The Legal 500

Overview

Until very recently, the Romanian economy, and by extension the legal market, had been growing consistently, dynamically and apparently sustainably for many years. Public utilities had been privatised. A flat tax rate of 16% had been introduced, encouraging the creation of wealth. Romania was a country of ever-increasing direct foreign investment, with a remarkably vibrant real estate market. As foreign investment rose and as private equity funds became an increasing presence, a market for more sophisticated M&A transactions developed. Similarly, the products relating to capital markets were becoming ever more like those in Western Europe. For some years, the sole problem facing the Romanian legal market was a dearth of sufficiently trained lawyers to handle the exponentially expanding workload.

However, the international credit crisis has pulled the rug out from underneath the three leading – and interdependent – business practice areas: banking finance and capital markets, M&A, and real estate. The liquidity freeze took until September to hit Romania properly; real GDP growth for the first three quarters was a very robust 9.1%. But the delay has done little to ease the current pressure. Add the threatened withdrawal of EU development funding in the face of endemic 

government corruption, and the picture is very far from healthy. As investors retreat, financing withers, real estate and M&A transactions are put on hold or abandoned altogether, and corporate lawyers sit idle. Market commentators are agreed that the aggressive, sudden expansion of the legal market over the past four years is going to be followed by an equally aggressive contraction. Those firms best able to reposition their offering will cope better than their peers.

The immediate future for the legal market lies in the past, and the rapidly crumbling communist infrastructure. The greatest short term source of new projects for firms will be PPP and public-sector civic works, particularly the rehabilitation and expansion of Romania’s insufficient motorway network. Firms expect an increase in funding programmes and projects initiated by local municipalities, for improvements in wastewater, local roads and amenities. Energy is anticipated to be the most important sector, with billion-Euro power plant modernisations, renewable developments and a new market in emissions trading all coming into play. The other inevitable growth areas in the downturn will be corporate restructuring, insolvency and dispute resolution. Many market players believe that pharmaceuticals and IT will be the most active business sectors in 2009.

Romania has a relatively open legal market and, in recent years, has seen a steady, sustained influx of international firms. This trend continued in 2009. Some firms, such as White & Case, Shollenbarger attempt to open from a cold start. Others such as Marian Dinu Law Office (DLA Piper) use the remains of defunct firms, in this instance some former Linklaters Miculiti, Mihai & Asociatii lawyers and office space, to help them hit the ground running. It is Allen & Overy LLP’s arrival that generated far and away the most interest, because it entered on the back of an association with an up-and-coming domestic firm Radu Taracila Padurari Retevoescu SCA in association with Allen & Overy LLP, meaning that it is immediately a force in the market. Of the domestic firms, Nestor Nestor Diculescu Kingston Petersen and Musat & Asociatii still dominate, with Tuca Zbarcea & Asociatii now joining them in the top echelon. Real estate specialists Popovici Nitu & Asociatii are not far behind. Of the established international firms, CMS Cameron McKenna SCA and Badea & Asociatii In Association With Clifford Chance are the strongest, although the latter’s current reliance on financing and real estate work may prove problematic going forward. French firm Gide Loyrette Nouel and Austrian firms Schönherr and Wolf Theiss are all active in the market and steadily increasing their presence.