London, long the dominant legal market in Europe, is still expected to remain a major base for law firms after Brexit. But Magic Circle firms and major U.S. players alike have also been building up in alternative markets like Amsterdam, Luxembourg, Paris and the Nordic countries for many practice areas as clients also shift their focus.
The result has been firms adding partners, snapping up local rivals and otherwise opening up shop on the continent to serve practices like banking, intellectual property and insurance that have all long been U.K. mainstays.
"I think [Brexit] is a catalyst for lots of thinking about many of our practice areas," said Ian Cox, regional managing partner for the U.K., U.S., Europe, the Middle East and Africa at Herbert Smith Freehills LLP. "At the moment there is still not enough certainty about what the ultimate deal is going to look like."
To be sure, it isn't all about Brexit. Many firms cautioned that the U.K.'s departure was only part of the reason for their moves as they look to carve out new territories.
But the sudden break with Brussels, which has spooked London's banks and insurance companies, has certainly also prompted firms to explore alternative destinations.
With its thriving financial culture, Germany is among the top countries soaking up fresh interest from international law firms, including Linklaters LLP and Eversheds Sutherland. Despite unattractive corporate tax rates, major banks are moving operations there from London, and law firms are eyeing the opportunities that brings.
Frankfurt, Germany
Big lenders including U.S. giants Goldman Sachs Inc. and JPMorgan Chase & Co. have begun moving staff to Frankfurt, and the Association of Foreign Banks in Germany, a lobby group, said in March that around 20 banks have decided to expand their presence in the city.
"In the area of financial services regulation we have seen an increase in revenue of 40 percent over the last three years — a proportion of that clearly goes down to Brexit," said Andreas Steck, senior German partner at Linklaters LLP.
The Magic Circle firm, which employs around 300 lawyers in Germany, opened its fifth German office in Hamburg in May to help meet demand, where staff include tax partner Jens Blumenberg and his M&A and corporate colleague Wolfgang Sturm. The firm is now prepared for further growth in Germany.
"Frankfurt specifically is the place to be," Steck said. "Investment banks in Frankfurt will be bigger. That of course leads to support from the firm in general and a clear growth of those practices in Germany."
Eversheds Sutherland has similar Teutonic ambitions. The firm cut the ribbon on its fourth German office in Düsseldorf in August, focused on real estate and insurance, after it acquired local firm Grooterhorst & Partners. Eversheds Sutherland also recently hired 10 lawyers in Germany from local rival Beiten Burkhardt as it taps into local talent pools.
"We chose Düsseldorf because it is the German city where most U.S. corporates are located," said Ian Gray, chairman of Eversheds Sutherland (Europe). "We act for many of them already but believe we can develop the client base much further."
The firm moved into a new office in Hamburg in May and now plans to bolster its Düsseldorf operation further as the team looks to branch out into corporate, mergers and acquisitions, employment and litigation work. Gray downplayed the importance of Brexit, however, saying that the German push is part of a wider trend.
"Our commitment to Europe goes well beyond the issues that Brexit may present," he said. "The markets are growing for us already, especially in Germany, Spain, Italy and France."
Dublin, Ireland
Across the Irish sea from Britain, Dublin presents its own opportunities for expansion. The city has emerged as the most popular post-Brexit base for financial services firms, according to new data released by Ernst & Young in June. Unlike Frankfurt, which is a magnet for bankers, the Irish capital is a big draw for London's asset managers.
Some 21 U.K. financial services firms are setting up shop in the city, ahead of Frankfurt's 12 companies, according to EY.
Among the law firms ready for an Irish deluge is DLA Piper. The firm announced its new office there in May, with lawyers specializing in technology, life sciences and financial services. The firm hired partner David Carthy, who acts regularly for U.S. and international companies expanding into Europe, for the office from Dublin-based law firm William Fry.
"The challenge now is how we can establish it quickly enough to actually meet the internal demand," said Andrew Darwin, DLA Piper's global co-chairman.
The firm has looked at Dublin many times over the years, but the business case for opening in the Irish capital never quite stacked up, Darwin said.
"But the advent of Brexit, and therefore the importance of Dublin as the only English-speaking, common law jurisdiction that will be left in the EU, means that for us that tipped the balance," Darwin said.
Luxembourg City, Luxembourg
Luxembourg is also fast emerging as a new base for business after Brexit. London-headquartered insurer RSA Group PLC, Japanese insurance giant Tokio Marine Group and Hiscox Ltd. are all moving some operations there in time for Britain's departure.
And law firms are following. Ashurst LLP said in June that it will open an office in the duchy to take advantage of Brexit business. Norton Rose Fulbright likewise announced its new Luxembourg operation in May 2017 to serve corporate, tax, banking and capital markets clients.
The new office marks a further push into Europe after Norton Rose moved into Monaco in late 2016 to focus on shipping and finance clients.
"We opened our offices in Luxembourg and Monaco to build upon our offering and to address the growing needs of clients across our core sectors," said Martin Scott, managing partner for Europe, Middle East and Asia at Norton Rose Fulbright. "Luxembourg is one of the main hubs for international investment and asset management in continental Europe."
Beyond the continent's biggest financial services centers, a series of firms are staking out other parts of Europe largely looking to dominate gaps in the market.
Milan, Italy
Herbert Smith Freehills, for its part, has its eye on Milan. The firm opened its first Italian office there in January, focused on intellectual property, particularly patent litigation for pharmaceutical companies. The office employs eight lawyers, including two partners, and will continue to grow, said HSF's Cox. The firm picked Italy for expansion following similar success in London.
"Pharma and patent litigation is seen as a growth area in the short to medium term by the industry generally," Cox said. "It has huge potential."
The firm will now seek to expand the same practice in Germany and Paris, and Cox said that Brexit to some degree influenced these decisions.
"Whereas traditionally the center of gravity for a lot of this big pharma patent litigation would have been in London, inevitably we couldn't guarantee that that would continue to be the case," Cox said.
Dentons, meanwhile, forged into the Dutch market, Europe's sixth largest economy, in April 2017 after merging with Amsterdam-based law firm Boekel. That deal gave the firm an outpost with 70 lawyers specializing in banking, insurance and M&A in the Netherlands. And the office has continued to grow from there.
"We've added a number of partners. There are around eight, which is a very substantial number," said Evan Lazar, chairman of the Europe board at Dentons. "We are hoping to attract a few more."
Dentons also plans to focus on Spain and Germany, jurisdictions where it is smaller than it would like to be. The firm too is hoping to expand into Austria and the Nordic countries in the years ahead.
"There are very few international law firms that have real strength in the [Nordic] markets and we see that as a real opportunity," Lazar said.
Dentons is not alone in seeing huge potential in the region. Though the Scandinavian countries have limited populations, their natural resources and banking sectors are significant. And for years many international law firms have left those markets alone.
DLA Piper, which has operated in the region since the early 2000s, helped buck this trend in February 2016 when it merged with Finnish firm Peltonen LMR Oy. In 2017 it went further and joined forces with Danish firm LETT, making it the largest law firm in the Nordic region with 370 lawyers in total.
"We are in a unique position because we are the only pan-Nordic firm that is also part of a global law firm," Darwin said. "The countries themselves are quite small, other than Sweden. But the region as a whole ranks in the top 15 for GDP in the world. It's economically very powerful."
While firms may be staking out the map of Europe like a game of Risk, lawyers predict that not too much will change for London as a legal capital.
Though banks and other companies have drawn up contingency plans, they have not yet shifted large numbers of people or operations out of London.
And with its wealth of infrastructure and expertise, few involved in the legal industry expect it to lose its luster for clients. Dentons expects London to remain its biggest European office after Brexit, and DLA Piper will also keep its main international base in the British capital.
"Although the banks and others will move certain services into other markets, Lloyd's of London is not going to empty the office in Lime Street and move everyone to Brussels," DLA Piper's Darwin said.
"We see London for the foreseeable future as having a huge role to play," he added.
--Editing by Melissa Lipman and Jeremy Barker.
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