The arrival of legal giant DLA Piper last Spring underpinned Dublin’s growing status as a destination of choice for international law firms. Lauding its newly adopted city as globalized, cosmopolitan and pro-Europe in outlook, the firm’s punchy recruitment video announced “Ireland is bold and disruptive. We are bold and disruptive.”

The US behemoth is regularly cited as one of the top five law firms in the world, both in terms of revenue and expertise, so its arrival in Ireland was big news; particularly as it announced a five-year plan to build a team of over 100 lawyers. Based on current figures that would be sufficient to catapult DLA Piper into the top ten of Irish firms.

As things stand, only two of the top ten firms in the rankings (based on the number of practicing solicitors) are international; Eversheds Sutherland a stalwart in Dublin since the 1980s and Maples and Calder, funds specialists headquartered in the Cayman Islands, which saw Ireland as a natural fit and set up base in 2006. 

For a small open economy, the pace of inward, global expansion in the legal sphere has traditionally been glacial with Irish players like Arthur Cox, Matheson, A&L Goodbody and McCann Fitzgerald dominating the market and providing Irish services to UK and international law firms on every aspect of corporate law from tax to mergers and acquisitions. 

Brexit, a truly disruptive force, has begun to change that. 

While Ireland will likely suffer deep economic wounds from Britain leaving the European Union, there have been spoils in certain sectors. Take financial services, where according to EY’s Brexit tracker, Dublin has stolen a march on Luxembourg and Frankfurt in luring business out of London for EU passporting purposes. 

Even if Britain plumps for a no-deal Brexit, the legal sector in the UK will likely swoon from the blow and yet still manage to rally as Europe’s centre of international (rather than EU) business law and arbitration. 

But in legal services, the gains have been modest and in truth, they look set to stay that way. While Dublin has been touted as something of a hot ticket since the Brexit referendum, only a limited number of international law firms have opted to put feet on the ground. These include the UK headquartered Kennedys, DAC Beachcroft, DWF and the US firm Covington & Burlington.  For the most part, they have chosen to open up satellite branches with, at most, a handful of partners. 

Certainly, none of the larger firms is moving operations lock stock and barrel out of Britain. This comes as no surprise. The legal services sector in the UK is the second-largest legal market in the world after the United States, employing around 340,000 people and contributing £25 billion to the economy annually. It is one of the great UK success stories. 

Even if Britain plumps for a no-deal Brexit, the legal sector in the UK will likely swoon from the blow and yet still manage to rally as Europe’s centre of international (rather than EU) business law and arbitration. 

London’s preeminence seems assured when there is so little competition. Ireland, soon to be the largest English speaking, common law country in the EU, has shown a striking degree of indolence in trying to grab a slice of the high-value legal work potentially on offer. 

Last January, the government rowed in behind a joint initiative by the Bar Council and the Law Society to promote Ireland as a global hub for international litigation and arbitration post-Brexit. Broadly, the idea was to capitalise on concerns about the enforceability of UK court judgments in the EU after Brexit and put forward Ireland as an attractive common law alternative for international litigants. This would require an investment in Ireland’s legal infrastructure.

There were positive pronouncements about Ireland’s legal potential from the Attorney General Seamus Woulfe at a passing out ceremony for newly qualified solicitors over the summer and before that at an EU Bar Association conference. “We are talking about a colossal amount of high-value work, and that’s what’s at stake, if and when Brexit happens,” the AG said last April, noting that £33.4 billion in legal work was up for grabs.

The latest Smith & Williamson survey of Irish law firms, released this week, found practices that once saw Brexit as an opportunity are now more likely to see it as a threat.

Woulfe and Chief Justice Frank Clarke even visited the United States to promote the project.

The promised implementation group to kickstart the initiative, which has the backing of the Irish Development Authority (IDA),  finally became a reality at the end of last month, with former taoiseach and EU ambassador, John Bruton named as its Chair. 

An opportunity or a threat

In the meantime, the clock is ticking and the mood among the legal profession is darkening. The latest Smith & Williamson survey of Irish law firms, released this week, found practices that once saw Brexit as an opportunity are now more likely to see it as a threat. The chief concerns were a loss of cross border business and increased costs as competition to hire and retain staff heats up with new players entering the market. This negativity is most pronounced among the big firms and comes after a year of increased revenue and profits when sentiment should be upbeat.

On the plus side, there has been a recent, overdue move to address issues of capacity by increasing the number of judges in the Court of Appeal from nine to 15. On her retirement from the Supreme Court last June,  Justice Mary Finlay Geoghegan noted that the government’s laudable goal of making Ireland a post-Brexit centre of legal excellence would not be achieved without additional resources. Delays of up to two years for hearings in civil cases before the Court of Appeal are simply not acceptable if Ireland is to be taken seriously as an international legal destination.

These factors, plus the more general political uncertainty surrounding Brexit, go some way to explaining why the vast majority of international law firms have happily hedged their bets on Brexit, preferring to let the situation play out. It is as easy for large UK firms like Allen & Ovary to register lawyers working in Brexit sensitive areas like EU and competition law on the roll of Irish solicitors and maybe even to take out practicing certs, for passporting purposes, as they figure out which way the wind is blowing. Mergers and acquisitions may prove to be the preferred route in the future. 

Besides hedging is exactly the trait you would expect from the naturally cautious legal fraternity when faced with looming uncertainty. 

While there is some doubt as to whether UK lawyers will be allowed to practice without bricks and mortar operations in Ireland post-Brexit, the wait and see approach is still the one favoured by over 3,000 UK based lawyers since the 2016 referendum.

By August 2019, 1,568 England and Wales solicitors had been admitted to the Irish Roll of Solicitors, 737 of which had taken out practising certificates.

Why hedging makes sense

It is certainly easier than jumping the gun and racking up huge overheads in Dublin on five to ten-year commercial leases while trying to recruit from a small pool of local, top-flight legal talent. 

Besides hedging is exactly the trait you would expect from the naturally cautious legal fraternity when faced with looming uncertainty. 

When it comes to consolidating for Brexit purposes, why rush in? 

Most global law firms, including the top UK Magic Circle firms, have offices in several European jurisdictions. These have been beefed up, as necessary, to ensure maximum flexibility to meet the contingencies of Brexit. There has been a lot of forward planning.

Law firms follow their clients. It is bread and butter capitalism. 

It is no coincidence that the new entrants who have launched substantial operations in Dublin – DLA Piper, Simmons & Simmons and Pinsent Masons to name a few – have all tailored their core offering to Ireland’s economic strengths providing tax and legal services to the IFSC, big pharma and the “Silicon Docks” where multinationals like Google and Facebook have set up European headquarters. 

DLA Piper’s top partners said from the get-go that Brexit was not the main reason they chose to open in Dublin. They wanted direct access to the increasing number of decision-makers working with global budgets on the ground in Ireland. That is what makes the investment worthwhile.

Law firms follow their clients. It is bread and butter capitalism.