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Law firms in Switzerland: a country apart
"Famed espacially for its unique bankings system, Switzerland presents a very uniform landscape of commercial law firms"
Switzerland is unlike any other international legal services market in Europe. Despite its status as the corporate hub par excellence, only one Anglo-American firm, Baker & McKenzie, enjoys a significant local presence and the largest international firms often only have representative offices there. Domestic firms thrive (see fig. 1) on the basis of relationships of trust. The situation overall looks as if a non-aggression pact has been signed with the major Anglo-Americans.
Global firms stay wary
During the 1980s, a large number of international firms sought to establish in
Switzerland. A general outcry and national protectionism got the better of the trend. Coudert Frères, for example, was ordered by the Geneva Society of Attorneys to submit the letterheads from every one of its offices worldwide to prove that they did not state that its lawyers were licensed to plead in Geneva. As a consequence, very few foreign firms have a presence in the country (see fig. 2).
Things began to change at the start of the current decade. Several international firms announced plans to establish offices in Switzerland or expand their local practices. Holman Fenwick Willan brought in Matthew
Parish to set up an arbitration group in Geneva, adding one of the firm’s core practice areas to its Swiss operation. Akin Gump arrived in Geneva the same year, recruiting a Hogan & Hartson team that had quit the firm after its merger with Lovells. US litigation specialists Quinn Emanuel Urquhart & Sullivan were able to establish a representative office thanks to the arrival of Thomas Werlen, formerly head of legal at Novartis, at the end of 2011. The following year, both Speechly Bircham and Farrer & Co. set up offices in Zurich.
Bird & Bird, for its part, signed an association agreement with the local firm of BCCC Avocats in 2013. This alliance is an example of how some Anglo-American firms are covering the Swiss market, an approach to which certain others, whose plans for the country are not bearing fruit, will doubtless revert. A case in point is Allen & Overy, which has found neither partners to relocate nor a local team to recruit and has virtually abandoned its plans; meanwhile local firms are successfully holding on to the young talent that might be tempted by the Anglo-American adventure. “Allen & who?” is the whisper in the local market. This transaction might, however, have marked a significant opening-up toward the members of the Magic Circle.
Whatever the case, the three main fields of expertise for foreign firms in Switzerland are arbitration, international trade and private-client business, i.e. wealth planning, investment management and tax. They thus remain divided as to whether to obtain licenses to practice Swiss law. A handful employ a small number of Swiss staff, whereas the remainder prefer to rely on the relations they maintain with domestic firms. For the moment, plenty of the foreigners confine themselves strictly to their specialties. Holman Fenwick, for example, focuses on international trade, while Withers concentrates on private clients.
In its own way, however, the country has adapted to changes in the legal professions. In 2011, the prime bastion of legal federalism was breached when unified civil and penal codes were introduced to replace the separate codes followed in each of the twenty-six cantons. Besides facilitating collaboration between attorneys in different Swiss cities, the new legislation gives an economic boost to the litigation and arbitration practices of large firms, for most of whom these fields represent a major sphere of activity. The litigious environment is expanding thanks to rising numbers of banking disputes, not least cases connected to the Madoff fraud in which a number of Swiss investment funds lost money. Firms have thus steadily built up expert litigation and arbitration teams, hiring extra specialists to meet client demand. At the same time, Switzerland’s attractiveness has risen as a result of the country’s new shift toward ending the doctrine of banking secrecy. Most local lawyers believe that Switzerland should now be regarded as an “onshore” jurisdiction. Anti-money laundering legislation, for instance, has been tightened and the number of bilateral agreements on sharing tax information is increasing. Lawyers would benefit if the country shed its label as a tax haven: international clients might then be attracted by its levels of professional expertise, rather than by its banking system.
In criminal law, changes in procedure have led to the abolition of examining magistrates. The decision to prosecute or discharge now lies with public prosecutors, who then bring the accusation before the courts in a model resembling that followed in the US. Allegations against lawyers are meanwhile multiplying: criminal proceedings were brought against Edgar Paltzer, a partner in the firm of Niederer Kraft & Frey, and the banker Stefan Buck in May 2013.
Geneva or Zurich – forced to choose?
Where to locate is a matter of great strategic importance for firms. Differences in culture, and thus legal practice, between
Geneva and Zurich mean that a choice often has to be made. Some firms, however, insist that doing business in the Confederation makes a presence in both cities indispensable. In 2010, the Genevan firm Lalive transferred some of its German-speaking partners to a newly opened office in Zurich. In March 2012, Meyerlustenberger and Lachenal linked up to create a thirty-partner firm with fifty or so employees and a presence in both Zurich and Geneva, making it one of the biggest firms in the country. Lenz & Staehelin (see interview with Andreas von Planta, previous page) also has offices in both major cities. By contrast, Homburger and Niederer Kraft
& Frey offer a nationwide presence via a single point of contact. These firms believe it is impossible to be present in both Geneva and Zurich without maintaining two separate identities in the same organization. Homburger, for instance, takes the view that it is perfectly possible to advise French clients from Zurich (see interview with Daniel Daeniker, next page).
Yet Geneva and Zurich are not the whole country. Some firms maintain a presence in Lausanne, Basle or indeed Zug, among them Meyerlustenberger and Lenz & Staehelin. Bär & Karrer, meanwhile, has offices in Zurich, Geneva and Lugano, being one of several ambitious firms which are further expanding their business into the southern cities that serve as gateways into Italy. Companies in the north of the Italian “boot” are attracted by the expertise in tax, M&A and banking law on offer at Swiss firms.
Signs of an opening
Swiss firms all possess a strong base of local clients with international operations. This gives them direct access to the global market without having to rely on cross-border networks to generate business. The banking sector too is gradually opening up, Homburger having advised Credit Suisse on an $8 billion convertible bond issue in 2011. This made Credit Suisse one of the first Swiss banks to issue bonds. A resurgence in mergers and acquisitions also began sharply in August 2012 when the Julius Baer banking group negotiated the purchase of Merrill Lynch’s wealth management subsidiary in a deal worth $880 million (€652 million). In early April 2013, the Swiss bank announced that it had taken over the same businesses in Chile, Uruguay, Luxembourg and Monaco and was planning to target other regions too, among them the UK.
Local law firms, however, are increasingly feeling the competition from international firms which advise their clients to avoid local law for cross-border transactions. Swiss law can be circumvented by arranging for contracts to be governed by British or American law instead. This essentially cuts the Swiss attorneys out of the loop, leaving them to pick up the crumbs of transactions carried out on their home soil. More generally, Swiss lawyers have little presence in the international market except where they have become specialists in a particular field. Schellenberg Wittmer, for example, a rare case of a successful Geneva/Zurich merger, enjoys a solid reputation in international commercial arbitration.
Another sign of immobility in the market is the excessive number of non-practicing lawyers. Large numbers of young graduates are choosing alternative careers, with the banking sector remaining highly attractive. Successful recruitment is thus a problem that firms have to address.
Adjustment among local firms
At the turn of the 21st century, the proliferation of new laws and the growing complexity of the globalized economy led even in Switzerland to a rise in specialization. The Swiss attorney has thus become either a litigation specialist or a corporate lawyer, and generalists are on the way out. Today, a new challenge has arisen for Swiss lawyers to meet: competition from new centers of banking and investment. In Singapore, for instance, the government has made efforts to attract global wealth, primarily through regulatory changes designed to make it easier to invest. These include a tax exemption scheme for investments in family holding companies registered in the jurisdiction. Likewise, the maximum tax rate for individuals is 20%, corporation tax has been cut to 25.5% and income and capital gains on investments outside Singapore are tax-free for non-residents. All this makes Singapore an ideal location for clients disappointed by the regulatory obstacles in Switzerland. Withers understood this when it brought Matthew Feargrieve into its Zurich office in February 2013 to develop a pan-European investment funds practice. Feargreave, a solicitor in the UK, the Virgin Islands and the Caymans, previously worked in offshore firms and is a specialist in asset management and private investment. Such experience is increasingly sought after as Switzerland seeks to strike the delicate balance between questioning the banking secrecy system and attracting foreign investors to the country.
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