I keep hearing that local offices of international firms have been dominating the CEE legal market. Journalists covering the market look at the corporate, finance, and litigation league tables for the region, notice that international firms occupy more places than would be typical in Western Europe, and report a story of global brand domination. I am almost certainly biased, but I see things differently.
I admit, in reviewing the current league tables in the leading legal directories, we can see that global and regional firms are notably present across the higher tiers. But the remarkable thing is not their continuing presence;
it’s the distinct rise of independent local players. The progression is actually fairly easy to chart.
In the early 1990s, when the CEE markets opened, international firms arrived on the wave of foreign direct investment and were well placed to meet the growing demand. Larger local practices were literally non-existent, and the international firms encountered no effective competition. This resulted in a slew of international players opening offices throughout the region. At the time of state-owned sales and privatizations, the international firms on the ground prospered. As a result, few if any local law firms occupied top spots in league tables.
Since then, the situation has been gradually changing. Many of the international firms have either exited the market or downsized operations considerably. At the same time, top-tier domestic firms have been thriving, and most have outgrown the local offices of the internationals. An article that appeared in CEE Legal Matters two years ago highlighted that in banking, corporate, and litigation tables at the time, on average 57.7% and 56.5% of top tiers were occupied by locals, according to Chambers and The Legal 500, respectively. Notably, the methodology employed by CEE Legal Matters did not count any of the purely CEE brands as locals if they operated in more than a single jurisdiction, thus perhaps tipping the scales in favor of “international” firms a bit more than may have been justified.
Yet, we only need to look at recent Chambers Europe Awards’ nominations to see the impact that local firms are making. In four of the seven country awards to be conferred in the CEE region this year local champions formed a clear majority of nominees. However, local firms have not only gained traction in the nomination process – they win as well. By way of example, the Czech Republic stands out for producing two lone independents that hold their own – with successive award wins – against strong global players. Ours is, I feel obliged to point out, one of them.
Of course, market observers can be forgiven for misinterpreting the trend. When you look at the rankings for the entire CEE region, only international firms are present. It makes sense – the international firms have the wider footprint with offices in multiple jurisdictions within the region. Local firms tend to be present in just one or a few. Thus, the regional league tables are naturally skewed in favor of the larger, international firms. The question is whether this says anything about the market share of the internationals versus the locals. My answer is: not necessarily.
As a region, the CEE is not any more coherent in terms of history, languages, or territory than any given region of Western Europe. The reason why CEE regional league tables are produced is that a number of international firms have opted for a pan-CEE strategy and there is a market for tracking their success. It should then be no surprise that the international firms pursuing a pan-CEE strategy excel in league tables tracking firms applying such a strategy. A woman standing before a mirror and asking who is the fairest in the land should not be that surprised to see herself.
What the pan-CEE league tables fail to measure is the actual proportion of CEE work handled by local firms. A huge number of deals involving the region are handled by firms who have not opened their own local outposts or are present in just a few of the CEE jurisdictions. They naturally need to team up with the top domestic practices in order to meet sophisticated client demands. This is an arrangement that works well for the locals and provides a significant source of high-profile work, yet the league tables are completely silent about this story.
So do local offices of the international firms dominate the CEE market? They certainly are present in the market, and I am sure that they do a great job. There may be jurisdictions where they keep casting a long shadow. But the times of their dominance of the region are over.
By Martin Kriz, Partner, PRK Partners
This Article was originally published in Issue 4.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.