No banking on the Swiss

Emma Vere-Jones asks why so few solicitors are setting up shop in Switzerland, and discovers that the closely knit, mature legal market means that firms need a strong appetite to make entry financially beneficial

It is unlikely that US firm Sidley Austin Brown & Wood ever envisaged that its first mainland European office would be in Switzerland (see [2002] Gazette, 2 May, 6).

But it was not about to say 'no' when opportunity came its way.

On 6 May, the firm took on a group of 33 lawyers from Atlanta-based firm Powell Goldstein Frazer & Murphy, including a four-lawyer office in Geneva.

The group specialises in international trade law, policy and dispute resolution.

But while the move significantly boosts the firm's profile in Europe, it is not a sign that invasion of the Swiss market by large international firms is about to begin.

But why are the global legal players - not least the magic circle in the City - leaving Switzerland alone, when they have offices in virtually every country surrounding it?

'The Geneva office deals purely with World Trade Organisation work,' says Carter Phillips, managing partner of Sidley Brown's Washington office.

'That might change, but at this stage we're just looking to have a fully integrated international trade practice.'

Times are changing in Switzerland - it is no longer as isolated from the European Union as it once was.

The EU now accounts for 70% of Switzerland's trade, and a new treaty allowing for free movement of labour will give qualified EU lawyers rights to appear before Swiss courts.

As well as being home to big native multi-nationals such as Nestl, Novartis and Credit Suisse First Boston, many foreign groups domicile their holding companies there.

This is good news for lawyers in Switzerland who do any mergers and acquisitions, or financing work, but it also makes the country more attractive to larger predators.

As yet, however, the big guns have not made their move.

'A firm would need a strong international trade practice to warrant a move there,' says Mr Phillips.

Few international firms have a presence in Switzerland, with Baker & McKenzie the only global firm to make a significant impact on the market.

This is, in part, because of Baker's longevity in the jurisdiction.

The Swiss office has been established 40 years, and is full service.

And, unlike other international firms, Baker & McKenzie offices are financially independent, meaning an office in a smaller jurisdiction is not a draw on the firm's central coffers.

'Switzerland is not a strategic market for large international law firms,' says Martin Anderson, managing partner of Baker & McKenzie's Geneva office.

'That's really because of the volume and size of transactions and the size of the economy.'

There are a few other overseas firms with small offices there including, ShawnCoulson, the international law firm that includes London firm Moon Beever, US firms Winston & Strawn and Shook Hardy & Bacon, Manchester-based Zatman & Co, and a number of other European firms.

US firm Jones Day Reavis & Pogue previously had a Geneva office that closed last year.

'It just wasn't a strategic location.' says one Jones Day partner.

'We don't see it as a place you need to be as a global law firm.'

Andrew Zatman, name partner at Zatman & Co, describes the Zurich office as more of a facility.

He says: 'It is financially independent from us, mainly catering for private clients doing property transactions.'

Mr Zatman says that one of the factors deterring the big UK firms from establishing a presence in Switzerland is that the local judicial authorities do not encourage foreign players to open up.

The accountancy firms have also made the move there - despite a ban on multi-disciplinary partnerships.

They have linked up with smaller Swiss firms, but as yet have really not had much success.

'They are perceived more as a long-term threat,' says Mr Anderson.

However, they are beginning to enjoy an increase in both the volume of their work and their profile, he adds.But another Swiss lawyer says the accountancy firms' impact to date has been very small indeed.

This is in part, he theorises, because as yet they have not managed to attract top lawyers: 'They're not yet the place where the most successful practitioners would want to go.'

The likelihood of the global firms entering Switzerland in the near future is 'slight', says Alan Peck, chief executive of Freshfields Bruckhaus Deringer.

'There was a flurry a couple of years ago when it looked as though we might have to go charging in,' he says.

But as the initial public offerings - so prevalent in 1999 and early 2000 - dropped away, so did the interest of the international firms.

'It's much less of an issue now than a few years ago,' says Mr Anderson.

'From the point of view of clients, and therefore from our point of view, there is no need for us to be there,' Mr Peck continues.

'There is more than enough very competent Swiss advice from independent firms.

At the moment I don't think there is much appetite on the Swiss side or on ours.'

And some Swiss lawyers maintain that even if the international firms did want to make their mark, they may struggle to gain a foothold in the mature and somewhat closed Swiss market.

'In Switzerland it is still very much a person-to-person business, and all firms are small - even the so-called bigger ones,' says the managing partner of a small Swiss firm who did not want to be named.

'It will be difficult for the international firms here.

They don't have a unique selling point.

Swiss companies don't necessarily want to be bound to one firm.

They're not keen to give all their international work to one single firm.'

'For US and UK firms, Switzerland is not a top priority,' confirms Marcus Guggenbuhl, partner at Swiss firm Vischer.

'And Swiss firms do not have a great willingness to be tied with one firm.' But many firms do have loose relationships with the large internationals, he notes.

'It's a very mature market.

To come in and start from scratch would take a long time, and have high costs,' Mr Anderson says.

'The only possible option, then, would probably be merger or integration with a leading Swiss firm.'

But while the international firms may not have men on the ground in Switzerland, they are still working in the region - usually out of their German or Austrian offices.

And there has been some movement towards the pan-European concept, with Meyer Lustenberger & Partner joining the German BBLP alliance, and corporate, communications and banking firm Von Erlach Klainguti Settler Wille joining the CMS network run by City firm CMS Cameron McKenna in 2000.

As yet however, mergers with the international firms seem some way off.

'That's not a priority as far as Swiss firms are concerned,' says Mr Anderson.

But to think it would never happen is somewhat naive.

In the same way that the Dutch market has been swamped in recent years, the same could easily happen to the Swiss.

The question is whether the international firms want or need it enough.

'No one knows if the current situation will continue or if [mergers] will become an issue in the future,' says Mr Guggenbuhl.

Mr Peck adds: 'At the moment I don't think there is any appetite on the Swiss side or on the side of the international firms.' But if the international firms do in the future get a taste for Switzerland, it is likely they would make a meal of the Swiss legal market.

Emma Vere-Jones is a freelance journalist