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A Consideration of Foreign Law Firms in Slovenia

A Consideration of Foreign Law Firms in Slovenia

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Resentment by domestic law firms in CEE markets against the international and regional firms that have moved in on their once exclusive domain is a common, though perhaps diminishing, refrain. How do domestic law firms in Slovenia feel about the foreign firms that have opened up shop next door?

The Early Days

The Slovenian market was, for several years after the break-up of the former Yugoslavia, purely domestic, with top level commercial legal services provided by solo practitioners and a small but skilled set of firms, including Jadek & Pensa (which traces its origins back to 1958); Selih & Partners (1961); Miro Senica & Attorneys (1986); and Rojs, Peljhan, Prelesnik & Partners (1989), all of which of course frequently received work from regional and international firms based outside the country (“Foreign Firms”).

The nature of the legal market changed in June 2001, however, when Austria’s Schoenherr opened its Ljubljana office, followed by fellow Austrians Wolf Theiss in 2003 and CMS Reich-Rohrwig Hainz in 2008. Most recently, Belgrade-based Karanovic & Partners became active in the country in 2015 as well. In addition, of course, the Big 4 are present in Slovenia, several (including Deloitte Legal, since 2013, and PWC Legal, since 2017) with dedicated legal arms.

The Foreign Firms 

At least anecdotally, it appears the Foreign Firms were not initially greeted with open arms.

Many of the lawyers at the Foreign Firms in Slovenia recall some opposition from their local competition in their early days in the country, although their recollections are mainly anecdotal and second-hand. According to a partner of one Foreign Firm in Slovenia (let’s call him “Foreign Partner”), who chose to remain anonymous, “a few years ago there was some kind of a glitch between domestic firms and international firms about the business model. I think basically it all comes from their insecurity. They saw how much of the market share [the Foreign Firms] could have.” He refers to a whispering campaign waged both by the Bar Association and local competitors against the Foreign Firms. “I’m not sure who was involved, but it came from the Bar Association. There were some notes and letters a few years ago. And there were rumors spread to clients, who would come to us and report that people were saying nasty things about us.”

According to Foreign Partner, the resentment grew out of anxiety about the number of offices, lawyers, and even back office staff the Foreign Firms can bring to bear. “They think our advantage is that we’re bigger – and of course they’re right,” he explains. “But if you look at the top ten firms in Slovenia, all three kinds of firms are represented (regional, local firms with foreign offices, and strong local firms with a network). To a certain extent, yes, we have an advantage. But to a certain extent this advantage can be mitigated. We cannot just walk into the office of a large client and get the business.”

In other words, he insists, he faces the same bottom lines as his domestic counterparts do. “I heard a few people accuse us of coming with really low prices, but this is not true. We need to be profitable as well. I don’t understand that at all. We’re doing business just like they are.” 

Ultimately, though, Foreign Partner insists that any real conflict was in the past. “This has stopped now. I don’t see it – I don’t even hear it from my clients.” And the Bar Association is on board as well, he claims. “I feel we have a modern president of the Bar Association. He understands that international law firms are no threat to the Slovenian market.” 

Though he concludes with a curious note: “I’m not sure I really believe what I said – but I hope that this is the case.”

Bojan Brezan, the Office Managing Partner in cooperation with Schoenherr, agrees that there was some resentment by local firms in the past. “There were some issues in this respect,” he says. “It’s hard to say where they were coming from. A few years ago there was some negative campaigning going around.” 

Nonetheless, he says that, “in the last few years the local firms have, to a certain extent, come to terms with the fact that there are several international firms in the market,” and he emphasizes that “I’ve never personally had any bad experience with any local firms.”

And anyway, Brezan points out, the relationship between the Foreign Firms and the local firms may not be perfect, “but it’s not perfect between local firms either.” According to him, “obviously to the extent you’re losing market share, whether from local firms or other international firms, it’s always sensitive.” And competition for that market share is increasing from a variety of sources, beyond the Foreign Firms. “It’s not just the international firms,” he says. “It’s also a lot of new local firms that have popped up and taken away part of the market share from the national champions. So competition has increased, and it’s a tougher market.”

The Local Perspective

Andrej Kirm, Managing Partner at Slovenia’s Kirm Perpar firm (which opened in 2012), knows that, in some CEE markets, there has been open conflict between the local and Foreign Firms. “We have strong partnerships with other law firms in CEE,” he says, “and we are aware that there were severe difficulties with the international law firms, obstacles, which the local firms made for them for the mechanism of operation.” Still, he insists, “in Slovenia I do not see any real issues with those.” Indeed, he says, Schoenherr, CMS, and Wolf Theiss “have been present in the market for decades, so they are well-accepted as market players and we never really had any issues.” In fact, he says, “we worked on certain cases for a client on the same side, in certain cases against these international law firms and my experience has always been good, those firms were always cooperative, I have no negative remarks about the cooperation with them.”

And Kirm rejects the suggestion that local firms may be at a competitive disadvantage against Foreign Firms. “We have had experience of both winning on requests for proposals, as well as losing against international law firms. I do not think there is any specific advantage or disadvantage in bidding against international law firms compared to a strong local/domestic player.” According to him, “the main competitive advantages that the ILFs have is that, if they are already working for an international client who is looking for a project in Slovenia, or looking to buy a certain company in Slovenia, the ILFs will be the natural choice.” This, however, is outweighed by other, compensating factors. “However, my view is that our strongest card of domestic law firms against ILFs are two key competitive advantages: one is that we can adapt and offer lower rates, and the other is that we can in several cases offer more senior staff, compare to what the ILFs would be able to offer.”

Focusing on the first point – prices and fees – Kirm rejects the suggestion that Foreign Firms are able to drive prices down. “Generally, this is not a big issue,” he says, “because the ILFs will have strict boundaries in which prices compete, and these prices generally would not vary much between the CEE markets – the hourly rates would not be too different with those in, let’s say, Vienna, Prague, or Ljubljana.” As a result, he says, if anything, it is domestic firms that have the advantage. “Costs of labor in Ljubljana are much lower, and the costs of operating a law firm in Ljubljana are much lower, which is why we do not really have the impression that these international clients would go for such prices, so there are more on the opposite scale.” 

In fact, he says, to the extent that unfair competition on fees exists, it is not coming from the Foreign Firms. He says it is “more of a problem with certain local law firms which are trying to win cases just for references. With international law firms this has never been the case.” 

All things considered, Kirm claims, the compelling benefits of independence have led him to reject invitations to tie-up in the past. “We have been approached by ILFs to serve as their formal local partners, so also using their brand names in Slovenia,” he says, “but we haven’t decided for such cooperation. Because we value our independence highly, and it enables us to work with several international law firms which are not present in Slovenia. And this is a strong channel of our work, so we are not tied to one particular player, but cooperate with several international players.”

A Managing Partner at another local firm (let’s call him “Local MP”), who prefers to speak anonymously, agrees that the Foreign Firms have an obvious advantage in serving clients from their home country. “Big international law firms already have major international clients coming from their region. If we have strong German ILFs, for instance, they have majority German clients. And they of course will enter the market with them. This is a normal business advantage, nothing else.” Still, he says, the Foreign Firms have no real advantage in getting the local clients looking for top-level legal counsel. “I do not think [the Foreign Firms] have a business advantage in Slovenia, when they are trying to engage new clients, because 

local firms are very professional, with very high-level and skilled attorneys, which ILFs do not have in Slovenia, which is a main advantage for domestic firms.”

Indeed, Local MP says, even the Foreign Firms that are in Slovenia sometimes are forced to turn to local competitors for assistance. “Slovenia is quite small, and none of the ILFs have strong staffs here, so for ordinary legal work, their teams here are suitable, but for complex legal advising and presentation they usually engage domestic experts.”

Thus, like Kirm, Local MP says that, even if the Foreign Firms do have the advantage of a foreign pipeline, the domestic firms retain a strong advantage of their own. He focuses on market knowledge and experience. “If we have a problem that is domestic and locally-oriented, the advantage is obviously on our side. This is our playground; they cannot compete with us here.” He continues. “The [Foreign Firms] here cannot compete with strong domestic law firms, and also the advantage Slovenians have in the Adriatic region – Serbia, Croatia, Bosnia, and Macedonia – they cannot compete with us. We have a history, we know them, we speak their language, we know their laws, and no ILFs can compete with that. They can be stronger, they can be bigger, they can have more resources and bigger clients, but from a professional point of view they cannot compete with that.”

For Local MP, the key comes down to institutional experience. He says of the Foreign Firms, “their local offices in Slovenia, and also Croatia, and Serbia, they have junior associates, and for a big client that is a problem. Such clients want to have the same level of service as they get from their country of origin, for example if a client is coming from Germany and the firm is from Germany too, they want to have the same service level as in Germany.” As a result, he says, his firm often gets clients who started with the local offices of Foreign Firms before switching. “We have lawyers with more than 25 years of experience – and no one in the ILFs can compete with such expertise in Slovenia. They can compete in Austria or Germany, but not in Slovenia.”

He continues. “Our law firm has been in Slovenia for more than 30 years – for Slovenia, this is a big number. Slovenia is a young country, and thirty years is quite a tradition, and no international law firms here can give you such tradition.” Accordingly, he says, turning poetic: “If we look at this from a local perspective, definitely, radition is something domestic firms have and international firms do not. They are like the wind, they come and go. When Slovenia is in the transitional period, they are very active here, and when there is nothing happening they go away and come back. They are not permanent here.

Indeed, a colleague of Local MP’s insists that this advantage is widely-acknowledged across the market. She reports having worked at the firm for ten years, “and I have never thought of being employed by the international firms. Because the reputation of attorneys in strong domestic firms is actually much higher than in international firms; the team is much stronger, in domestic firms, and the knowledge.”

Of course, not all Foreign Firms are created equal, and Local MP points to a growing threat coming from a different direction. “In recent years is the Big Four firms are starting their own law departments,” he says. “These firms of course have some competition advantages, because of their very strong client base, because their existing client base in tax and audit, of course this is an advantage.” He sighs. “But it is a free market. We have to compete with our service and try to be the best we can be, that is the way the competition works as far as I am concerned.”

And of course Slovenian firms are not completely unarmed in their battle for clients against Foreign Firms claiming multi-jurisdictional coverage as a strength. Many domestic firms have, in recent years, joined strong law firm networks across the region specifically to challenge the Foreign Firms’ perceived strength. “Slovenia is a small market,” Local MP says. “All markets in the region are small, but together we are quite big, which is why domestic firms in these markets are connecting and acting as one – that is why there are several regional networks, which are getting stronger, including ours.” And Local MP claims that clients appreciate the structure. “Many clients who came into the region with one of the big international firms, or one of the Big 4, they were not satisfied with the services regionally. In Austria they would get excellent service – but locally and regionally not. A lot of them are now entering the whole region with our team and our network. We believe this is the future for this Adriatic region – not big international firms, but a partnership of the best domestic law firm in each country.”

Partner Tine Misic of the ODI Law Firm claims not to be concerned about any advantage the Vienna-based firms may have in serving Austrian clients, or the Belgrade-based Karanovic & Partners may have serving Serbian clients. Indeed, he says, “Generally speaking, apart from this obvious pipeline, being in Vienna or Belgrade, I would say the playground is even.” 

Misic, like others, points to experience as a countervailing advantage for the local firms. “Selih or Jadek & Pensa have been around for 50-60 years. They have been around since forever, they have partners who have been around forever, they know the market better.” Still, he’s not ready to write off the Foreign Firms. “I would not say that the quality provided by Foreign Firms is worse because of that fact, however. There are nuances and differences, but they were involved in big transactions, and for that reason I would not say that their level is worse, per se, just because they are foreign firms. They employ Slovenian lawyers as well.”

Of course, that’s not to say all is rosy. With now four Foreign Firms on the ground, the Big 4 ramping up their legal operations, and ever-more local competition, the fight for market share is a daily one. “It is a tough market,” Misic says, “because it is saturated – or over-saturated – and it is only getting worse. It is not easy. It is tough. And Slovenia is a small market, so it is a tough ground to play on.”

Of course, the creation of or entrance into a regional law firm network isn’t the only way for Slovenian firms to compete for foreign clients with both Foreign Firms and other major Slovenian firms. Following the dictum that “what’s good for the goose is good for the gander,” ODI Law has, since opening its doors in 2005, itself become a regional firm, expanding outward from Slovenia to open offices in Serbia, Croatia, and Macedonia. 

The Bar Association

For his part, Roman Zavrsek, the current President of the Slovenian Bar Association, insists there have never been any formal barriers to Foreign Firms wanting to open offices on the ground in Slovenia. “Concerning the ILFs in Slovenia, they are more or less regulated by the Domestic Law on Attorneys, which has been more or less unchanged since 2004 when Slovenia entered the EU,” he says. “The regulations are in compliance with EU directives, and they more or less are the same as in Austria or Croatia, and some other countries, so the ILFs can establish branch offices and register with the Slovenian bar association as a foreign legal firm and can employ both local lawyers and foreign ones.” 

Thus, Zavrsek does not believe the Foreign Firms pose any kind of existential threat to the domestic firms. The Slovenian market is small,” he points out. “We are smaller than Paris, population-wise. There is no real business for the international law firms.”

Ultimately, Zavrsek says, there are no obstacles for Foreign Firms. He points out that “three of the ILFs are in the top ten law firms in Slovenia, and three out of four in my opinion is quite good in a sense – I would say at least one third of the economic market is shared between the ILFs.” As a result, he says, “I am not aware of any obstacles, and I haven’t heard of any complaints from any ILFs in regard to the branding and names of the firms.”

The Competitive Spirit

Ultimately, what almost everyone returns to is an acknowledgement that competition is an inevitable – even a necessary – component of a modern and healthy legal market, regardless of its source. Schoenherr’s Bojan Brezan says, ultimately, “healthy competition is always a good thing.” 

ODI’s Misic too insists that a rising tide lifts all boats. “Truth be told, competition is always good, and although Slovenia is a small market, having competitors is always good.” 

Foreign MP agrees. “Of course there’s always a battle between competitors,” he says. “And there should be! It’s good for clients – good for everyone. I really don’t think of competitors as someone I need to destroy. I need them to help keep me on my toes, to make me better, and to keep me out of my comfort zone.” 

He laughs. “Maybe I’m naïve – I probably am.”

This Article was originally published in Issue 6.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.