British magic in Romanian law

The distance between London's famous Magic Circle and the Romanian business environment has grown visibly smaller in the past few years, as British companies have followed their clients, which are looking for business opportunities on the local market. Whether they have or not an office in Romania, British law firms are actively participating in the development of the market.

Their contribution shows, on the one hand, in the business volume that has been steadily growing in the last years, and, on the other, in the increasing professionalism of the entire market.

The Magic Circle concept became part of the international vocabulary almost 15 years ago, but its origins are not quite clear, says Marian Dinu, who manages the Corporate / M&A department of Linklaters Bucharest.

"Generally, it is accepted as a media term, but it is also thought that it might have been generated by one official from the respective companies. As the definitions differ, group structure can also vary, but, in general, the group is made up of Linklaters, Clifford Chance, Allen & Overy and Freshfields. Sometimes, it also includes Slaughter & May and Herbert Smith."

The power of this "brand" remains formidable, Dinu goes on to say, as it gives glory and credibility to the law firms involved. "It may be that the term has lost some of its importance (an entire global elite of American and British firms is being formed), but it still means something to the clients and to the potential employees."

According to Legal Business magazine, the Magic Circle members are the top British firms experienced in M&A transactions, which have privileged ties with the main investment banks and with the FTSE100 companies, are awarded the biggest mandates for the capital markets, litigations and banking loans, have the best international reputation, are responsible for the inbound activity of international clients, attract the top talent and generate the highest revenues and profits.

"The international network is increasingly becoming a key element in differentiating between these firms - except for Slaughter & May, they all have powerful international networks and often are the main players involved in complex contracts at a global level," Dinu specifies.

Based on this strategy, Linklaters opened its Romanian office in 2000, the first British firm from the prestigious club to show interest in the local market. Marian Dinu joined the Bucharest team in 2001, after spending two years at the London office of Linklaters.

"The local team is an ideal mix of Romanian, British and American lawyers," he says. "This is essential, considering that clients often ask for combined legal assistance. Of course, we also have our firm's full support globally, if needed."

As the Romanian market of business law has been maturing, the interest of international firms has also grown.
In 2006, Clifford Chance exceeded 1bn sterling pounds in revenues, which propelled the company to the leading position worldwide. In the same year, the firm teamed up with its partner in Romania, with the newly-formed entity called Badea Clifford Chance - one of Romania's top ten law firms in terms of assets.

One year after the takeover by the British group, Badea Clifford Chance announced a surge of more than 180% in the business volume in 2006, from the previous year. The benefits of the partnership thus became obvious, and the firm seems determined to keep mining its British roots. Badea Clifford Chance is now in the middle of the registration process at the British-Romanian Chamber of Commerce (BRCC).

However, physical presence is not a necessary condition to do business on the local market, especially in the context of the business environment globalisation. For instance, in March 2006, Allen & Overy won the tender organised by Fondul Proprietatea to select its international legal advisor. Also, Freshfields Bruckhaus Deringer is involved in various activities on the local market.

"We do not have an office in Bucharest, or plans to launch one," SebastianLawson, senior associate, told TheInvestor. "However, this did not stop us from taking part in some of the most important deals in Romania, such as the first eurobond issue launched by the Bucharest City Hall." (The 500 million-euro bond issue was launched on the London Stock Exchange in June 2005 and was the largest bond issue in Central and Eastern Europe and Romania's first municipal eurobond issue, according to the firm's international website).

Freshfields Bruckhaus Deringer is among the eleven members supporting the BRCC, a status which gives it additional benefits (invitations to business events, free attendance at certain international conferences and seminars, participation with presentations and speakers at the BRCC events etc).

"Our perception", Lawson says, "is that there is a significant number of local firms providing legal assistance at the highest level, and we should be working with them, not competing against them by opening offices, as other international firms have done. We will team up with the appropriate local firms for certain projects."
In his opinion, this approach secures maximum synergy between international expertise and local know-how. "We are not interested in all types of local transactions, only those where we believe we can add value, as an international firm."

Tradition, complexity and vision
The British legal system has three main characteristics, says Eatough, a partner with Badea Clifford Chance, specialised in international capital markets.First, it has a long tradition and an extensive set of laws, which has led to the creation of well-documented precedents for various commercial situations.

Although old, the system is also very sophisticated, Eatough says, because it needs to keep up with the modern business environment and especially with the growth of the City of London, one of the world's main financial centres.The third defining trait is contractual freedom (the fundamental approach of British courts to commercial contracts stipulates that the parties have to respect the contractual norms they agreed upon).

The size of the system and the high level of complexity require strict specialisation, Eatough states. "The typical British lawyer (and by that I mean the lawyers that are involved in transactions) tends to be highly specialised, to meet the needs of clients operating in the niche areas that have developed in the City/"
Surprisingly or not, British lawyers have a much more varied educational background than those from other countries, says Marian Dinu from Linklaters. This has provided for a much broader perspective of the entire system.

"British law firms were among the leaders of the international expansion," says Lawson from Freshfield Bruckhaus Deringer, "as they were certain that global operations benefited the clients. Consequently, they assumed the need to move and operate in a variety of legal and business environments."

Undoubtedly, British expertise helped develop the local market after 1989, boosting focus on transactions. According to Dinu, the top end of the market has already reached a high level of sophistication. Romanian legislation remains a problem for the lawyers and the foreign investors, as it needs to continue its stabilising process.

"I was extremely amazed by how similar Romanian and British lawyers are," David Eatough confesses. "Romanian lawyers tend to go for a highly analytical approach of the structure of transactions, in the attempt to identify the best solutions, to face the legal challenges so that they can get the best results - and this approach is very similar with the strategy of British lawyers."

David Eatough, a partner with Badea Clifford Chance, specialised in international capital markets.
"The challenge for British lawyers - and the most interesting part of our job - is to apply the knowledge acquired elsewhere in such a way that can work in the Romanian context."

Sebastian Lawson, senior associate Freshfields Bruckhaus Deringer
"British lawyers tend to have a certain commercial orientation - the education system places responsibility not only on the academic analysis, but also on the client's commercial objectives. Furthermore, British lawyers are migrating towards this field supported by a much more varied educational background than other nationals."
Marian Dinu, head of the Corporate / M&A department, Linklaters

The British legal system consists of four different systems, which correspond to the four geographical areas (England, the Wales, Scotland and Northern Ireland). The Scottish system is perhaps the most different, sharing certain similarities with civil law. The doctrine of "common law" - the cases debated in the courts - is an important feature of the British system, similar with the one from the United States or Australia.

As for corporate law, one of the aspects that civil law countries such as Romania often find surprising is mainly aimed at public companies and involves the fundamental premise that firms will rather conform to the spirit and the objective of a law, than to the exact legal stipulation (a different approach from the one often stipulated in civil law jurisdictions).
(Linklaters)

articol scris de Ana-Maria GAVRILA -