Legal and business news analysis - Global Insight October/November 2021
Covid-19: law firms reap rewards of EU recovery
The European Commission’s Summer 2021 Economic Forecast, published in July, shows the difference a year makes. Whereas the EU economy saw negative growth of -6 per cent in 2020, this year it’s heading for a 4.8 per cent increase in gross domestic product. It’s also forecasting 4.5 per cent growth for 2022. Consumer spending is rebounding and economies are, for now, ‘back in motion’.
Law firms in the EU region are feeling the positive effects of this and have been particularly busy in 2021. There are concerns, however, about what’s around the next corner for these economies, and that the longer-term effects of the pandemic may be less reassuring.
In the immediate term, however, countries have been opening up. By the end of the summer, vaccination rates were ranging between 60 per cent and 80 per cent of the adult population across the EU’s major economies. Those economies have also been kickstarted into action by the EU’s €750bn recovery fund.
According to an IBISWorld report, entitled Legal Services in Europe and published in January, legal services in the EU are valued at €130bn and have been buoyed up by the trend towards recovery. This is particularly the case in corporate law, which makes up about 27 per cent of legal services in the region. Biagio Olivieri, an analyst at IBISWorld and the author of the report, tells Global Insight that ‘law firms are the winners in the aftermath of the pandemic, with robust growth in M&A activity, IT, and restructuring.’
The results of a short questionnaire, carried out for Global Insight and involving members of the IBA European Regional Forum, also bear out this optimism, at least as far as the short term is concerned. One respondent commented that they were expanding their office and staff, while others had seen ‘sustained’ or ‘significant’ growth. Teams have grown and there are new practices and ‘niches’.
Law firms are the winners in the aftermath of the pandemic, with robust growth in M&A activity, IT, and restructuring
Biagio Olivieri
Analyst, IBISWorld
The sustained demand for legal services through 2021 may even lead to a shortage of good lawyers to get all of the extra work done. One respondent to the questionnaire explained that ‘at the start of the pandemic we all thought that there would be significantly less work’, and as a result, ‘we suspended actively recruiting new associates. But the period that followed provided more work than ever. So we very much regretted putting on the breaks on recruitment.’
Rolandas Valiunas, Co-Chair of the IBA Law firm Management Committee and a partner at Ellex Valiunas in Lithuania, says that ‘our local legal market here is growing 10%. So the biggest problem will be that we are all competing for lawyers and there may not be enough talent.’
Though greater demand for legal services is clearly a positive for firms, the pandemic has taken its toll on staff through family pressures and anxieties over health and wellbeing, for example. When combined with the considerable pressure generated by the sheer volume of work, the result is concern about burn out among staff.
One respondent to the IBA European Regional Forum questionnaire estimated that most staff at their firm had had to do about 30 per cent more work due to demand – the usual summer lull in M&A deals didn’t happen this year, for instance. Another respondent reported that their firm had trained one of their members to be a mental health first aider. Meanwhile, a third respondent commented that staff engagement had been a challenge for them.
The shift to remote working experienced by many lawyers may have been the one consolation prize of the pandemic, and something many won’t wish to give up. But firms are keen to get everyone back into the office, for a few days at least. Valiunas says that ‘if we lose our spirit of team work we lose everything so perhaps our biggest challenge is encouraging our staff back.’
Respondents to the questionnaire offered a range of experiences as to how to balance time at home and in the office effectively and what policy to adopt on this. One firm had left it up to individual teams in each practice area to consult on possible mandatory days. With demand for legal services continuing, lawyers may have the leverage here, Valiunas argues. ‘You cannot force people to come back into the office or you could lose them immediately,’ he says.
There are reservations about how long the EU recovery will last. The longer-term growth trend over the next five years in the EU’s legal services sector is, says Olivieri, around 2.5 per cent ‘as operating conditions normalise’. This is a significantly more modest rate.
One respondent to the questionnaire commented that their firm was taking a ‘moderate stance with respect to [making] strategic changes’ and they were ‘waiting for better visibility as to the development of the pandemic.’
There is a nervousness around how much the recovery is down to public funds, the EU’s recovery package – the Next Generation fund – and what happens when those funds are spent. For example, Le Conseil National Des Barreaux, France’s bar association, noted in a survey of its members in June that any cautiously optimistic responses were coming at a time when ‘the French economy is largely being sustained by the state.’
The legal services sector in the EU is large, highly fragmented and wide-ranging, with around 670,000 enterprises crossing very different practice areas and sizes, so the picture is not the same across the board. ‘There are going to be many practices with slower growth,’ says Olivieri.
The experience of the pandemic and the recent recovery favour larger firms, compared with sole practitioners and small and medium-sized enterprises, he adds, because size can better ‘exploit developments in tech’.
For the vast majority of firms in the region, the immediate prospects are good – what’s less clear is for how long.
With thanks to IBA European Regional Forum members for participating in the questionnaire.
Image: eamesBot C / Shutterstock.com
Conferences return to the IBA calendar
On 10–11 September, the IBA held its 25th Annual Competition Conference in Florence, marking a welcome return to in-person events following a break of 18 months because of the pandemic.
The conference was a great success, with 126 participants in attendance and leaders from the European Commission and national competition authorities giving keynote addresses.
Conference Co-Chairs Thomas Janssens and Daniel Swanson noted that ‘the pleasure of speakers and participants at meeting in person was tangible and made for well-attended and really lively sessions. We are delighted at the success and popularity of the conference’.
Six other conferences are open for registration at time of writing:
- Virtual fever, the new pandemic? News and trends in Intellectual Property, Communications, Media, Technology, Art and Outer Space Law Conference, 11–12 October, Berlin
- From start-up to IPO, 17–19 October, Paris
- Digitising of International Commerce, 17–18 November, Milan
- 23rd Annual Transnational Crime Conference, 3–5 November, Madrid
- Building the Law Firm of the Future: 4th London Law Firm Management Conference, 18–19 November, London
- 26th Annual IBA Global Insolvency and Restructuring Conference, 28–30 November, Edinburgh
In relation to Covid-19, the IBA is adhering to conference registration criteria and a code of conduct to keep events as safe as possible, as well as following any local requirements. Refunds are available if cancellations need to be made for Covid-related reasons (conditions apply).
Plans are underway for further conferences and many are open for would-be delegates to register their interest – see the full list here.
IBA Global Showcase
The IBA’s Global Showcase (25–29 October), free to IBA members and non-members alike, is now open for registration.
Through a series of high-profile expert sessions, some of the biggest issues and challenges facing the global legal profession will be discussed, with speakers sharing ideas and solutions.
The IBA Global Showcase will highlight the diverse work and achievements of the IBA's membership in many key areas of policy and practice. There will also be sessions specifically designed for key groupings within the membership. All this will be enlivened by a mix of interviews and discussions with leading commentators, as well as plenty of opportunities for networking among your peers.
IBA webinar programme continues into autumn 2021
The IBA’s webinar programme continues into autumn 2021, with around 20 events set to take place between October and December.
These include ‘The impact of the European Public Prosecutor’s Office on the fight against corruption’, organised by the IBA Anti-Corruption, Business Crime and Criminal Law committees. This webinar, which takes place on 20 October at 13:00 BST, will review the recent activities of this new institution, which launched its operations in June.
On 2 November at 13:00 GMT, the IBA Academic and Professional Development Committee will host ‘Enhancing diversity in the legal profession through education and training’. This session will examine how universities and other legal education providers can promote and embed diversity in the student experience, as a foundation for careers in the legal profession.
Global Insight podcasts
The latest Global Insight podcasts address Russia’s rule of law crisis and the chronic delays in court hearings in England and Wales.
In ‘Russia’s rule of law crisis’, we look at the continued efforts by the Russian authorities to suppress dissent and silence critics like Alexei Navalny and what these measures mean for the rule of law.
This podcast features comment from Maria Logan, legal counsel to Mikhail Khodorkhovsky during the Kremlin critic's imprisonment in Russia for fraud; Galina Arapova, a human rights lawyer and Director of the Mass Media Defence Centre in Voronezh; and Sir Tony Brenton, the United Kingdom's Ambassador to Moscow from 2004–2008.
A backlog of more than 50,000 unheard cases is the concerning focus of ‘Justice delayed: a system on the brink’. Will the new Justice Secretary, Dominic Raab – the eighth person to hold the position in a decade – be able to alleviate the crisis?
The podcast takes a look at the causes and impact of the backlog and the measures proposed to deal with them, including reopening Crown courtrooms, expanding the Nightingale temporary court system until March 2022 and modifying 71 courtrooms to hold large, multi-hander trials.
The speakers are Baroness Helena Kennedy QC, Director, IBA’s Human Rights Institute; Peter Csemiczky, criminal defence solicitor and partner, Hickman & Rose, London; and Sara Carnegie, Director, IBA’s Legal Policy & Research Unit and former Director of Strategic Policy at the Crown Prosecution Service.
All IBA Global Insight podcasts can be accessed here and on major streaming platforms.
IBA launches Covid-19 Task Force to assess global response policies
The IBA has formed the Covid-19 Legal Policy Task Force to constructively assess Covid-19 response policies from around the globe. The Task Force, co-chaired by Almudena Arpón de Mendívil, Harry Rubin and Peter Bartlett, will issue concrete and actionable recommendations for future pandemics and will present its findings on 27 October in the Presidential Showcase during the IBA’s Global Showcase event.
Almudena Arpon de Mendivil, IBA Vice-President and a partner at Gómez-Acebo & Pombo, said: ‘Through the IBA’s unique position in the global legal community, we are very well-placed to proffer recommendations for proactive global legal policy coordination to aid the world in coping with the current pandemic and future ones.
'The Task Force’s executive recommendations will be in ten areas, including technology, immigration and healthcare. The recommendations are currently focused on the developed world, with recommendations for countries with ‘sophisticated legal frameworks and institutions’ and consequently, the Task Force will assess the possibility of producing phase two recommendations for legal practitioners in developing counties. The intention is that these recommendations are ‘pursued with all deliberate speed to equip the global community with more potent legal tools to combat pandemics’.
In memoriam: John Ruggie
The IBA joins the international community in mourning the passing of Professor John G Ruggie, the architect of the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the Berthold Beitz Research Professor in Human Rights and International Affairs at Harvard Kennedy School.
Professor Ruggie served as the UN Assistant Secretary-General from 1997 to 2001 and was instrumental in establishing the UN Global Compact and the Millennium Development Goals. In 2005, he was appointed UN Special Representative on the issue of human rights and transnational corporations and other business enterprises by then UN Secretary-General Kofi Annan.
His mandate led to the unanimous endorsement by the Human Rights Council, in June 2011, of the UNGPs – a set of guidelines for states and companies to prevent, address and remedy human rights abuses committed in business operations. The UNGPs have influenced numerous other international standards, policies and regulations, which have since been implemented.
The IBA has championed and contributed to the work of Professor Ruggie since the beginning of his mandate as UN Special Representative. At its Annual Conference in Vienna in October 2015, the IBA Council adopted its Business and Human Rights Guidance for Bar Associations, and with a resolution of the IBA Council in 2016, the IBA Practical Guide on Business and Human Rights for Business Lawyers was adopted. Both were strongly influenced and informed by Professor Ruggie’s work.
In memoriam: Blaise Pasztory
The IBA was saddened to learn of the passing of Blaise Pasztory, an Honorary Life Member of the Association. Blaise was a long-standing and enthusiastic IBA member and officer, and among other positions served as a Councillor Emeritus of the Legal Practice Division and Chair of the Section on Business Law (SBL) between 1988–1990. The high point of his tenure as SBL Chair, as noted by Blaise himself, was the highly successful joint SBL and Section on General Practice conference in Strasbourg in 1989, which he was instrumental in organising. Blaise was also behind the formation of the Eastern European Forum in 1990. As noted by Willem Calkoen, another Honorary Life Member, ‘Blaise inspired the spread of the IBA to many new countries’.
Jacques Buhart, also a former SBL Chair, remarked that ‘Blaise was an immensely talented lawyer and human being. As soon as you met with Blaise, he would demonstrate a sense of empathy, listening very carefully to what you were saying. He contributed substantially to the restructuring of the IBA in the 1990s and in particular to the creation of the organisation as it stands today. We will all miss Blaise’.
Dr Mark Ellis, IBA Director, remembered his encounters with Blaise at Annual Conferences fondly: ‘One of the best things at the IBA is meeting engaging, friendly and intelligent people. Blaise was one of those people. I always looked forward to time with him at the Annual Conference – he was a very dear person.’
Blaise spent his legal career of more than 50 years specialising in corporate, securities and international law in New York and Budapest, establishing himself as a highly respected member of the legal community. Latterly, he had helped to found KCG Partners in Budapest. In 2004, he was awarded the Order of Merit (middle cross) of the Hungarian Republic for his contributions to the improvement of commercial and economic ties between Hungary and the United States.
His memory will be cherished and kept alive by his family, friends and the international legal community.
IBA wins Aptissimi award
The IBA is the proud recipient of the 'Contribution to the Legal Sector and to Society' Aptissimi award for 2021.
The awards are organised by Esade Alumni Law Club, the association of former Esade Business School students interested in the legal profession, and highlight individuals and organisations that in their professional, academic or institutional careers have demonstrated the values that define Esade's objectives.
In a letter to the IBA notifying the Association of the accolade, Patricia Valenti, Director of Esade Alumni, remarked that ‘the panel has especially valued [the IBA’s] leading role in the global development of the profession and its values since its founding more than 70 years ago [...] The IBA is the most important worldwide association of international lawyers and has demonstrated to be an unparalleled forum for legal professionals to meet and debate, with a large social impact beyond a strictly legal sense’.
The awards ceremony took place in Barcelona on 7 October.
Covid-19: Asian law firms maintain optimistic outlook despite Delta outbreaks
Despite its successful hosting of the delayed Tokyo 2020 Olympic Games, by the end of August the Covid-19 and medical situation in Japan was worse than when the Olympics began.
The Delta variant is contributing to a rapid rise in daily cases in the capital, while, within the week of 30 August to 6 September, there were over 5,200 new cases confirmed across Japan. Prime Minister Yoshihide Suga extended the state of emergency for Tokyo and other prefectures until 12 September.
Hideaki Roy Umetsu, Co-Chair of the IBA Asia Pacific Regional Forum and a partner at Mori Hamada & Matsumoto in Tokyo, says that having experienced life under such circumstances for seven of the past eight months, ‘it doesn’t feel like an emergency anymore. We are feeling normal with this working style and not having any difficulties.’
Umetsu says his firm has now completely adjusted to remote working, with only a limited number of staff still working at the office. ‘When the pandemic hit […] our economy did slow down,’ he explains. ‘Some M&A stopped and foreign transactions were suspended. But after that, the larger Japanese law firms have all been very busy on M&A activities, capital markets are quite active, there are lots of compliance issues, and litigation has come back.’
Asia’s leading law firms have mirrored the impressive performances of their international counterparts during the pandemic. ‘There was a Covid influence on cross-border work, but my impression is that we quickly went back to normal in 2020,’ says Umetsu. ‘There was no dramatic decrease in the number of deals, even cross-border deals.’
In China, a booming domestic market helped the country’s leading firms to post positive financial results even as the pandemic hit overseas work. JunHe recorded a single digit revenue growth rate for 2020, the first year in which it saw more revenue generated from advising domestic clients than foreign investors and foreign invested enterprises in China.
As the economy has already shown signs of robust recovery, the Chinese market could provide a safe harbour for overseas capital in the context of a global pandemic
Xiaojun (Warren) Hua
Managing Partner, JunHe
‘Many FDI [foreign direct investment] or ODI [outward direct investment] projects we’ve been working on are cancelled or put on hold, and most of the projects that are still in progress are moving quite slowly,’ says Xiaojun (Warren) Hua, Managing Partner at JunHe. ‘However, as the economy has already shown signs of robust recovery, the Chinese market could provide a safe harbour for overseas capital in the context of a global pandemic. We are therefore expecting that the recovery of our FDI practice will be sooner and stronger than that of our ODI practice.’
The domestic M&A surge in China has been partly fuelled by the increasingly sophisticated bankruptcy and restructuring of major conglomerates. For example, JunHe advised Liaoning Huishan Dairy on its RMB 30bn ($4.64bn) debt restructuring – a deal that involved more than 120 affiliated companies.
With the growth of China’s economy likely to be driven mostly by domestic consumption and investment, Hua says his firm has been reinforcing its teams in the fields of capital markets, including Hong Kong initial public offerings (IPOs), regulatory compliance and dispute resolution. ‘In terms of ECM [equity capital markets], the implementation of a registration system in [Shanghai’s] STAR and [Hong Kong’s] GEM markets has greatly increased the speed and efficiency of IPOs and stimulated the interest of high-tech and growing companies for listing.’
The firm handled 170 IPOs in 2020, a 295 per cent increase on the 43 IPOs recorded in 2019. The upward trend continued in the first half of 2021, when it closed 89 IPOs. The story is the same for debt capital market work, with the firm closing 137 bond issues in 2020 – up from 106 cases in 2019 – and recording 72 cases for the first six months of 2021.
As a result of Sino-US political tensions and the introduction of regulatory hurdles by the US Securities and Exchange Commission, many US listed Chinese companies are considering returning to Hong Kong while others in the process of a US listing are diverting to Hong Kong.
Cross-border investment into the Republic of Korea was badly affected when the pandemic first surfaced. However, leading firms are now busily working on M&A deals that were frozen and seeing growing interest and workflow in other areas, such as e-commerce and data privacy.
Most Korean firms grew last year at a rate of between one and ten per cent, although a small number grew by as much as 18-25 per cent. Bae Kim & Lee recorded 3.5 per cent growth in 2020, with annual revenues of KRW 350bn ($310m). ‘We have witnessed substantial growth and increased activities in online platform businesses,’ says Sky Yang, former Co-Chair of the IBA Asia Pacific Regional Forum and Managing Partner at Bae Kim & Lee.
Some Asian firms took the opportunity resulting from the pandemic to be more creative in their product and service offering to ensure they stayed relevant to their clients’ changing needs.
Mori Hamada & Matsumoto invested heavily in legal technology while fellow Japanese firm Nishimura & Asahi set up a digital transformation group that provides both legal and non-legal support for clients on a range of new technologies, data and regulations to help them undertake digital transformation.
Korean firms continue to engage with clients mostly via various technology platforms, with travel being rare. ‘Even our clients in Korea prefer to meet us by Zoom or Microsoft Teams,’ says Sun Hee Kim, Newsletter Officer of the IBA Asia Pacific Regional Forum and a partner at Yulchon, in Seoul. ‘What is interesting is that we no longer use teleconference. We have gotten used to meeting face-to-face virtually.’
While firms in Asia did implement large-scale flexible working arrangements when the pandemic first hit, few have plans to maintain such a system in the long-term. ‘We believe that face-to-face communication is not only conducive to improving a sense of belonging and team awareness among lawyers (especially young lawyers who have just entered the business), but also to the mentoring and management of lawyers by their superiors,’ says Hua.
Umetsu agrees that the training of young lawyers is a key challenge facing every law firm, and notes that his firm have always taught young lawyers through open-plan offices, but Covid-19 prevented this. ‘We are using technology to have online meetings, but this cannot replace sitting together,’ he says.
Although Japan now has a good vaccination rate, rates elsewhere in the region remain relatively low, leading to fears that the Delta variant will continue to spread. China is seeing an outbreak of the virus in some provinces, for example. However, until this starts to adversely affect deal-flow, firms in Asia remain cautiously optimistic.
Image: aslysun C / Shutterstock.com