them. Over the past four years, many law firms have selectively expanded the depth and breadth of their existing EU footprint, or created a new one where it did not previously exist.
Nowhere is this more apparent than in Ireland — until the mid-2000s, it was not even on the long list of international firms considering where to open next in Europe. Offshore giant Maples and Calder was the first to arrive in 2006, followed by Eversheds Sutherland in 2009 and Dechert LLP in 2010.
Dublin's new arrivals list features some notable heavy hitters: Addleshaw Goddard LLP; Ashurst; Bird & Bird; Cadwalader, Wickersham & Taft LLP; Covington & Burling LLP, Dentons; DLA Piper, Fieldfisher; Hogan Lovells, Pinsent Masons; Ropes & Gray LLP, Simmons & Simmons LLP, Squire Patton Boggs and Taylor Wessing.
According to a report by Reports Legal in June 2023, the strategic focus of most new arrivals currently centers on a few specialist practice areas: funds, employment, insurance and IP.[1]
However, a minority of these firms have publicly stated their ambitions to deliver a full-service offering, potentially challenging some of the Big Six Irish independent law firms. Notably, this includes Dentons,[2] while DLA Piper[3] has already achieved that goal.
As in other European markets, a handful of international firms have absorbed smaller and mid-market players into their brand. The net effect is to increase competition for fees and market share, as well as adding to the relentless war for local talent.
Strategic plays by a number of U.S., U.K., European and offshore firms have also been a feature of the Luxembourg legal market, which has grown from around 500 lawyers in the mid-2000s to more than 3,000 today.
As Europe's biggest funds market, and the second-largest global center after the U.S., Luxembourg is a natural EU-based alternative to Dublin. Since the Brexit vote, at least a dozen international firms have opened a local office in the Grand Duchy. More are expected to follow, while many of the international firms already there have ambitious growth plans.[4]
Geopolitical uncertainties, a demanding regulatory environment and macroeconomic forces continue to weigh heavily on deal making. Amid concerns of potential recession, most European economies were distinctly flat last year, with the EU projecting GDP growth in 2023 at 0.6% in both the EU and the eurozone — the currency union within the EU.
Higher interest rates and an uncertain economic outlook have led to markets remaining relatively quiet, with only modest levels of initial public offerings and corporate capital raising, as well as distinctly lower volumes of both mergers and acquisitions and private equity transactions.
However, law firms are planning ahead for a rebound in activity, particularly once interest rates start to come down with the federal funds rate — the U.S. equivalent of the Bank of England's base lending rate — anticipated to lead the way.
Some managing partners may be anticipating a rebound, positioning their network capabilities with a view to a potential resurgence in deal and financing activity — perhaps as early as the second half of 2024 — but even the most bullish managing partners do not simply calibrate their firms' bench strength based solely on a predicted short-term uptick in potential work streams, such as private equity.
Much more often, they are looking to consider the potential of making a longer-term strategic play in terms of anticipated market growth, the potential of key practice areas, and their clients' expectations over the next decade and beyond.
The beating heart of the EU, Brussels has historically been the most favored destination for U.K. and U.S. firms wanting to have a continental European presence.
But they are not just present; they tend to dominate the top end of the market, according to Chambers and Partners rankings. In competition — antitrust — work, for example, Freshfields Bruckhaus Deringer, Cleary and Latham & Watkins LLP are the only Band 1 firms.[5]
Meanwhile, in corporate law and M&A, the Chambers top trio comprises Freshfields Bruckhaus Deringer LLP, A&O Shearman and Cleary.[6]
Notwithstanding the preeminent position of these blue-chip international players, Brussels continues to lure other big-name international firms who also want a piece of the action. Despite being home to more than 100 international firms, a further glut of new Brussels office openings by U.S. law firms has been unfolding since 2020.
The most recent big names to arrive include Reed Smith LLP; Curtis, Mallet-Prevost, Colt & Mosle LLP; Kirkland & Ellis LLP; Simpson Thacher & Bartlett LLP; Fried, Frank, Harris, Shriver & Jacobson LLP; Weil, Gotshal & Manges LLP and Davis Polk & Wardwell London LLP.
More U.S. and other international firms with a London office, but without an EU presence, are expected to set up a Brussels base. Elsewhere, Amsterdam is also seeing a trickle of new office openings, with Fragomen, Del Rey, Bernsen & Loewy LLP and Squire Patton Boggs among the most recent arrivals.
The jury is still out on whether there will be further significant international expansion in the EU's big four: Germany, France, Italy and Spain. Having invested heavily in these markets over the decades, not every U.S. and U.K. firm has made a success of their local operations.
For now, the battle for work with residual French and German independents has been at a standoff for some time, while Italy and Spain have always been trickier destinations for many international players.
Brexit is now history. For numerous international law firms seeking to capitalize on the world's second most important financial market, London remains a mecca.
The majority of Europe's larger independent firms have been there for at least 20 years, yet London's ever-evolving landscape is still punctuated by notable new openings and developments in and around the square mile.
Among the most recent to enter the fray is mid-sized German firm, GSK Stockmann Ltd., which opened a London office in September 2022. Leading Belgian independent firm Van Bael & Bellis, which has a Geneva office dedicated to World Trade Organization matters, also opened in London in September 2020, but perhaps the most striking is Kuwait-based Meysan Partners, which launched its London office in July 2023.
Concluding Thoughts
Looking ahead, there will be more opportunities for law firms to grow strategically, both across the EU's diverse markets and in London. Providing cost-effective alternatives to the established elite, this is particularly true for boutique firms in specialist practice areas.
Smaller players can eventually become part of that elite too. The emergence of Quinn Emanuel Urquhart & Sullivan LLP as a disputes powerhouse in London provides evidence of what can be achieved.
Having spent 15 years building its highly profitable local team of star litigators, Quinn Emanuel launched an IP practice in London in May 2023. The London office, which started out with just a handful of litigators, now has nearly 100 lawyers in its local team.
But the success enjoyed by Quinn Emanuel is not always easy to replicate. Increasing the lawyer headcount in a European office that has an existing footprint can, however, be relatively easier to achieve and potentially provide a better return on investment than doing the same in London.
Although still a significant feature, the war for the best talent in most European capitals is simply not as acute as it is in London. New York salaries increasingly prevail at the top end in London, creating a trickle-down effect elsewhere in the local market. In Europe, once secured at a cost that is notably below rates in London, solid margins of additional return can be reasonably achieved by lawyers supplementing existing European teams in growing practice areas.
International law firms with an established European office and a locally developed reputation can also be a bigger draw to potential recruits than a greenfield operation where lateral hires are expected to carve out more of their own practice or bring a sizable book of business with them.
Statistically, such a move can often create a higher risk for both parties than joining a well-established team.
Historically, one of the main reasons for law firms opening a European office has been to take advantage of emerging or developing markets.
Thirty years of operation in central and eastern European jurisdictions has paid dividends for some, as Bulgaria, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovenia and Slovakia have since become EU member states.
The recent decision by EU leaders to open membership talks with Ukraine and Moldova holds the potential for greater access to new central and eastern European markets in the future.
Over time, new opportunities for law firms operating in Europe will continue to expand in line with the EU's continuing expansion and enlargement.
James Lavan is executive director at Buchanan Law.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://reportslegal.com/ireland-dublin-disruptors.
[2] https://www.dentons.com/en/about-dentons/news-events-and-awards/news/2020/january/global-law-firm-dentons-launches-dublin-office.
[3] https://www.dlapiper.com/en-gb/news/2022/11/dla-piper-announces-plans-to-double-workforce-in-ireland.
[4] https://reportslegal.com/luxembourg-funds-in-flux.
[5] https://chambers.com/legal-rankings/competition-eu-belgium-2:2926:32:1.
[6] https://chambers.com/legal-rankings/corporate-ma-belgium-7:354:32:1.
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