Page 10 - bne magazine March 2017 issue

10 I Companies & Markets bne March 2017
CEE’s legal market goes local
David Stuckey of CEE Legal Matters
Central and Eastern Europe’s legal markets are highly diverse, yet some trends can be discerned. There has been a gradual retraction of the larger international firms to the strongest (and therefore most lucrative) CEE markets, a corresponding emergence of regional firms and the appearance of ever-more sophisticated local firms, as business lawyers struggle to find reliable profits and sustainable busi- ness models in challenging times.
The international firms that swooped into CEE in the years after the fall of the Berlin Wall, to capitalise on the rapidly emerging markets and lucrative privatisation opportunities, remain in the region by and large, though the number of transactions that can support their London-driven billable requirements have shrunk. Bit by bit, as the privatisations and big ticket deals that charac- terised the first two decades dwindle, many firms are starting to retreat back to the most profitable markets.
Thus, in the past decade stalwart Linklaters ended its pres- ence in Bucharest, Budapest, Prague and Bratislava (in 2008); White Shoe firm White & Case withdrew from Bucharest and Budapest (in 2015); French Gide Loyrette Nouel withdrew from Belgrade (2009), Bucharest (2014), and Budapest and Kyiv (both in 2015); Chadbourne & Parke closed its doors in Kyiv (2014) and Warsaw (2016); and Clifford Chance stepped back from Budapest (2009) and Kyiv (2015). Speculation is common about which offices of which firms are next to go. But international firms are hardly pulling out of the region entirely, and several dozen offices remain throughout CEE,
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including – despite significant political turmoil and conflict – in Ukraine, Russia, and Turkey. The Czech Republic and Romania also remain popular, despite several prominent departures. And of course cheap travel and modern technol- ogy (including legal document management software) mean that firms are increasingly able to manage local mandates from home offices located outside the CEE region as well.
In addition, two firms seem to be defying the general trend: Dentons and CMS – both with flexible operating models which allow them to compete directly with local and regional players in terms of fees in ways many international firms refuse to do – seem to be thriving.
Regional firms fill the void
As the international firms slowly retreat to the north, a grow- ing cadre of regional firms is expanding to take their place. This expansion reflects one of the most significant develop- ments over time in the region – the growing sophistication and skill of local lawyers, who are increasingly able to compete with the expatriates who flew in from London or New York to manage deals in previous years.
These regional firms are generally able to offer lower fees than the internationals, which are hamstrung by London or New York billing requirements, and they are increasingly able to offer a “one-stop shop” service across the region, including in markets such as Serbia, Croatia, Bosnia & Herzegovina, Albania, Slove- nia and Bulgaria, which are too small for the internationals.