Italy: Strong local roots, increasingly global outlook

The Italian legal market is a competitive, high-density one, in which independent local law firms more than hold their own against Magic Circle and US firms, who have managed to successfully dominate the Italian legal landscape only in banking, finance and competition. Italy’s legal market is somewhat peculiar, split between tradition and innovation, and historically in thrall to the strong personalities and visionary abilities of a small group of veterans – though this picture has been changing, given the changing expectations of clients vis-à-vis their external counsel.

A crucial bridge between Europe and Mediterranean, Italy is in some ways very attractive for international companies. The high quality of niche and luxury “Made in Italy” products, and the strong potential of its market, has ignited the interest of foreign investors. Today, the domestic market is mature, and law firms have taken the necessary steps to compete.

Small and medium-sized enterprises and family businesses dominate the economic landscape; they represent the bulk of even the manufacturing industry. The peninsula has a smaller number of multinational corporations than other economies in the Old Continent, but one of Italy’s strengths is the thriving state of its modestly sized firms, which employ more than 80% of the workforce. The north of the country is highly industrialized and diversified with good infrastructure, and represents the industrial backbone of the nation; the south is renowned for its tourism industry. There is a marked gap between the two in terms of wealth and opportunities.

The long road to institutionalization

BonelliErede, Chiomenti and Gianni & Origoni, the leaders of Italy’s legal market, have in recent years undertaken a series of initiatives aimed at modernizing and adapting their organizations to present-day reality. The main objective of these efforts has been to achieve institutionalization. And what does institutionalization mean? It is to see a firm continue its existence after its founders have gone. These three prestigious law firms have passed through the key stages of the country’s economic history, and have always been present in the operations that matter most. All three have great lawyers and weavers of trusted relationships, yet as market players were faced with the urgent need to manage the transition from one generation to the next.

To face the so-called “grey hair factor”, back in 2013 BonelliErede appointed two relatively young managing partners, Stefano Simontacchi and Marcello Giustiniani, who were 42 and 50 respectively; currently, Simontacchi manages the firm alongside Andrea Carta Mantiglia, with an executive board that as of 2021 has a “pink quota” in place: a minimum of one woman on the board at any given time. In fact, since BonelliErede’s 2019 merger with Giuseppe Lombardi’s elite litigation boutique Lombardi e Associati, the firm has placed particular emphasis on modernization, which has involved, among other things, rebranding the firm, establishing a new communications strategy, and setting up a multi-disciplinary ESG practice group.

Part of what makes the 400-lawyer firm unique is the strength of its offering in Africa and the Middle East. BonelliErede has three strategic outposts in these regions: Cairo (Egypt), Addis Ababa (Ethiopia) and Dubai (the United Arab Emirates).

Another legal-market leader to have made major changes is Chiomenti. Founded in 1948, the firm is a pillar of the Italian market. Internationalization has always been a key goal of the firm, with offices in Rome, Milan, London, Brussels, New York, Beijing, Shanghai and Hong Kong. Similarly to BonelliErede, Chiomenti has kept an eye on succession planning: the 300-lawyer firm is currently managed by three partners from different age bands – Francesco Tedeschini is ten years older than Filippo Modulo, who in turn is ten years older than Gregorio Consoli – helping unite seasoned veteran perspectives with more youthful and dynamic ones.

In 2020, Chiomenti announced its commitment to a more socially responsible future by setting up WeCare, a pro bono programme for “socially committed parties in sectors of public utility and for projects considered worthy of support”. The firm has also set up an ESG taskforce and made steps to improve its own internal sustainability.

Fellow market behemoth Gianni & Origoni was founded in 1988 with the goal of developing a truly international business practice. The idea was to import the Anglo-Saxon model of a law firm to Italy. At that time, the Italian legal elite was conservative, consisting of a few relatively small firms. Three offices were opened – Rome, Milan and New York. The two Italian offices were meant to work closely with Italian clients, while the American one was created to effectively manage clients with international reach and activities. Today the firm has over 430 lawyers, and offices in Rome, Milan, Bologna, Padua, Turin, Abu Dhabi, Brussels, Hong Kong, London, New York and Shanghai.

Despite being Italy’s largest law firm today, Gianni & Origoni is also the firm that has faced the largest spin-off in Italian legal history. At the end of 2007, 80 lawyers, 17 of them partners, decided to quit the firm. The split gave life to a new entity, now a major player: Legance.

Founded in the early days of the global financial crisis, Legance is an amalgamation of the words “legal” and “finance” but also evokes the word legame, which is Italian for “bond” – possibly another piece of financial wordplay in translation, but more likely an evocation of the firm’s commitment to its clients and its colleagues. 15 years on, Legance is one of the largest operators in the Italian market, a truly independent full-service law firm with more than 320 lawyers and offices in Milan, Rome and London. (The firm also opened a New York office in 2017, but quietly shuttered it four years later.)

A bit of history

The reforms which started in the early 1990s are key factors behind the transformations that characterize the Italian legal market. The strong deregulation process, which began in 1992, and the large-scale privatizations (mainly in the energy, gas, transportation and telecoms sectors), though coming later than in other eurozone countries, had a profound impact on Italy’s economic structure, paving the way for the entry of American and English law firms.

The privatization of state-owned companies increased stock market capitalization, contributing substantially to the reduction of public debt and therefore to the adherence to the Maastricht criteria. Following the new liberalizing trend, the Italian business environment became more investor-friendly and a place for international firms looking for cross-border business transactions. The enhancement of the financial markets generated a favorable context for sophisticated and integrated legal services, which prompted local firms to restructure their internal organization. Faced with international competition, domestic law firms have had to adapt their capacity to meet the demands of a growing market.

High lawyer-to-population ratio

Another characteristic of the Italian market is the high concentration of lawyers, which has its roots in the 1970s following the liberalization of access to university. According to the Italian Bar Association, Italy has more than 245,000 qualified lawyers. By way of comparison, Germany has barely 165,000 lawyers, while France has fewer than 70,000.

Reforms have been made to the legal profession in order to dampen the number of new entrants into the legal market, introducing more selective tests for admission to the Bar.

A changing legal landscape

As Filippo Modulo, managing partner of Chiomenti, explains: “the Italian legal market is characterized by the presence of a very high number of individual practitioners as well as by a significant number of boutiques and other players, both independent and Anglo-Saxon.”

In Milan and Rome, and indeed in many cities in Italy, you won’t go far without seeing some kind of law office, usually run by a sole practitioner. But consolidation in the legal market in Italy, on both a domestic and an international scale, is an increasingly common sight. The most significant in the last few years has been BonelliErede’s aforementioned 2019 absorption of Lombardi e Associati, but Gatti Pavesi Bianchi’s 2020 merger with tax boutique Ludovici Piccone & Partners is another important example.

Consolidation has also been taking place on an international scale: in late 2021, prominent Italian firm Nctm joined a French firm and a German firm in establishing a verein named ADVANT, while Pirola Pennuto Zei & Associati made a similar move at a similar time, joining the Franco-German alliance unyer to make it a Franco-Germano-Italian network.

However, there is also a trend in the opposite direction: many experienced practitioners decide to split off from large firms to set up their own boutiques (or in some cases join established boutiques), often taking their clients with them. Key recent examples since the COVID-19 pandemic include marquee corporate partner Roberto Cappelli leaving Gianni & Origoni (where he was a name partner) to join finance boutique RCCD, forming corporate finance powerhouse Cappelli RCCD; or Riccardo Agostinelli leaving Gattai, Minoli, Agostinelli & Partners (now Gattai, Minoli, Partners) to join Molinari e Associati (now Molinari Agostinelli), transforming a firm noted for its corporate and restructuring capabilities into an all-around corporate finance firm.

At a smaller scale, recent splinters include the departures of both Angelo Zambelli and Claudio Russo from Grimaldi Studio Legale, to set up a labor boutique and an insurance boutique respectively. These are simply examples to illustrate that for every consolidation, there is a fragmentation. The Italian legal market never stops shifting.

The final significant aspect of the legal landscape is the American and English firms. Magic Circle firms Clifford Chance, Allen & Overy and Linklaters are leaders in the Italian banking and capital markets sectors, as is Latham & Watkins, while Freshfields Bruckhaus Deringer and Cleary Gottlieb Steen & Hamilton are renowned for their strength in contentious disputes and competition work. Hogan Lovells is a market leader in IP, IT and telecoms.

Milan: the economic engine

Milan asks you a question in German and answers you in Sicilian, sang Lucio Dalla. Close to the heart of Europe, it’s a city that has been able to reinvent itself. Far from being a grey financial center, it has become a tourist hotspot, exploiting its discreet beauty. Milan is Italy’s financial and commercial center, and is heart of the fourth-largest regional economy in Europe. It is also recognized as the world’s fashion and design capital. The city is the seat of Borsa Italiana, the Italian stock exchange, which merged with the London Stock Exchange in 2007.

Milan and its hinterland comprise the largest industrial area in Italy and the economic engine of the country; Lombardy, the region that is home to Milan, accounts for 40% of Italy’s industrial output. The city is a major center for the production of textiles, chemical, industrial tools and heavy machinery.

In the wake of privatization, which started in the ’90s, Milan became an essential financial hub for Anglo-Saxon law firms searching for new markets to invest in. All major law firms, both local and international, are based in the city.

Milan is also the headquarters of the main banks – Banco Popolare di Milano, UniCredit, Intesa Sanpaolo and Mediobanca – as well as media groups such as Mediaset. M&A, banking, finance, restructuring and IP are among the most important activities for Milan-based firms; meanwhile, Rome-based firms and offices tend to specialize in administrative and competition law. Bureaus strong in labor, employment and white-collar crime might be found in either city, or both.

The entrenched wealth gap between northern and southern Italy has only been growing over the years; the coronavirus has significantly exacerbated this, with the north (thanks to its strong agricultural and industrial bases) faring better economically than the south (which is more dependent on tourism) despite suffering higher casualties.

The longer-term effects of the wealth disparity remain to be seen. But Italy as a whole has begun to recover from the crisis, and its legal market is proving as resilient as ever.