The impression the country gives is not uniform, as perceptions of Romania vary from one business sector to another, depending on the degree of regulation and the involvement of the relevant authorities in the sector, among other factors. The business community blame Romania’s perception abroad, saying that things look different in reality than in the perception of some analysts that conduct evaluations and country reports and sometimes superficially undermine a country’s outlook with a tendency to generalize the problems of the region and apply them to single countries.

The question of whether anyone still believes in Romania as a legitimate destination for foreign investment is an absolutely vital one for the wellbeing of the country. 

Law firms follow closely every movement of the economy, being one of the sectors directly impacted by the uptrend or downturn of the country. 

The local market for legal services is still characterized by a fierce battle on prices, with pressure coming from both clients and law firms in a region where the golden years of economic boom are long forgotten.

The legal services market it is for sure highly competitive, says Florian Nitu, Managing Partner of Popovici Nitu Stoica si Asociatii ”we are working in a highly competitive environment. Romania is by now a well-developed market of legal services, with local independent law firms and international ones disputing not always very gently their positions. On the other hand, there are still unexplored areas, there is room for innovation and the local peculiarities of the legal framework offer certain competitive advantage to independent law firms. On the other hand, like any other mature market, the legal services market in Romania is facing fragmentation. This is a process pushed very hardly by small to medium law firms, organized around 1 to maxim 3 partners and a number of associates, focusing on certain niches or client-lead firms.“

The same opinion is shared by Stefan Damian, Deputy Managing Partner at Tuca Zbarcea & Asociatii, “the legal market is pretty tough and competitive, as the market progressed at a sensible rate in terms of number of law firms, much faster than the Romanian economy or the number of deals.”

2016 has been an year under the sign of change, both locally, and internationally. Locally, we had a first round of elections in the spring, the local elections, and expect a second round, the parliamentary elections, to come in the autumn. There is also an afflux of new legislation on key matters for the economy either already enacted, e.g. new legislation on public procurement, or in the pipeline, e.g., possible new legislation on capital markets, or on companies, to name a few. Internationally, we had the Brexit, the Turkish coup d’etat, a significant global decrease in oil prices, and a rather visible escalation of matters concerning security, economy, and foreign relations within Europe.

“All these have taken a toll on the working environment” says Mona Musat, Managing Partner, Musat & Asociatii. “We have seen projects slowed down, others scrapped, and others substantially changed to account for the increased risk, and instability. Notwithstanding, Musat & Asociatii has fared well to date. We do witness an increase in the amount of work and effort to be put into projects, with, unfortunately, less flexibility in terms of fees. We have however adapted accordingly, and remain involved in some of the most important mandates of the year,” adds Mona Musat. Given the current international context, Romania may be an alternative to investors, looking for more stability, and less conflict. This should lead in the long run to increased business opportunities for clients, and further work for law firms. 

“We are experiencing an interesting development of the legal practice in Romania. After 1989, we witnessed a reshaping of the legal profession and recognition of the lawyer’s liberal work character, this stage and adaptation being formally recognized by the legal profession law adopted in 1995. The majority of lawyers in Romania continue to be sole practitioners and less as joint lawyer partnerships,” says Cristiana Stoica, Founding Partner of Stoica si Asociatii.

“The Romanian legal market no longer looks as it was in 20 years ago. Many of the leading lawyers acting in Romania today carried a pioneering work for the legal profession as there were no sources for best practice examples. Specialization of law firms becomes a more present reality and the transition from general law to specialized practice areas is extended. In the last 10 years we see a strong development of a good base of business attorneys in other cities in Romania,” she adds.

The law market is in one word “alive” says Prof. Dr. Jörg K. Menzer, Managing Partner, Noerr. “If I had to detail a bit, I would say the environment is alert, uncertain but nonetheless thriving. Alert, because the market moves quickly and demands quick legal solutions; uncertain, because 2016 is a year with two different elections in Romania and several events that have major implications on the EU (e.g. Brexit or the Turkish crisis). Last but not least, it’s thriving because the movement and the positive developments on the market are obvious.”

„Romania continues to benefit from a general perception of stable country at a political and macroeconomic level. Considering the global context, we see this as a major opportunity for future growth. In recent years, the legal services market in terms of supply and demand has become quite sophisticated, mirroring a more mature, complex and integrated business environment both locally and at a global level. We see more competition and pressure on fees, as well as new entries on the market, mainly through spin offs from established firms. This is a sign that the Romanian legal services industry has reached maturity in terms of talent and opportunities,” says Madalina Rachieru, Partner, Clifford Chance Badea.

Others agree. Sorin Mitel, Managing Partner at Mitel si Asociatii, adds that all lawyers seem to be working more and more hours a day during this year. In the same time, the working environment continues to be characterized by speed and fast adaptation.

Even if the work seems to take an upward trend there are still challenges and the one lawyers mostly mentioned is pressure on fees.

“Clients are pushing hard for law firms to provide fixed or capped fee quotes and looking for hourly rate discounts,” says Bryan Jardine, Managing Partner, Wolf Theiss, and adds that the law firms are responding with even more aggressive pricing offers often resulting in more work for less fees. “Increased fee pressures coming from clients demanding “more for less” and competitor law firms prepared to reduce fees dramatically to secure work. In addition, with new technologies, clients have increased expectations of efficiency,” says Jardine.

There are several challenges, says Prof. Dr. Jörg K. Menzer, Managing Partner, Noerr: “increased pressure on the fees, protecting key client relationships, service consistency etc. These all can develop in the following years depending on the strength of the law firms, their flexibility and, of course, those of the individuals. One major challenge is the continuous training and specialization of the lawyers, who have to constantly adapt to new and more complex circumstances. Staying up-to-date is an increased but essential effort for each lawyer nowadays, since matters become much more complex - in Germany, Romania and worldwide. I expect companies providing solutions and trainings for the legal business to grow and broaden their spectrum of services. Another major challenge is finding the right balance between career and family. I didn’t, and I think I don’t speak only for myself when I say that it’s probably the toughest one.” He adds: “I don’t know if it’s a trend, but it certainly is an important factor that influences the development of law firms. I recently read in a study that very few law firms make big efforts to keep their employees. Many use only financial incentives for this and consider them to be sufficient. The fewest take teambuilding measures, health promotion or sustaining work ability into consideration. Such efforts will have to gain more weight in law firm management in the near future, and I think that competitive law firms slowly realize this.”

Mona Musat, Managing Partner, Musat & Asociatii, believes that the profession seems to be facing a paradigm change, as since the 2008 crisis, both private and public clients have been pushing a cost driven selection of law firms, approach which has shaped the market accordingly.

“We appear to be at a time legal services are treated more and more like a commodity, with mandates being granted to the lowest bidder, irrespective of mandate significance, or the bidder’s resources, or exposure to similar cases. The above is hardly adequate for big projects, which are very resource consuming, costly, and complex, and has led to law firms facing fiercer and fiercer competition between themselves on fees, clients, and lastly talent. Add to this an increase in alternative sources of legal advice, with computer software, and artificial intelligence being more and more used to successfully provide support to clients everywhere, and it all seems to point to a need to adjust business models to such trends.

As with any field swept by aggressive competition, resources and adaptability will be the key for the years to come. We expect law firms will have to explore new ways to add more value to their services, include new technologies in the business workflow, and rethink client origination, and retention, talent recruitment, and generally their working environment.“

There are a number of challenges, says Florian Nitu, Managing Partner of Popovici Nitu Stoica si Asociatii. “First is economic and derives from market fragmentation which is driven by niche firms ready to push their fees below reasonable costs, in a form of dumping that generates spiraling effects. The second main challenge is definitely the commoditization of legal service, a global phenomenon that affects Romania as well, with immediate consequence in fee structuring and profitability of law firms. A third phenomenon that we have to handle consists in what I call superficialization of the legal service or the advent of legal rubber stamping. We are fighting these adverse trends by investing in top notch resources, highly qualified people, who can stand at the forefront of this market and we are confident that quality legal service provided timely by honest and commercially aware lawyers will pre-empt, while remaining profitable.”

Stefan Damian, Deputy Managing Partner at Tuca Zbarcea & Asociatii argues that lawyers’ independence should be seen as an intrinsic part of the rule of law and not as a vulnerability of the latter. Also, well-established precedents and interpretations of the laws should not be suddenly overturned and replaced by exotic ones. In addition, regular consultations with Lawyers’ Associations in relation to various amendments of regulations or procedures concerning and likely to affect or have a greater impact on the profession and the justice-making should be the rule and not the exception.

Judging by recent developments in the market, managers of law firms have to make sure they point the firm in the right direction of development. Even though Romania is still perceived as riskier than other countries, it is still a country you cannot neglect, but finding the right path for growth is vital.

“The number of lawyers in Romania is growing quicker than the market,” says Mihaela Bondoc, partner at Bondoc si Asociatii, adding that ”new technologies also provide more possibilities of efficient assistance and frequent contact with clients. Law firms need to pay now more attention than before to identifying, attracting and keeping the right talent and to monitoring with an open and alert mind the evolutions in social and economic behaviors,” believes Mihaela Bondoc.

Florian Nitu from Popovici Nitu Stoica si Asociatii names three areas of development: Projects, Transactions and Claims. “This is the triad of legal services that is getting again the momentum in Romania, and generally, in Eastern Europe. In terms of Projects, we see new infrastructure and concession works being relaunched, in line with the EU funded schemes being resumed, but also public procurements within areas of significant growth potential. Claims, litigation and arbitration in general, keep lawyers very busy, with work-outs and resolution of assets being fostered by litigation tools. Also investor-state dispute resolution went through a process of maturation with foreign investors being more mindful to such regimes, which translates into complex legal work being now done before and alongside with virtually any investment process.”

Stefan Damian of Tuca Zbarcea & Asociatii names the consolidation of the team and client base as the most important goal on the short and medium term with aim at strengthening the tax and criminal law practices. 

“Our main goal is to keep the engine on, despite all the above mentioned hurdles, and consolidate our business says Prof. Dr. Jörg K. Menzer, Managing Partner, Noerr. “One aspect of consolidation - not only in Romania, but for all our offices in CEE - is to think, work and sustain business regionally. Thinking and acting only locally is not an option for us, as it isn’t for many companies in the European Union. Our strengths will be bundled to sustain this regional approach that will surely consolidate our performance in the following 4-5 years.“

Mona Musat, Managing Partner Musat & Asociatii - “During the twenty five years of existence, we have amassed substantial expertise and resources on all fronts, and this allows us to a high degree of adaptability. Recently, we have been looking into new ways to better respond to market needs and consolidate our market leader position while keeping true to our values: quality, integrity and responsibility. We have also been expanding our teams, and increased client contact, and business community involvement. We are also improving our working environment, and continuously keeping an eye on talents, being them young or senior.“

Madalina Rachieru, Partner, Clifford Chance Badea points out three main pillars of development echoing the shifts and trends in our core markets. 

“Our Banking & Finance team has been quite busy, as businesses are looking to ensure their working capital and much needed investment funds through financing or refinancing agreements. Separately, we see increased interest and an acceleration of Capital Markets-related work, as more and more companies are looking into diversifying financial resources through IPOs or bonds issues, and they are also facing new regulatory changes. Our Corporate M&A team is the legal adviser of choice for strategic investors and major private equity funds looking to strengthen their foothold in Romania by either expanding businesses or consolidate the current ones. 

Our Litigation practice has seen significant growth in recent years to generate now a third of our business, especially due to strategic litigation. We expect this trend to continue, with important work in commercial and competition-related litigation, white collar crime, insolvency and restructuring, as well as international arbitration. Data protection is also gaining in market focus, in view of the need to align to a globalizing legislation. 

For the next year, we expect continued consolidation and cleaning of balance sheets in Banking, increased interest from foreign investors for agribusiness deals, further development of the IT&C industries, a long due kick off in major infrastructure projects, further solid growth in Real Estate with opportunities in both financing and M&A, new M&A deals in the Pharmaceutical and Healthcare industries, and milestone projects in Energy & Resources (including the dual listing of Hidroelectrica, a deal Clifford Chance Badea lawyers assist on).

Bryan Jardine, Managing Partner Wolf Theiss: “Continuing to deliver higher value quality legal work to clients which are more sophisticated consumers of legal services. In particular, we look to leverage our strong regional footprint to work as preferred CEE/SEE regional counsel for multinational clients or large global law firms which do not have a direct presence in our region. As noted above, we have seen increased activity in the areas of corporate compliance, restructuring/insolvency, competition and data protection. We anticipate more activity in large public infrastructure projects, especially once the election cycle is completed in Romania and given the recent adoption of new legislation in the area of public procurement.”

 by Adrian Ion