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On September 2, Partners from 8 leading law firms in Austria met in Freshfields’ Vienna Office for a CEE Legal Matters Round Table on law firm business development and marketing approaches. The Round Table participants represented a good mix of international firms, including both Austrian firms with a strong CEE regional presence and firms operating exclusively in the Austrian market.

Core to Marketing and BD in Austria: Building Relationships

When it comes to marketing and business development in the country, Christoph Moser spoke at length about the need to identify the most effective channels. In contrast to the previous firm he worked at, Moser explained that Weber & Co., a smaller firm operating with limited resources, found value in moving away from “intensively sending out press releases.” He explained that: “We find it critical to stick close to the community and try to find smaller channels for our news and legal expertise and try to address our peers directly, in particular Corporate/General Counsel/Banking clients.” 

Coming from the opposite side of the spectrum, Jasna Zwitter-Tehovnik argued that, while DLA Piper, as a global firm, benefited from a multitude of global marketing initiatives, there is still a strong need to “adapt to market realities.” In her view, this goes beyond a simple assessment of whether the media channels used are sufficiently focused on the local markets. Instead, as she put it, “you need to position yourself as a lawyer of trust, and you need to make sure you build a personal relationship with your client to let him know you for the specialist you are.”

Willibald Plesser suggested that the ultimate answer is simple: “Get out there and see your clients.” Markus Piuk emphasized the same thing by explaining that if you don’t spend time with your clients, someone else will. According to him, in most CEE jurisdictions – not only in the competitive Austrian market – there are at least 10-15 strong law firms, which makes it imperative to constantly differentiate yourself by engaging in dialogues with potential clients. 

But staying connected to potential clients is not all about generating new business. In fact, Christian Dorda mentioned that, in his estimate, less than 20% of his firm’s work  is generated from actual marketing efforts. The rest, he said, is a matter of “reputation of the brand, which is simply impossible to build without building a personal relationship.” Plesser further explained that a great deal of effort needs to be dedicated to maintaining and developing existing client relationships to receive the best possible mandates from them in the long run, both in terms of complexity of the matters covered as well as, implicitly, the fees generated. 

While relationship building is important in any jurisdiction, the participants suggested that it is even more so in Austria. Speaking to this point, Dorda explained that it is important, in the relatively small Austrian market, to be perceived as having a strong civic sense and to be engaged in your community on an on-going basis and belonging to associations (such as, he suggested, various chambers of commerce). 

Advertising: Does it Pay to Pay?

Since the CEE Legal Matters business model is built on advertising revenue, we asked the attending partners about the perceived value of advertising for their firm as well as what best practices they have developed in maximizing its returns. On the topic, Huber explained that the reality with advertising is that “half of the advertising spent is wasted, but the curse is that it is close to impossible to know which one.” Dorda’s position is that advertising is generally “good to have as background noise and to make sure you have some form of presence” but that it cannot replace direct contact. Horst Ebhardt linked the drive for and potential impact of advertising to the growth stage of a firm. In his view, young organizations stand to benefit considerably more from the brand visibility it promises, while the added value for established brands, while not nonexistent, is diminished considerably. 

In terms of best practices, Moser explained that his firm’s approach is generally to be as specific in their target segment as possible. According to him, it is usually best to “try to allocate print marketing funds to publications that we believe are not necessarily read by all but reach the core target audience.” Similarly, Huber’s approach is that it is best to “focus our advertising spend to industry specific outlets.” At the same time, firms can distinguish themselves not only by choice of channel, but also by the message conveyed: “I personally prefer advertising only if we feel we have something especially pertinent to say. Simply putting our name out there by itself does nothing for us,” Piuk explained. 

“Content is king” seemed to also be one of the main consensus points. According to Friedrich Jergitsch, there are so many things happening in the legal industry that firms have a plethora of marketing tools available to them. Traditional advertising, in his mind, can easily and effectively be complemented by using various channels to advise clients on legislative changes, for example, which helps firms position themselves as experts. In terms of distribution of this kind of content, Piuk spoke about Schoenherr’s “Legal Insights” reports, which are appreciated by clients and have helped the firm create real leads. Ebhardt mentioned that once content is generated it makes sense to use a healthy mix of firm-maintained platforms and outsourced ones as distribution channels. Huber also mentioned that even creating “blog-type” platforms to put forward such content is useful, especially in terms of motivating and rewarding younger lawyers. This can also be leveraged on social media platforms to great results if done consistently, according to Zwitter-Tehovnik, especially since tools such as LinkedIn are useful not only in conveying a firm’s message, but also in keeping track of developments. She conceded, however, that social media can become a massive drain on time.

Legal Directories: Worth the Time Investment?

All law firm marketeers complain about the massive amounts of time eaten up by legal directory submissions. This work involves not just gathering relevant information on previous deals and nagging fee-earners for relevant information, but also reaching out to clients and asking them (sometimes repeatedly) to vouch for the quality of a firm’s work. We asked the attending partners if they feel these efforts pay off in terms of generating business. 

Jergitsch said that he does not recall once being called up by a new client because of their ranking in a directory. That is not to say that the rankings do not add any value, he noted, agreeing with Horst Erbhardt, who explained that law firms “cannot really afford to not be listed as it is more of a confirmation that anything else.” The same was argued by Plesser who described the rankings as a “useful endorsement to have,” with Moser reinforcing this view by explaining that for clients it is “really hard to argue [internally] why a choice was made for one [unranked] firm over others which are ranked.” Piuk also explained that being listed in such directories is particularly useful in what he called “exotic markets” (such as Moldova, he said, for Schoenherr). In such markets, Piuk explained, a general counsel turning to the market for the first time is quite likely to rely on such directories. Plesser applies the same logic when it comes to “niche or exotic” practice areas but emphasized that, at the end of the day, all the above are valid points if you are talking about established directories with a thorough methodology. 

Branding: Out Looking In and In Looking Out

Since a great deal of the discussion focused on the specific nature of the Austrian market, we asked the representatives of international firms in Austria whether the branding efforts of their firms focus on positioning themselves actively as large international organizations or whether they feel the need to localize their brand identity. Plesser emphasized the need to strike a balance between the two. On the one hand, he mentioned that Freshfields does benefit from its full service/top level positioning promised through an international brand, but he emphasized that that promise has to be constantly fulfilled by providing the best quality service that clients can get on the market. He pointed out that a brand is always something that “in some instances it is perceived to add value, while in others it is something that makes you fight uphill.”

With regards to the size of marketing and business budgets allocated to markets outside of Austrian borders, the percentages ranged from CMS’s approximately 10% (as estimated by Huber) to Weber & Co.’s 40% – the majority of which Moser explained was targeted at the German market. Ebhardt did point out that, at times, such investments are hard to break down by market, as when, for example, he meets a General Counsel in New York for work in Austria. 

A BD Culture: Not all Lawyers are Marketing Animals

For the last part of the discussion, participants discussed their approaches to building up a business development culture, with a lot of the conversation revolving around how they train up the rain-makers of tomorrow. To start, Piuk pointed out that while his firm dedicates a lot of time and effort towards fostering a business development culture, “it cannot really be forced upon people.” He explained that there are some people who are genuine “marketing animals” and genuinely enjoy speaking with clients, while others, with “incredibly strong legal expertise” may simply not enjoy that aspect as much. “That is not to say they are not critical,” Piuk clarified, “as there is nothing better than doing marketing with a strong professional that is a go-to expert in his/her field.”

In terms of “training the young,” Huber explained that structurally firms can and do include BD as part of their “core curriculum,” complemented by a reward system such as (for instance) a “business developer of the year.” The same was noted by Zwitter-Tehovnik, who referred to what DLA calls its “academy,” and is part of the firm’s partnership track. Also in terms of structure, Ebhardt explained that all Wolf Theiss lawyers have a “BD target agreement,” based on their strengths and seniority. He also mentioned an interesting exercise that the firm carried out regularly, with several GCs agreeing to be “pitched” by young associates as part of an in-house competition that even the GCs, Ebhardt claimed, enjoyed. 

Dorda also spoke about the importance of creating a flat hierarchy to allow younger members the opportunity to see first hand not just that they have to be in front of a client, but also how to do so effectively. According to Moser, having a young associate shadow a client meeting is a critical tool to demonstrate that effective lawyering is not simply about billable hours, but also showing them the value of communicating with clients. “I never had feedback from a GC that it is not ok to bring an associate to a meeting,” he added. Jergitsch explained that, while in some cases, it might be difficult to bring associates along for a BD meeting, Freshfields tries to make sure that associates are constantly encouraged to write and “get their name out there.”

Overall, the round table generated a fruitful exchange of ideas, and we would like to thank all the participating partners for their time and especially to Friedrich Jergitsch, who offered to host the event. We look forward to more such gatherings in the future!

This Article was originally published in Issue 5 of the CEE Legal Matters Magazine.

Strangely enough, there are no Anglo-Saxon expatriate partners – we’ll call them “ASPs” – working among the leading local or international law firms in Vienna. Oh, there are a number of partners from other countries in CEE. But expatriates from the highly-developed and sophisticated legal markets of the United States and United Kingdom? Not one.

How can this be? The other countries of CEE are, if not awash in ASPs, certainly not unfamiliar with them. Russia has the most, with well over 20 in leading law firms in the country. The Czech Republic has over 10, Budapest has over 5, and Poland, Slovakia, Romania, Turkey, Ukraine, and even Serbia, Croatia, and Bulgaria are home to multiple as well. 

In comparison to some other CEE Capitals, Vienna is widely-acknowledged as a highly international and cosmopolitan city. Indeed, referring to the city of 1.7 million people as an “international city” is like calling Sachertorte “tasty,” Mozart “talented,” or the Alps “tall.” 

The city has a history as expansive and international as any in the region – it was the capital of the largest empire in Europe during this past millenium, first via the Hapsburgs, from 1526–1804, then via the Austro-Hungarian empire into the 20th century. It has been home to intellectuals and artists like Freud, Mahler, Wittgenstein, Gustav Klimt, Lotte Lenya, and Falco. According to the International Monetary Fund, the country has the 4th largest economy in CEE, behind only Russia, Turkey, and Poland. It regularly attracts about 5 million tourists, and it is regularly listed at or near the top of the world’s best cities to live in. 

Yet there are no native-English speaking partners in Vienna. 

Of course, the low number of ASPs among Austrian partnerships does not mean the country’s firms are lacking in English-law knowledge and training. Peter Huber, the Managing Partner of CMS Reich-Rohrwig Hainz, points out that, “recruits of larger Austrian law firms, both graduates and lateral hires, usually come with some international experience having completed post-graduate studies and/or training with an international law firm in an English speaking country.” He adds that “there is also a certain trend for senior positions, particularly in the transactional practice areas, to be filled by English/US-qualified Austrian nationals returning to Austria after having practiced abroad for a considerable period.”

Fair enough. But that’s true for many – if not most – CEE legal markets, and ASPs are not uncommon elsewhere. What makes Austria so unique?

Reflecting on his essentially unique existence as a senior Anglo-Saxon lawyer in a law firm in Vienna (one of only 2-3 in the market), Senior Associate Blair Day laughs: “It seems odd. I wonder if historically it hasn’t evolved that way. I get the impression that the Austrian legal scene is somewhat more restrained. We don’t have other Magic Circle firms here at all, and for some historical reason it seems they just haven’t been here.”

Day is touching on a significant part of the answer, for it turns out that it is – at least in part – Vienna’s history as an outward-looking capital and center of empire that explains the scarcity of US/UK lawyers in the city. Over the centuries the country developed a competent and sophisticated legal market consistent with its intellectual renown in other areas, educating and preparing its lawyers for a cross-border and commercial law practice in a way few other European markets could match. And that development was not crushed by the Iron Curtain that draped across many of its CEE neighbors following World War II. As a result, the country’s lawyers maintained their outward-looking focus and high skill level, while the growth and development of other countries in CEE was stunted and squashed.

When the Curtain was pulled aside, a large number of common-law qualified lawyers were invited to the former communist countries of CEE to assist in the transition to market-oriented economies and the creation of a functioning and business-oriented market for legal services. 

In other words, British, Canadian, American, and Australian lawyers may simply not have been needed in Vienna as much as they were elsewhere. 

But that’s part of the story. 

Emergence from Communism … and a Different History at Home

Erik Steger, one of three Managing Partners at Wolf Theiss in Vienna, explains that in the first years of the transition to a post-communist economy in the former Eastern Bloc countries, “expats could assist in bringing the service level up [and] contribute experience with laws that these countries adopted.” And, once they came in, he suggests, “many more than a handful stayed and will now stay for good, [having] learned the local laws … and often learned the language [so that], today, they are excellent advisors in local law as well.” 

Steger also points out that those same markets benefit from the special attention of the European Bank of Reconstruction and Development and the International Finance Corporation – which inevitably make their loans under English law. As a result, he notes, experience with and knowledge of English law and native English language skills can be particularly useful in those markets. (Not coincidentally, perhaps, Wolf Theiss itself has two ASPs based in and covering four former Communist markets: Ron Given in Croatia, the Czech Republic, and Ukraine, and Bryan Jardine in Romania).

Schoenherr Partner Markus Piuk makes a similar point, without referring to the EBRD directly. Piuk points out that in CEE it is mainly financing transactions that are governed by UK/US law, and “hence, an Anglo-Saxon expat lawyer would in most cases not be able to work under his own law. This likely appears unattractive to many candidates and they rather move to jurisdictions where more transactional work is done under UK/US law.”

Speaking for his own firm, fellow Schoenherr Partner Alexander Popp explains that he and his colleagues focus on finding and employing highly skilled local lawyers instead of foreign lawyers with English law knowledge. Accordingly, the few Anglo-Saxon lawyers the firm has experimented with in the past were added not because of their UK/US legal knowledge or native English drafting skills, but “because they had a special industry expertise and knowledge which we needed, [and there was] a specific added-value contributed by that person.”

And as far as Austria is concerned, Popp is confident that his country’s lawyers are absolutely equal to those in the United States or United Kingdom: “I believe that the local lawyers in the top firms in Austria are able to provide products absolutely comparable to those prepared by US/UK lawyers.” 

Where does that “comparable” talent come from? An obvious answer is the long history and tradition in Austria of cross-border sophisticated commercial work. In addition, Peter Huber points to Austria’s law schools. “First of all,” he says, “we believe that legal education at Austrian law schools is more thorough and generally of a higher standard than in CEE/SEE.” 

Does Fewer Foreign Law Firms Mean Fewer Foreign Lawyers?

Many commentators draw attention to, in the words of Schoenherr Partner Markus Piuk, “the low level of penetration by UK/US firms in the Austrian market as compared to the Czech Republic, Hungary, Poland, Russia, and also Romania.” 

Indeed, there are only 4 English or American law firms with offices in Austria (Baker & McKenzie, DLA Piper, Eversheds, and Freshfields). By way of contrast, Poland – the CEE country ranked just above Austria in GDP – has over 20, and the countries in the 6 spots below it have more as well: Greece (with 5), followed by the Czech Republic (12), Romania (7), Ukraine (7), Hungary (11), and the Slovak Republic (7). It is not until you get to Belarus, with an economy one sixth the size of Austria’s, that you find a CEE market with fewer international law firms. 

Foreign firms generally have more foreign lawyers, and as the number of firms increases, the number of available positions increases as well (Freshfields, though it has no Anglo-Saxon partners in Austria, is the only top firm in the country with any senior native-English speaking lawyers at all). And the low number of international firms in the market, despite the size of the Austrian economy and the amount of foreign investment, seems to support the claims that the Austrian firms are fully prepared to serve clients at the highest level. 

Peter Huber of CMS makes just this point, noting that, “Austria has a mature legal culture and market and, unlike in most CEE/SEE jurisdictions, there has never been a ‘vacuum’ which represents a fertile ground for international firms (and their expats) seeking to penetrate the market.”

“The avoidance of taxes is the only intellectual pursuit that carries any reward.” – John Maynard Keynes

But let’s be honest: The competence of local firms and lawyers may not be the only thing keeping so many foreign counterparts from establishing Austria bases. 

Dentons Partner Marcell Clark has worked with Austrian banks for many years, despite being based first in Budapest (243 km from Vienna) for 7 years, and now in Bratislava (79 km). As many of his transactions for those clients are governed by English law, Clark believes his English law and Common law experience is useful, “but so is the experience and knowledge about the industry, about the business.” Unconsciously echoing the sentiments of Alexander Popp, Clark says “I think it’s a different kind of situation to have an English lawyer here who doesn’t have the experience. I think what [Austrian clients] value most is the knowledge – the real in-depth knowledge about their business.”

But Clark also believes that Austria’s extremely high income and corporate tax rates (see Graph 1) provide incentive to both firms and lawyers alike to offer their services to Austrian clients from outside the country. According to Clark: “Firms are able to provide more cost-efficient and competitive service to clients by basing their expats in neighboring countries, where costs generally are much lower than in Austria.” 

But being based in another country creates logistical problems for clients, doesn’t it? Apparently not. “I don’t think you necessarily need them based in [a particular country] to have the benefits of having a foreign lawyer,” Clark says. “If you just have a phone and a computer you can sit anywhere. You just want them in the same time zone.”

Blair Day, at Freshfields, says of the ability other Austrian firms have to locate their lawyers elsewhere in CEE that, “I guess they follow a slightly different model where they have a footprint across the region, whereas Freshfields has a base in Vienna and works with leading firms in each country.”

So at least for some firms, the reason appears to be logistical and financial, rather than merely a need to compete. 

Conclusion

Austrian lawyers take justifiable pride in their city’s history and traditions, as well as in the quality of lawyers and lawyering that result. And the unique circumstances in those neighboring legal markets still emerging from their decades-long sleep can not be denied. So history is a significant factor – maybe the most important factor – in understanding the low number of Anglo-Saxon lawyers in the market. 

But it’s not the only factor. And any analysis that doesn’t address the significant Austrian tax rate as well may not be capturing the entire story.

This Article was originally published in Issue 5 of the CEE Legal Matters Magazine.

The question of how much additional training fresh law school graduates require before qualifying as fully competent attorneys is one different countries answer differently. And a number of lawyers in Slovakia are not happy with the recent changes their country’s Ministry of Justice has made to the training requirements for the country’s law school graduates.

Not all jurisdictions require a trainee period for would-be lawyers. In the United States, for instance, graduates from accredited law schools require only a passing grade on the bar exam. Once that is obtained, young lawyers are considered competent to spread their professional wings and fly as far as their abilities can take them (landing once in a while to obtain mandatory continuing legal education credits).

A different regime exists in much of CEE – including in the Slovak Republic, where, on January 2, 2013, the Ministry of Justice extended the mandatory 3-year trainee period to 5 years, tying it with Austria and Latvia for the longest in the region (see summary on page 27). 

In making the change, the Ministry of Justice referred to a purported decline in quality among current trainees and the need to extend that process to ensure sufficient time was invested in preparing them for a career in private practice. Many believe the decision to extend the period was made at the urging of and for the benefit of senior Slovak attorneys, however, who were alarmed by the tide of new lawyers graduating from the large number of law schools in the country. And it’s been pointed out that, in addition to decreasing competition, the extended trainee period will provide significant savings for attorneys able to pay trainee wages for two years longer than before.

The change was not made without dissent. A current trainee at an international law firm in Bratislava remembers about his fellow students at the time the change was proposed that “everyone was really upset.” A petition drive was organized in protest, eventually generating enough support to trigger a statutory right to be heard. The Slovakian Anti-Monopoly authority was reportedly also concerned. The Slovakian Ministry of Justice listened to all objections, then proceeded as planned.

Radoslava Zemlickova, now a trainee with Vasil & Partners, was fortunate enough to finish her education at the Pan-European University Faculty of Law in Bratislava before the law changed and is therefore not bound by the new law requiring a five-year traineeship. Still, she’s also fuzzy on the justification for the change. “I’m not quite sure why they changed it, really,” she says. “The official explanation was that the legal trainees were not prepared to work independently even after the three-year legal trainee period, but from my point of view their ability may be proved by the final exam without any need for an extension of the legal trainee period.”

It’s not only trainees who find the justifications put forward for changing the law by the Ministry of Justice unconvincing. Tatiana Prokopova, Managing Partner at Squire Patton Boggs in Bratislava, understands the concern the old guard felt at the growing number of young lawyers in the country but rolls her eyes at their reaction. “I think they were feeling that there are plenty of young law firms spread around the country,” she says. “You just walk around and on every street you have a law firm, so it seems like there are plenty of them, and young advocates opened their own practices – but that’s a market. I don’t see that you can change the market by extending the training period. It’s an artificial interference, not a natural one.”

There’s little debate that the new regime works to the advantage of those who employ trainees and who now have an extra two years before they have to increase compensation to “attorney” levels. Still, though an employer of trainees herself, Prokopova feels that mere financial interest is an innapropriate justification for delaying others’ careers. She says, “From the point of view of employers it’s nice, but as a person, as somebody who also had to be a trainee at some point, it’s not very fair.”

Like Prokopova, White & Case Associate Veronika Pazmanyanova graduated before the new law went into effect, and thus needed only three years as a trainee. And like Prokopova, Pazmanyova does not want to see the door closed behind her. She says, “I appreciate the efforts of the Slovak Bar Association to establish a higher standard of legal services, but I don’t necessarily agree with their methods; I think the market should be more open.”

Pazmanyanova notes that under the new rule lawyers may be around 30 before finishing their traineeship – and they’ll have to wait another 3 years before obtaining the right to employ trainees of their own. This can be especially problematic for young female lawyers also wanting to have children, she believes, calling it “really an obstacle.” Especially because, as Pazmanyova points out, trainees’ wages are low – and only go up when that traineeship ends. She’s too polite to point fingers, saying only, “I’m not sure who benefits from this, but it’s certainly not the trainees.”

Of course, not all salaries are the same, and the fortunate few lawyers land more comfortably than others. “I’m very lucky,” Pazmanyova, at White & Case, admits, “because I’m working for a great law firm, and when I was a trainee, I didn’t feel less of a lawyer compared to the attorneys. In our firm you are treated like an associate whether you’re qualified or not. Also your paycheck is fair. But this is not the case for most smaller law firms.”

Editors note: Repeated attempts were made to contact both the President and the Secretary of the Slovakian Bar for comment. Those attempts were not successful. 

Mandatory Trainee Requirements in CEE (Click here for a larger image)

This Article was originally published in Issue 5 of the CEE Legal Matters Magazine.

In our previous issue we reviewed the role of General Counsel/Heads of Legal in CEE as reflected in the CEE Corporate Counsel Best Practices Handbook (see CEELM Issue 1.4. “Insights Into the World of General Counsel in CEE”), based on a survey of 695 General Counsel throughout the region. In this article, we will summarize the Handbook’s findings relating to  the relationship between in-house counsel and external counsel.

Picking External Counsel

The first question we asked was, if there is a need for external assistance, what are the main criteria used by General Counsel/Heads of Legal in picking the law firm they will instruct? We asked our respondents to rank among 5 criteria: legal knowledge of individual lawyer; flexibility on fee systems; brand reputation/track record of firm; fee rates; and trust/track record from working with individual lawyer. 

Based on the results, it appears the main focus of General Counsel tends to be on assessing individual lawyers rather than the firms they work in, as legal knowledge and track record of individual lawyers were chosen as the first and second most popular answers, respectively. In contrast, the brand reputation/track record of a law firm was ranked as least important. As Murat Vanlioglu, Head of Legal for Shell Companies in Turkey, said in an earlier interview with us (see CEELM Issue 1.1.), “the individual lawyer is much more important for me rather than the name of the law firm. In the end it is the individual who does the job, not the expensive firm.” Flexibility on fee rates and the actual level of fees were the third and fourth most popular answers, respectively, in line with a description provided by Anna Gritsevskaya, Legal Director Russia at PPF Life Insurance (see CEELM Issue 1.3.): “I am prepared to accept a higher cost but it must present real value for money.”

“There are two main ways which I developed when I realized I was slowly becoming overly-dependent on a handful of lawyers. The first is attending legal seminars of law firms since it gives me a great opportunity to both update my knowledge and to assess that of the external counsel I am listening to (as well as assessing his business acuity). The other can simply be summed up as “GCs network.” Granted, we interact considerably less than external counsel who get to meet regularly (even across each other at a table in a deal or in courts), but we do nevertheless.”  – Dmitry Popov, Vice-President Legal & Compliance for Russia at ABB (CEELM Issue 1.3.)

The methods of evaluating potential external counsel Popov describes seem to be reflected in the preferences most General Counsel in CEE expressed in our survey. We asked respondents to prioritize the following sources of information they use in their selection process of external counsel: ranking directories (i.e., Chambers & Partners, Legal 500, etc.); law firm websites; referral/recommendations from networks; and thought leadership (i.e., seminars, round-tables, presentations, articles, etc.). Based on the answers we received, referrals are the most common source of identifying quality external assistance, followed by thought leadership. Ranking directories were third, and law firm websites were last. 

One interesting aspect to consider is that, when we asked GCs what tools they most commonly used to keep apprised of regulatory changes, 76 percent responded that they attend law firm seminars and 70 percent reported reading thought leadership pieces in business legal publication (they were number 1 and 3 in terms of the most used tools with number 2 being direct information from regulatory bodies). The main takeaway for law firms appears to be: Generating useful content for GCs in this direction is critical for BD efforts.

Keeping General Counsel Happy

The general consensus is that recurring business is a key ingredient for a firm’s success since both volume and complexity of work tend to increase the longer a client-lawyer relationship endures. To explore this further, we asked GCs what KPIs they use to assess a firm’s input after a deal/litigation is completed. “Communication/Responsiveness” was the clear leader with 82 percent including it in their KPIs list. “Matching expectations on entrance of deal with results,” was the second most commonly listed with 74 percent including it. Timelines/duration of the deal and accuracy of fee predictions were included in 43 percent and 41 percent of responses respectively. 

We also asked General Counsel to rate their level of satisfaction with the overall quality of service of law firms in their jurisdiction. Across CEE, only 2 percent said they were “greatly satisfied,” and another 5 percent said they are “overall satisfied.” The great majority ticked the “acceptable level/ok” box – 53 percent. Another 26 percent reported being “somewhat dissatisfied,” with 10 percent saying they were “completely dissatisfied.”

In terms of specific countries, we calculated the variation of averages for each country (see Graph 1). What this graph illustrates is the deviation from the average in terms of rank (a deviation of “+1” would equal the full difference between the reported average being “acceptable level/ok” to “overall satisfied.” Overall, the countries where GCs seemed to be happiest with the overall quality of legal services provided in their jurisdiction were Estonia – with a deviation of +1.3 – followed closely by the Czech Republic (with a deviation of 1.2). The country with the lowest recorded level of satisfaction was Hungary (-0.6), followed closely by Bulgaria and Russia (both with -0.5).

Another subject covered by the study was the primary causes of dissatisfaction towards external counsel. “High cost relative to quality” was the main factor, chosen by 56 percent of respondents, followed by “uncommunicative/unresponsive,” chosen by 44 percent. “Fees too high” was identified by 38 percent and simple “incompetency” by 34 percent of the respondents. Twenty-eight percent reported “providing insufficient focus to own matters relative to other clients” as a cause for dissatisfaction, while 23 percent pointed to “fees substantially higher than originally predicted.”

The Classic Debate: International or Domestic Law Firms

We asked General Counsel to identify what types of law firms – international or domestic – carry out most work on their behalf. On average, international firms were reported to carry out 39 percent of externalized work, with 61 percent performed by domestic firms. One nuance to these findings is clear when responses are segmented based on the size of the company that the General Counsel is employed by (see Graph 2). While in the case of small companies (0-100 employees), only 18 percent of the work, on average, was delegated to domestic firms, in the case of companies with 10,000 employees or more 79 percent of the work was carried out by international firms. In fact, starting with companies with more than 1,000 employees, international firms already seem to win the majority of mandates. 

And since fee rates will always play a role in selecting external counsel, we further asked GCs to rate international and domestic law firm rates. It was no surprise to see that 0 percent of respondents rated the fees charged by both types of firms as “a great bargain.” But while 28 percent reported that fee levels were “overall good value for money” in the case of domestic law firms, only 11 percent reported the same for international firms. “Overall acceptable/in line with market realities and offering” was the rating given in 44 percent of the cases to domestic law firms and in 16 percent of international ones. “Overall a bit too expensive” and “completely overpriced relative to market conditions, assigned budget and quality of services offered” were ratings given in 19 percent and 7 percent respectively to domestic law firms, while the same percentages in the case of international firms were 49 percent and 22 percent. 

Find Out More

The full report is available on the CEE Legal Matter website here, and contains more information about these issues – and others, including how GCs in the region hire and train their legal teams and how their role varies in focus across different companies. The sponsors of the first edition of the Handbook were: Edwards Wildman, CMS, Freshfields, Stratula Mocanu & Asociatii, and Tuca Zbarcea & Asociatii.

This Article was originally published in Issue 5 of the CEE Legal Matters Magazine.