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State of the Union Austria is surrounded by the biggest development project in Europe: the expansion of the EU. Vienna’s lawyers are, for the most part, wisely guarding their valuable market share CHARLES BIRTS
THE WINDS OF CHANGE ARE ONCE again blowing from the east. On 1 May 2004, the European Union ushers in ten new countries – bringing the membership to 25 states, the largest expansion in the organisation’s history. Understandably, nerves are frayed. With the prospect of a wave of privatisations and investment into the region, Austria’s law firms are waiting for the curtain to rise – and they’re sitting in some of the best seats in the house.
Eastern union Austrian lawyers justifiably claim a geographic and historical advantage when promoting Vienna as the commercial hub for central and eastern Europe. The country borders no fewer than four of the new accession states to the east – the Czech Republic, Slovakia, Hungary and Slovenia. What’s more, the major European
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> economies of Germany, Italy and Switzerland lie to the west. The other six accession states lined up for May are Cyprus, Estonia, Latvia, Lithuania, Malta and Poland, while Bulgaria and Romania hope to follow by 2007. Austria’s legal community also points to the country’s own recent experience of EU accession when promoting its qualifications for the region. ‘Austria continues to be a bridgehead to our neighbouring countries,’ explains partner Martin Brodey at Dorda Brugger Jordis. ‘We are also a model country for the new states, as we were also a late entry to the EU.’ Lindinger: not expecting a flood of work on 1 May
Cautiously optimistic However, the majority of Austria’s legal community is not expecting a deluge of fees when the sun rises over the new eastern boundary of the EU on 1 May. The mood is
more one of gritty realism, spiked with prudent optimism. ‘The expansion of the EU is unlikely to cause a huge flood of work,’ predicts Christoph Lindinger, managing partner of Schönherr Rechtsanwälte. ‘But we expect to see a particular boost to our competition department, including antitrust and state aid advice. There is already demand for highquality advice in this area.’ Partner Michael Kutschera of Binder Grösswang agrees: ‘I don’t anticipate
that, from May, business there will jump. I believe it will be a gradual thing.’ While Austrian lawyers are keen to play down expectations as to the scale of the new opportunities that lie to the east, they concede that there is likely to be plenty to keep them busy, including some significant transactions. Areas such as competition, antitrust, state aid, merger control and accession advice should indeed provide a steady stream of new work. Investment in the new eastern European EU states will inevitably increase from both Austrian and international banks and corporates, providing corporate and M&A work for the law firms active in the region. ‘We will certainly see opportunities advising inward investors in central and eastern Europe,’ confirms Schönherr’s Herbst, ‘and also advising on questions of integration.’ Freshfields Bruckhaus Deringer partner Willibald Plesser adds: ‘There is still a lot of investment going on in the energy sector, for example, and a number of real estate funds are investing in Eastern Europe.’ There is also the prospect of infrastructure projects and privatisation deals further down the line. However, Austrians know as well as anyone that, with these politically charged projects, it is unwise to get too excited. Even the bravehearts talk in terms of years rather than months before most even reach the conceptual stage. Nonetheless, Plesser believes the region will see a significant upturn in this type of activity. ‘It was boom time after 1990 with the fall of the Iron Curtain, and then 1995-1997 saw a downturn,’ he notes. ‘The second wave will now come and we are likely to see privatisation transactions in Romania, Bulgaria, Croatia, Slovenia and Serbia. We have
‘We have a good understanding with our neighbours. We are also a model country for the new states as we were also a late entry to the EU.’ Martin Brodey, Dorda Brugger Jordis
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already seen PKO Bank in Poland and Unipetrol back in the market in the Czech Republic, and Petrom in Romania.’ Austrian law firms are lining up to enjoy the fruits of the market that’s blossoming on their doorstep. However, individual firms have very different ideas as to the best way of serving their clients in the region and winning lucrative new mandates against the inevitable competition.
well as other significant deals in central and eastern Europe. Schönherr, Austria’s second-largest firm, has also not been shy about establishing offices to handle work in the east. In addition to its presence in Vienna and Brussels, the firm also works out of Belgrade, Bucharest, Ljubljana and Zagreb. Christian Herbst emphasises that the firm’s strategy in the region is client-driven. Christoph Lindinger adds: ‘We do not endeavour to open our own offices in jurisdictions where there are “best friends” available who offer good legal advice. That is why we are not in Hungary and Poland, for instance.’ Another of Austria’s legal heavyweights has recently formalised its own ‘best friends’ concept that enables it to operate solely out of Vienna. Dorda Brugger’s Martin Brodey describes this important recent initiative as a
majority-owned subsidiary of HypoVereinsbank), on the privatisation of CB Biochim, the third-largest Bulgarian bank, as
Office policy Wolf Theiss has pursued dramatic growth over the last ten years, and now lists five offices outside Austria and its Viennese base, comprising a presence in Belgrade, Bratislava, Ljubljana, Prague and Zagreb. These outposts house a total of some 34 lawyers. Wolf Theiss’s strategy seems to have paid dividends, leading to the firm advising Bank Austria Creditanstalt (a
Brodey: Austria is a model for EU accession states
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A YEAR IN VIENNA On the face of it, Vienna seems an attractive proposition for lawyers, both local and international. It is difficult to find a lawyer the city who does not admit that 2003 saw a slow market compared with previous years, but in the same breath announce outstanding financial results, in some cases the best ever. It seems the Austrian market has a remarkable capacity to keep its law firms busy and thriving, even in times of limited economic activity. The market is flexible, and so are its lawyers. Ivo Deskovic of DLA Weiss-Tessbach suggests the stability seen during 2003, compared to some of its EU neighbours, is partly due to the relative size
> new programme for referred work. ‘The programme includes one of the top five law
of the market: ‘Austria is a secondary market and therefore the ups and downs aren’t as big as the larger European markets.’ Binder Grösswang’s Michael Kutschera echoes a number of his peers in his review of 2003. ‘For our firm, 2003 was an excellent year. Our main focus was not as strongly on M&A – more financing and new products, and also a certain emphasis on arbitration and litigation.’ While the number of transactions has diminished, law firms have been more than compensated by the few large headline deals that did come to the market. The government’s controversial privatisation programme continues
to keep the country’s lawyers busy. Binder Grösswang, for example, acted for ÖIAG and JP Morgan on the €540m privatisation of voestalpine AG. While generally depressed for the first three quarters of 2003, the M&A market has generated a few headline transactions. The largest transaction was the €1.9bn acquisition by Heineken of BBAG, where Cerha Hempel Spiegelfeld Hlawati advised Heineken and Wolf Theiss advised BBAG and 600 shareholders. Most lawyers believe the stagnant M&A market has now turned the corner, with the final two months of 2003 seeing more activity.
firms in each jurisdiction, including Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and each of the countries of the former Yugoslavia; Russia and the Baltic states will follow,’ Brodey explains. ‘This is a non-exclusive arrangement, so it is a programme rather than an alliance. It means we are able to provide a one-stop shop service for the region in Austria.’ There is of course another option open to Austrian firms looking to increase their capabilities in central and eastern Europe, which is to join up with other firms with an existing network in the region through merger or an association.
Foreign bodies In Austria’s dominant legal centre of Vienna, however, firms are still largely independent and growing organically, although this seems to have often been down to lack of opportunity, rather than through specific choice. In recent years, the legal market in Vienna has seen its fair share of flirtations between local firms and international suitors. Prior to its merger with Clifford Chance, German firm Pünder, Volhard, Weber & Axster stepped out for a while
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Herbst: Schönherr’s strategy is client-driven
with Cerha Hempel & Spiegelfeld, and CC itself had been through an unsuccessful courtship with the highly eligible Wolf Theiss. Although interest from UK and US firms seems to have receded, a handful of international names have established more formal relationships with the locals. The situation is in stark contrast to that in Austria’s powerful neighbour, Germany, where the legal market is stuffed with the names of the UK and US international giants. Lawyers in Vienna are quick to emphasise this feature of the German market. ‘Austria is different,’ points out Edith Hlawati of
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Public private partnerships are also creeping onto lawyers’ shopping lists, albeit in pencil. On 1 January the first free-flow toll project in Austria was opened, consisting of over 2,000km of road for trucks and buses. Law firms active on the project during 2003 included Graf, Maxl & Pitkowitz, advising the Austrian operating company Europpass Lkw Mautsystem GmbH, and Freshfields advising the government-owned Asfinag, which has responsibility for the Austrian road system. Whether this will kick-start any of the other PPP projects currently under consideration remains to be seen, but there does seem to be a heightened
Cerha Hempel Spiegelfeld Hlawati. ‘Freshfields is perceived by the market, as being the only global law firm to have a major presence in Austria.’ Freshfields arrived on the scene indirectly, through the merger of highly regarded local firm Heller Löber Bahn & Partner with Germany’s Bruckhaus Westrick Stegemann. This new entity then proceeded to join up with Freshfields Deringer to become Freshfields Bruckhaus Deringer. Freshfields has two offices in central and eastern Europe, in Budapest and Bratislava, having turned over its small Prague operation to the local partners in 2002. The mergers that have brought German firms into Vienna seem to have had the most impact on the Austrian
sense of anticipation in the market. ‘We hope to see PPP transactions including infrastructure such as motorways and office buildings,’ says Michael Hecht of Fellner Wratzfeld & Partners. ‘PPP is not brand new, but in the next couple of months and years it will be important for the legal industry.’ Lawyers across the board report an unsurprising increase in activity in the insolvency, corporate restructuring, litigation and arbitration areas. In addition, 2003 has seen a healthy flow of real estate-related work with German banks and investment funds being particularly active. For example, CMS Strommer ReichRohrwig Karasek Hainz advised Westdeutsche
legal market. In addition to the Freshfields Bruckhaus Deringer union, the tie-up of Austria’s Hügel & Partner with German MDP Haarmann Hemmelrath gave another foreign firm a prominent stall in the Austrian market place. That is not to say that this is the extent of the foreign presence in Vienna. In February 2003, Baker & McKenzie opened an office, a surprisingly recent entry into the Austrian market for this omnipresent global giant, through a merger with 21-lawyer local firm Kerres & Diwok, while back in 2001, New York-based Skadden, Arps, Slate, Meagher & Flom also established a small foothold in the Austrian capital, from where it concentrates on deals related to central and eastern Europe. Lovells enjoys a long-standing association with
ImmobilienBank on the financing of its €360m acquisition of the Millennium City in Vienna. While the capital markets also provided a mixed year for firms, this work saw signs of an upturn in the final quarter. A developing bond market complements a rising number of IPOs (Cerha Hempel acted as Austrian counsel to underwriters JP Morgan and Goldman Sachs in the €110bn IPO of Bank Austria, Europe’s largest in 2003). What’s more, increased refinancing and structured finance transactions and an encouraging amount of private equity interest have also all helped to keep lawyers smiling in what has been an unspectacular year for the Austrian economy.
Mondl, Trummer, Thomas & Partner, while CMS Strommer Reich-Rohrwig Karasek Hainz
MERGERS & ACQUISITIONS BANKING & FINANCE CAPITAL MARKETS ARBITRATION & COMMERCIAL LITIGATION INFRASTRUCTURE TAX REAL ESTATE
‘PPP is not brand new, but in the next couple of months and years it will be important for the legal industry.’ Michael Hecht, Fellner Wratzfeld & Partner
WOLF THEISS Attorneys at Law A 1010 Vienna, Schubertring 6 Tel +43 1 515 10 Fax +43 1 515 10 25 wien@wolftheiss.com www.wolftheiss.com WOLF THEISS Belgrade - Bratislava - Ljubljana - Prague - Vienna - Zagreb
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> is a founder member of the CMS
provide a high-quality service to Western investors, delivered by lawyers with international experience and training. There is no doubt that Austria has a long history of strong business relationships with its easterly neighbours, and this will continue. However, firms in Vienna are increasingly focusing on the less-developed legal markets among the EU accession states such as Croatia, Hungary and Slovenia, where few international firms are already entrenched, and the local legal markets are relatively undeveloped; markets which are unlikely to tempt the majority of UK and US heavyweights. ‘Most of the new EU countries have good local firms with English-speaking and internationally trained lawyers, and others such as Serbia will have sooner or later,’ explains Martin Brodey at Dorda Brugger Jordis. Kutschera: increase in work will be gradual
transnational legal and tax services organisation, set up in 1999. The most recent development in the Austrian market was the arrival of UK-based DLA, when it merged with regional heavyweight Weiss-Tessbach on 1 October last year. Weiss-Tessbach, one of Austria’s oldest firms, was based in Vienna and had further offices around the region in Bratislava, Budapest, Prague, Salzburg, Sarajevo and Zagreb. For Weiss-Tessbach, the merger came at the end of a difficult year that saw the departure of six partners, apparently unhappy with the direction the firm was taking in relation to its central and eastern European strategy. The remaining partners are now part of one of the most ambitious and growth-hungry firms in the world: this is a merger that will define whether there’s room in the country for more than two major international presences.
New frontiers While Vienna is not awash with foreign law firms, the locals face stiff competition in the region they so often refer to as their own backyard. Many of the big international names have an established presence and a history of success in the markets of central and eastern Europe, and local firms in a number of the new EU accession states can
‘We do not endeavour to open our own offices in jurisdictions where there are “best friends” available.’ Christoph Lindinger, Schönherr Rechtsanwälte
UK and US firms will continue to be involved in the majority of headline transactions in the region, on the back of government mandates and the large international corporate and financial investors. However, for the Austrian firms, there are significant opportunities to capitalise on traditional business relationships in the region, the undeveloped nature of local legal services on the ground and their ability to jump in a car or on a train and attend a lunchtime meeting in the familiar surroundings of Bratislava, Budapest, Ljubljana, Prague or Zagreb. As the EU grows, so will the influence of Vienna. LB Charles Birts is a freelance journalist.
BINDER GRÖSSWANG RECHTSANWÄLTE Sterngasse 13, A-1010 Wien Tel: +43 (1) 534 80 261 Fax: +43 (1) 534 80 8 E-mail: bg@bgnet.at Kaiserjägerstraße 1, A-6020 Innsbruck Tel: +43 (512) 579 973 0 Fax: +43 (512) 579 973 8 E-mail: tirol@bgnet.at
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