Lawyers’ Farewell to Eastern Europe

The Wall Street Journal, 8 October 2008 – Linklaters to transfer offices to local management, citing shortage of ‘big-ticket’ work. When the Cold War ended, some of the Britain’s top law firms piled into Eastern Europe in search of big deals. Now, one is pulling out.  

Linklaters next month plans to hand over its offices in Prague, Bratislava, Bucharest and Budapest to local management. The split came because Linklaters’ head office wouldn’t allocate extra partners to Eastern Europe, believing the operation isn’t growing fast enough, the firms says. Limiting the number of senior lawyers crimped the practice’s ability to grow.

‘’How do you justify putting a partner in Bratislava instead of London, Paris, Hong Kong, Dubai or Moscow?’’ says Nick Eastwell, Linklaters’ managing partner for Eastern Europe, the Middle East and North Africa. ‘’There is much less big-ticket [legal] work’’ there, he adds. ‘’These countries  have done very well. but they are now run-of-the-mill, mainstream economies.’’

The move shows how the legal world’s center of gravity has shifted. The privatizations and acquisitions that swept the former Soviet satellites after communism are done. Investment banks and their clients are focused on Brazil, Russia, India and China.

Linklaters is keeping its operations in Poland and Russia, where high oil prices have triggered an economic boom. In the Czech Republic, Slovakia, Romania and Hungary, the firm’s nine partners and their 120 lawyers are setting up their own firm called Kinstellar.

Kinstellar will specialize in acquisitions, project finance, real estate, infrastructure and energy projects, says Jason Mogg, its Prague-based managing partner and Linklaters’ former head of Central and Eastern Europe.

Mr. Mogg says big law firms like Linklaters restrict their growth by refusing to promote more of their lawyers to partner, not wanting to share profits more widely. ‘’The basic idea is no growth in the equity’’, he says. ‘’Everyone recognized it would have long-term implications on the profitability of the [Central and Eastern European] region.’’

But both sides say the split isn’t acrimonious. Kinstellar’s name is deliberately, if vaguely, similar to Linklaters, according to Mr. Mogg, and the firms say they will cooperate in the future.

Freed from London’s control, Mr. Mogg has big plans. He is thinking of opening offices in Turkey, Ukraine, Bulgaria, Serbia and Kazakhstan.