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Page 10
Brazil The demand for lawyers is booming
The Who is Who Legal Report on Corporate Governance, released in June, shows that Brazil has significantly increased the number of its lawyers in the past year. This boost in demand is due, says the report, to an increase in a renewed appetite for deal activity, general business confidence, and a desire by clients to engage more specialist legal services.
For example, companies such as Petrobras and Telefónica are seeking advice on creating partnerships with domestic entities, and shareholder agreements, particularly in the aviation and energy industries. As one local lawyer said: ‘The country is taking a more sophisticated approach to corporate governance: clients invest more time and money into getting the right people to identify and deal with the correct issues to get the deal right first time’.
José Carlos Wahle, partner in the São Paulo office of Brazilian law firm Veirano Advogados, notes that law firms are carrying out a lot of M&A and IPO work. The boost in construction work and large-scale infrastructure projects ahead of the World Cup in 2014 and the Olympic Games in 2016 is also helping law firms grow their businesses.
‘The economy is growing very well in Brazil and that is having a positive impact on the legal services market as companies demand more services,’ says Wahle. ‘Moves to improve corporate governance are also benefiting local law firms as they are getting more requests for due diligence and compliance work.’
However, Wahle adds that the Brazilian market is still very restrictive and ­access to it for foreign law firms is very limited – so much so that the Brazilian Bar Association withdrew the licence from one local law firm for its association with an international firm.
‘There is very little scope for international law firms to have any access to the Brazilian legal services market at the moment,’ says Wahle. ‘Foreign law firms cannot practise Brazilian law at all, but they may act as legal consultants and have associations with local firms through mutual referral so long as they do not hold any equity stake in a local firm.
‘There are discussions about relaxing these rules, but since the legal services market in Brazil is expanding as companies ask for more services, it is unlikely that the Brazilian Bar Association is going to act quickly when local firms are taking more business and becoming more specialist and ­sophisticated.’
Middle East The richest markets pose a challenge for foreign firms
Oil-rich – and simply ‘rich’ – the Middle East is an
obvious magnet for any industry to try and gain
a foothold, and international law firms are no
exception.
Anthony Garrod, consultant at Clyde & Co in the United Arab Emirates, says that the economic downturn has impacted on the legal sector, particularly those firms working on property deals, but notes there has been a growth in dispute litigation and resolution work as a result of construction projects being stalled or scrapped.
Each market in the region is different in terms of sophistication. For example, he says, the principal markets for legal services are Abu Dhabi and Dubai, while Saudi Arabia and Qatar are the most lucrative.
‘Without doubt, Saudi Arabia and Qatar are the best markets for law firms to be involved in because they are the richest,’ says Garrod. ‘Money continues to flow freely here and the governments are spending huge amounts on infrastructure projects to make these areas even more investor-friendly and to transform their economies, which means that there is a lot of due diligence and contract work that law firms can get involved in.’
But Andreas Haberbeck, partner at Hatem Abbas Ghazzawi & Co, based in Saudi Arabia, says that there are a number of challenges for foreigners trying to work in the local market. First, if a foreign law firm wants to operate in Saudi, it needs to work with a local partner, and finding one that has the necessary skills and resources can be difficult. Another problem is recruiting young lawyers.
‘There are tremendous restrictions put on foreign lawyers trying to come here,’ Haberbeck says. ‘To get a permit to work as a lawyer in Saudi you need to have five years’ experience, which means that it is almost impossible to recruit juniors from international firms to come here because they are too experienced and want too much money. Instead, you need to recruit local lawyers who have been trained abroad. The Saudi lifestyle can also be a challenge for anyone who is not native to the area.’
(Cont. from page 08) -coming increasingly engaged in a price war to win new business: some firms working on M&A deals have been offering to do due diligence work for clients for nothing, while other firms have cut their fees by a third to get clients.
But such cut-throat price reductions seem to be endemic to much of central and eastern Europe. Timur Bondaryev, managing partner at Ukrainian law firm Arzinger, says that customers are dictating fee structures. ‘Clients are not prepared to pay the same hourly rates and they want to cap fees. For example, in debt cases clients do not want to pay the law firm to just get an unenforceable judgment – they would rather pay up to 30% or 40% of the settlement award than pay an upfront fee, which means that it is more time-consuming and expensive for law firms to carry out the work.’
Several lawyers says that the big international firms are effectively being squeezed out of the markets as they can no longer compete on price, particularly as local firms can just charge a quarter of the fee. Added to that, there are exceptionally few areas where a local firm can no longer provide similar legal services, they say.
As a result, some international firms says that they have changed their approach and are focusing on providing more specialist services. Erik Steger, partner and board member at Austrian law firm Wolf Theiss – which styles itself as a central European law firm – says: ‘Clients want more assurance that we understand their industry sectors and the business risks that they face, rather than just the legal risks – they want industry expertise rather than just technical expertise. In some respects, clients want us to take a more business consultancy-type approach.’
While the lack of growth in the global economy continues to provide law firms with financial challenges, it is the resistance of local bar associations to allow foreign firms into some of the world’s biggest economies such as Brazil, India and China that presents longer-term headaches. So far, ­indications are good that these markets will be liberalised – but sceptics warn that any reform will be at their own pace.
Neil Hodge is a freelance journalist
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