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International Markets
brings with it a ‘lot of baggage’.
‘The public sector doesn’t yet understand the dynamics of how the western business community works. Also, you have to remember that few people have travelled and the average monthly salary in Serbia is just €320.
‘However, if Europe doesn’t embrace the Balkans, Russia is flexing its muscles very strongly in the region. You can’t leave vacuums, and when Europe was washing its hands of Serbia, Russia was very happy to come in and buy up the oil and gas industry.’
On the radar
Looking across the Atlantic, Charlotte Ford, the Law Society’s policy adviser on America and the Caribbean, identifies Chile, Argentina, Colombia and Peru as exciting new markets. ‘Chile, in particular, is relatively stable with sophisticated law firms that have developed links with the US market by sending their lawyers to do postgraduate degrees and gain work experience. We are encouraging them to set up similar projects with UK firms.
‘The British embassy in Mexico is encouraging commercial links with the UK, and where business goes, lawyers go too.’
Also on the radar is Africa. Nankunda Katangaza, the Law Society’s policy manager responsible for Africa, the Middle East and South Asia, says Nigeria remains the most attractive market in Africa for legal services, thanks to recent reforms to the banking and shipping sectors, investment in infrastructure and an anti-corruption drive.
‘As far as emerging markets to watch, Angola and Ghana are big ones,’ she says. ‘Angola’s economy has moved from 25 years of conflict to becoming the fastest-growing economy in Africa and one of the fastest in the world, thanks to its energy sectors.
‘The country is attracting billions of dollars in foreign investment and is the UK’s fifth-largest African market. English law firms haven’t been focusing on this market, possibly because business is based on civil law and conducted in Portuguese, but it is only a matter of time.’
Ghana is a newcomer on the oil and gas scene with the recent discovery of oil off its shores. Katangaza says: ‘It has taken a much more cautious approach to exploiting the new resources but, with its stable government and steady economic growth, it is already attracting the interest of English firms. As a common law jurisdiction with lengthy ties to the UK already, we are likely to see English firms taking advantage of those connections sooner rather than later, particularly as opportunities in agriculture, telecoms and infrastructure continue to grow.’
However, while fortune favours the brave, there are huge potential risks working in relatively unknown or undeveloped markets. There is little appetite at present among UK law firms to set up their own offices in these emerging markets and stringent due diligence is still required when deciding to form a relationship with a local firm, which may be operating in an unregulated legal market with no professional indemnity insurance (PII).
Nicole Bigby is head of risk at City-based commercial practice Berwin Leighton Paisner. The firm is well-versed in risk management, having identified a panel of more than 130 firms which it considers ‘safe pairs of hands’ for clients in over 65 countries, only opening offices in four countries where it felt it needed a physical presence.
She says it is critical to manage political and security risks by investigating the stability of the regime and the rule of law. ‘You also need to understand the regulatory and compliance environment, how to deal with corruption and identify the source of funds, as well as what might be quaintly called local business customs and practices.’
She says the Balkans are on the path to Europe and are organising their regulatory and business environment to facilitate that transition. ‘What is important in emerging markets is for local lawyers to be able to access skills in more mature markets through placement programmes to help their transition to a more sophisticated market.’
Gannon agrees and welcomes the opportunities UK law firms offer her lawyers in terms of secondments and training. From the UK firms’ perspective, she says, ‘the key message is know your local partner well. Business is about individuals and we have seen people burnt by believing what people tell them. So, make sure you get independent advice and be aware of cultural differences’.
Harrison agrees: ‘In the non-EU market where we practise, it is very important that UK law firms stick rigidly to their own regulations, such as “know your client”.’
Each of the Balkan states faces challenges in opening its legal market, says Gannon. ‘Serbia is drafting a new law on advocacy that anticipates a second listing for foreign lawyers. It is hoped this will resolve problems with the current practising rules which have resulted in some foreign lawyers facing possible prosecution.’
Less developed markets may not have a recognised or independent bar association or law society, so lawyers won’t necessarily be registered with an organisation, Bigby warns. ‘Firms may not have PII, although, with the maturation of financial systems and regulatory regimes, it may be possible to arrange that on a one-off basis for a transaction. Your terms of engagement need to take these issues into account.’
Issues such as lack of PII have prompted Rodney Ramsden, a solicitor based in the Isle of Man, to start building up a network of firms in undeveloped markets which will come under the umbrella of his law firm Lex Mercatoria, which has appropriate PII cover.
One development Nicole Bigby welcomes is a project in French-speaking Africa to harmonise business law. ‘The project is a really important way of managing risk and ensuring business has some certainty about the regulatory, legislative and judicial environment,’ she says.
Existing markets
While emerging markets offer new opportunities, another way to reach new markets is through existing, well-established centres.
Continued on page 8
Legal Services Directory 2010
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