The announcement last month of America Online's takeover of the publishing giant Time Warner left both City commentators and new-media watchers hyperventilating.

They were stunned not so much at the deal's enormity -- even if at £100 billion, it was the biggest merger ever -- but at what it heralded.An Internet company barely ten years old had gobbled up an establishment giant in a deal that promised to marry old media with new.

Perhaps, last month, the Internet finally came of age.Clare Gilbert, general counsel at America Online's European operation, is playing down the news.

It is a shareholder issue, she claims.

AOL Europe, as American Online is known here, is a 50% joint venture between AOL and German media group Bertlesmann.

Obviously, there will be benefits for European members in terms of content -- including Warner Bros film library, Time magazine and CNN -- but otherwise it is business as usual.The 34-year-old solicitor is both vice-president and general counsel of AOL Europe.

She is dismissive about the rather grand, double-headed job title, and jokes that US colleagues wouldn't talk to her unless she had a suitably imposing title.Ms Gilbert has been with AOL from the start of the European story five years ago, when the then-fledgling Internet company was a client of hers at City solicitors Nabarro Nathanson.

Ms Gilbert and her boss, Liam McNieve, were headhunted by Masons, and left taking their prestigious client with them.

But not for long, as Ms Gilbert went in-house at AOL at the beginning of 1998 and Mr McNieve set up a specialist Internet practice, called McNieve.

He remains AOL's number one external legal adviser.AOL Europe employs about 2,000 staff and reaches a total of 2.8 million households across Europe.

American Online, the worldwide operation, has 19 million members.

Not bad for a company that only started in 1985 -- then called Quantum Computer Services -- with the humble goal of enabling members to play Atari video games over telephone lines.

Then came the big vision -- to change the Internet from the domain of the computer geek to something well-adjusted members of the public could enjoy.

To this end, the company designed a ground-breaking graphic interface allowing members to navigate by pointing and clicking.The upstart has left a string of vanquished rivals choking in its dust, including CompuServe and Netscape.

AOL even got the better of mighty Microsoft.

Bill Gates was once reported to have said to AOL chairman Steve Case: 'I can buy 20% of you or I can buy all of you.

Or I can go into business myself and bury you.' Within five years, AOL was a bigger Internet Service Provider (ISP) than its rival.Ms Gilbert says last month's deal is proof that the Web is going to be the 'mass media of the future'.

It put an end to talk of Internet companies being overvalued and 'not living in the real world.

It is a real endorsement of the Internet,' she claims.The legal work generated for AOL Europe by the merger will mainly involve getting the deal passed by the competition authorities.

The European Commission has announced that it will investigate the takeover, if only because of its 'sheer size'.Unlike the US, where the anti-trust busters are bound to scrutinise the deal closely, Ms Gilbert believes that in Europe this will be more a matter of notification rather than having to win the authorities over.

AOL and Time Warner obviously face a different market in Europe to the one that exists in the US, where the market is bigger and has fewer players, she explains.At AOL's Hammersmith headquarters, barrister Julian Jarvis handles the day-to-day legal work in the European legal and policy department.

Most of the work is generated by the content, advertising, e-commerce and distribution companies AOL deals with.

He has been with AOL for 14 months.

'That doesn't sound lon g, but in this business it is years,' he says.He was persuaded to leave the Bar to join AOL because he wanted to work in the Internet industry.

'I wanted to get closer to the commercial side of business and get stuck into a proactive role rather than reacting to litigation and disputes,' he says.

'I'm glad I did.'The company is in the process of recruiting a second lawyer.

AOL as a company is growing at a phenomenal rate, but it is a popular sector and Ms Gilbert has no doubts about its ability to attract first-class lawyers.Three other non-lawyer executives work in the department carrying out 'quasi-legal' work, such as handling criminal matters, data protection, and membership services.

AOL could have employed lawyers but the executives have been with AOL for a long time.

She adds that the department needs a 50/50 balance between technical know-how and legal knowledge from these staff.AOL prides itself on its 'flat' culture, with an absence of hierarchy.

'When you walk in the office you don't know who is who,' she says.

There is a conspicuous absence of suits, but there are lots of media types and a fair smattering of boffins.

The egalitarian ethic extends to the ultra-modern offices -- decorated brightly, and occasionally in AOL colours -- which are open-plan.In Brussels there is a solicitor Kevin Coates -- who previously worked at the European Commission and before that at City giant Allen & Overy -- and a lobbyist.

There is also one lawyer in France, and three in Germany.Ms Gilbert divides her work between managing the pan-European element of AOL, contributing to AOL's business management scheme and running a number of special projects.

Her role is evolving away from the law into business strategy.

'I've done my time negotiating contracts and I don't want to do it as a career,' she says.Much of her time is devoted to regulatory affairs, which amount to attempting to convince the policy-makers of Europe of AOL's way of thinking.

And it's not an easy job.

Government organisations fundamentally do not understand the Net, she claims.Ms Gilbert quotes a line from Mr Case about regulation dictating the success of the Internet.

AOL's number one priority campaign -- 'Stop the Clock' -- brings it head-to-head with BT.

AOL believes that, for e-commerce to thrive, shoppers need cheap, unlimited access to the Internet; BT is still wedded to charging by the minute.

People don't pay to browse the shops, argues Ms Gilbert.The UK market might be more competitive than their European colleagues' commercial environment but BT still has 85% of the residential market.

'BT is really trying to put the squeeze on competition,' she says.AOL is taking the campaign to Europe where the dragging of heels is even more pronounced than in the UK.

By way of an example, she reports that AOL had access to BT's costs to argue that it was over-charging customers.

However, such information is not even available for either Deustche Telecom or France Telecom.Cyberspace is the new frontier and is rife with conflict over where legal rights start and finish -- such as the issue of whether 'cached' copies -- temporary computer files all ISPs make as part of the transmission -- should be subject to copyright under European law.

It might seem an esoteric point but it's real a headache for ISPs.Cached copies have no independent economic significance.

'My understanding of copyright is that it is an economic right, and so there's no reason why they should attract copyright protection,' Ms Gilbert argues.As the market leader, AOL is at the heart of the debate on free speech on the Internet.

For every advocate of the empowering nature of the Web, there is a critic decrying cyberspace as awash with porn and racist propaganda.

Last year, AOL won a landmark verdict when a Munich court overturned the conviction of Felix Somm, the former head of the German subsidiary of CompuServe, which was bought by AOL.

Mr Somm was convicted in May 1998 of aiding and abetting 13 instances of the illegal distribution of pornography by failing to block access to news groups on the ISP.

He faced five years in prison.The original decision made the legal system a joke, she says, and was an embarrassment to German business.

Any analogy between distributor and ISP does not hold, she explains, because there is no effective means of control over the content.

She says AOL has received no complaints about content in the past six months.If AOL-Time Warner delivers on its promise to represent a new era for the Internet, the lawyers will have to keep up.

'New developments occur on a daily basis,' she says.

'It's such a period of growth, and so legally uncertain.

Every day is a challenge.'AOL'S LEGAL WORK-- Budget: AOL Europe spends £6,000-£7,000 a month in the UK on 'day-to-day' legal work.

But the 'vast majority of fees', says Clare Gilbert, go on 'special projects' where AOL hires not just lawyers but economists and lobbyists.-- Law firms regularly used: Liam McNeive is the first port of call for AOL.

His practice specialises in new media, e-commerce and communications.

Baker & McKenzie advises on the Stop the Clock campaign (lead partner: Robbie Downing).

Nicholson Graham Jones advises on intellectual property (lead partner: Peter McBride).-- Top e-commerce firms: According to Ms Gilbert, they are McNeive ('really understands the business'), Bird & Bird, Olswang (which AOL has not instructed), Baker & McKenzie (for the telecommunications perspective and competition issues) and Lovell White Durrant (for mergers and acquisitions of Internet companies).-- What makes a good Internet lawyer: 'Understanding the industry is crucial,' she says.

'A lot of people claim to do this type of work, and they know the theoretical issues -- but they often don't know the real issues we are facing, particularly when we are doing work which takes us into the telecoms sector.

A lot of those lawyers only see things from the perspective of a traditional telecoms company.'