RSG

The Global Threat to Spanish Tradition
by James Chambers

Big might be beautiful but it is by no means innovative. Now in its fifth year of publication, The Financial Times Innovative Lawyers Report continues to reward European law firms for proactive originality irrespective of transaction size.  This levelling approach has continually seen the international law firm Eversheds and regional firm Wragge & Co disrupt the traditional dominance of the UK’s magic circle firms at the top of the FT Law 50, the accompanying table of the most Innovative European Law firms. The same, however, cannot be said of Spain.

Since its inception in 2007, the FT Law 50 has featured at least two of the three law firms in Spain’s holy trinity: Uria Menedez, Cuatrecasas Gonçalves Pereira and Garrigues (leading Portuguese firm Abreu Advogadas began submitting last year although they have yet to feature in the FT Law 50). Spain is evidently an innovative legal market but the dominance of the top three firms is not subject to the same kind of domestic challenge.

That is not to say that the traditional order in Spain is sacrosanct, but in an illustration of the globalisation of the legal industry, the biggest challenge is coming from abroad. International firms like Freshfields Bruckhaus Deringer and Clifford Chance are increasingly appearing in the lists of innovative Spanish deals, perhaps indicative of the increasing competition to their own predominance at home.

Out of over 600 submissions researched by RSG Consulting for this year’s report, the restructuring of the Spanish savings banks emerged as the dominant legal issue in Spain. Uria, Cuatrecasas and Garrigues all submitted transactions involving Spanish banks, but a prominent entry from Freshfields should remind the Spanish trio that even the most traditional and parochial of clients find it difficult to resist the draw of the international law firm.

Talking about the relative merits of the different law firms in Spain, a banker from Goldman Sachs said: “Freshfields… tend to think more out of the box. Uria and Garrrigues are much more into the work of law.”

The competition from international laws firm is also happening elsewhere. In the context of Spain’s much maligned real estate market, Clifford Chance represented BBVA on the sale and leaseback of over 1000 bank branches, despite their being no existing real estate relationship with the Spanish bank and having acted on a similar deal for BBVA’s arch rival, Banco Santander.

Fear of globalisation should not be overstated, though, as this challenge from international law firms in Spain is nothing new. It will soon be thirty years since Clifford Chance first opened in Spain and the Spanish trio are still the dominant force in transactional deals. Nevertheless, innovative law firms are not simply pushing forward changes in the law. Like their counterparts in the USA, UK firms are taking a fresh approach to the provision of legal services and it is here where the contrast with the Spanish giants is most evident. Legal process outsourcing, for instance, has become embedded in UK and US law firms, but the unbundling of commoditised legal services and outsourcing it to cheaper overseas jurisdictions is virtually non-existent in Spain.

Language is often mentioned as an obstacle to LPOs on the Continent but there seems to be no reason why the Iberian firms can’t use close ties to Latin America in the same way as UK firms use a similar relationship with India and South Africa. A Dutch lawyer we spoke to from Linklaters expects the LPO industry will eventually enter Continental Europe via the London firms, but as the cost of legal services becomes increasingly important to clients, can the Spanish law firms afford to wait?

We will have to wait and see how long it takes leading firms like Garrigues to pick up on these developments, but there is evidence to suggest that a nascent fight back might be coming from outside the Spanish trio. The 90 lawyer firm CMS Albiñana & Suárez de Lezo, a new entrant in this year’s awards, represented Citi Infrastructure Partners on the €7.89bn acquisition of Itínere Infraestucturas. A referee we spoke to from the client said that he wouldn’t go with Clifford Chance or Linklaters in Spain because the quality of partners staffed on a deal is a “lottery”. In contrast, he said that “smaller firm like CMS will put the best lawyers on the job”, repeating a similar criticism that we have heard of the Magic Circle in the UK, which has seen alternatives like Eversheds preferred in a beauty parade.

For smaller Spanish firms considering entering next year, it is useful to remember that – as the title would suggest – lawyers are central to the FT Innovative Lawyers Report. And in that respect, size is irrelevant.