A new status of the legal profession, the exit of some foreign companies and a stiff fee competition in the context where the market stalled last year at best: these factors show 2014 will be a more challenging year both for domestic companies and for international companies operating in Romania.
Nevertheless, lawyers believe recent trends are not an uncommon phenomenon and can somehow indicate the market is maturing.
The year started under the sign of new rules issued by The National Association of Romanian Bars (UNBR), the body regulating the legal profession. According to these, law firms and cabinets are no longer allowed to publicly disclose information on clients, even if the latter agree, about financial results or other projects they are involved in.
According to lawyers, these rules were already included in the status, but their formulation left room for interpretation.
Asked whether the business law market can be perceived as a more hostile environment at present against the same period of last year, Adina Chilim-Dumitru, a partner at NNDKP, answered no. “This perception can be conveyed by the way some UNBR stipulations have or have not been applied so far. Many of them existed already, and their republication in a revised form is only aimed at curbing excesses and not at hindering the publication of messages that are relevant for clients and the market”.
Nonetheless, some international companies of Romania, such as Gide Loyrette Nouel or White & Case, decided to close down their Bucharest offices, leaving behind whole teams of lawyers who set up new companies or moved to other established market players.
“Moves ‘dictated’ by international companies’ global strategy or by lawyers’ personal options are natural features of a mature market,” explained Adina Chilim-Dumitru.
Notable international companies still present in Romania include two members of the prestigious Magic Circle. Thus, Clifford Chance teamed up and subsequently merged with the Bucharest office, now known as Clifford Chance Badea, coordinated by lawyer Daniel Badea. On the other hand, Allen & Overy chose to team up with Radu Taracila Padurari Retevoescu (RTPR), a law firm coordinated by lawyer Costin Taracila.
At the same time, DLA Piper, with the largest receipts among international law firms in 2012, has an office in Bucharest, coordinated by Marian Dinu. Other companies, such as Schoenherr, CMS Cameron McKenna, Dentons or Kinstellar are part of international or regional networks, operating as a single transnational entity.
On the market, competition between companies is most visible in terms of fee pressures. Part of players cut fees, triggering similar moves by other players. As an immediate outcome, aggressive players gain market share, at the price of temporary profit declines.
A secondary outcome is the pressure felt by companies attached to international player names. While domestic companies are more flexible as regards the fee policy, as they have no group guidelines they have to abide by, foreign companies also apply, in line with possibilities, tariff cuts in a bid to adapt to the domestic market.
Additionally, any foreign company opening an office in Romania can rapidly see domestic companies, run by business law veterans, dominate the market.
“Romanian established law companies further dominate the market and the recent international firm exits confirm the rising competition between Romanian companies and international ones, as well as the success of the ‘Romanian’ business law model. Looking at the ranking of the five largest law firms on the market, we can see the top four positions are filled by Romanian companies, whose position is strengthening year after year,” stated Mona Musat, partner at Musat & Asociatii company.
(English version by Catalina Apostoiu)