Slovakia, it appears, is an unusually competitive CEE market for law firms – but one in which clients appear to be particularly satisfied with the quality of service they receive.
Keeping Work In-House
It appears that more work than ever is being kept in-house in Slovakia.
The 2015 CEE Corporate Counsel Handbook shows that while General Counsel and Heads of Legal (collectively Chief Legal Officers, or CLOs) across the region reported an increase in the amount of work they kept in-house, Slovakian CLOs reported the highest increase, with 71 percent of Slovakian survey participants reporting an increase from the previous year. Unsurprisingly, then, Slovakian CLOs reported spending an average of only seven percent of their time supervising the work of external counsel – almost half the regional average of 12 percent.
CEE Legal Matters reached out to several Slovak CLOs to reach behind the numbers. Stefan Orosi, Head of Legal and Compliance at Prima Banka Slovensko, reported a representative strategy, saying that “most of the legal work is done internally,” and adding, “we outsource preparation of transaction documentation in high volume loans and litigation in delicate legal cases.” Indeed, litigation is the most common work outsourced by CLOs. Marek Simoncic, General Counsel at Atos Slovakia, explained that Atos outsources, “in general, complicated bigger cases (where the damage exposure exceeds EUR 100,000) and labor law disputes.” Lucia Tandlich, Head of Legal at Markiza, also said: “we usually outsource litigation matters and occasionally issues which require specific knowledge of the subject matter and which are time-consuming, or more complex projects.”
In terms of corporate/transactional work, the annual summary of deals reported by CEE law firms contained in the CEE Legal Matters Special Year-End Issue showed that Corporate/Commercial/M&A work represented 32.6 percent of the client matters firms reported – and Slovakia was right on par, with 31.4 percent of the work reported in the country being Corporate/M&A related.
The Importance of Relationships in a Saturated Legal Market
Competition among firms in the country is fierce. Slovakia, with a population only one-seventh that of next-door Poland, has a comparable number of ranked firms in the major listings: 24 in Corporate/M&A in Chambers & Partners compared to Poland’s 31, and 34 in Legal 500 against 37 (or 48 if “other recommended firms” are included) for Poland.
And the General Counsel we spoke with seem to feel the market is, indeed, full. Simoncic said: “In my opinion the Slovak market is more or less saturated,” and Orosi said, “in my personal opinion, the Slovak market in legal services is very saturated. I do not see any room for new competitors.” Although Tandlich agreed with this suggestion and said that she understands that “the fight for a client becomes even harder [in] these times,” she also added that, “on the other hand, there is always place for new players, local or international; its just [a] question whether they are able to convince potential clients about quality of their services and submit a reasonable offer.”
But the difficulty in securing new work may relate to more than an over-crowded market. Perhaps as the result of a considerably smaller marketplace to begin with, GCs in Slovakia seem to focus more on previous exposure with their external counsel than counterparts across the region. The 2014 CEE Corporate Counsel Handbook showed that “Trust/Track record of working with an individual lawyer” was ranked higher in Slovakia than in most CEE countries as an important criterion in picking external counsel. While the average across CEE was 2.47 (respondents were asked to rank several criteria from 1 to 5 with 1 being the most important to them), the Slovakian average for it 1.9.
This unusual focus on the value of an existing relationship was stressed, in one form or another, by all three of the General Counsel we spoke with. When asked the main source of information he uses in selecting law firms, Simoncic – who was in private practice himself before joining Atos – referred to his “personal contacts and experience from the past.” Tandlich mentioned the same criteria first in her answer: “Previous experience, if available (quality and [effectiveness] of provided service); reputation in the market; price and references in specific area that is subject to outsourcing.”
Evidence that Slovakian law firms depend on previous experience as a source of business even more than those in other markets is found in another set of data from the 2014 Handbook as well. Specifically, when asked about the “primary sources of information as to the quality of external counsel you have not yet worked with,” GCs in Slovakia, on average, ranked referrals and recommendations from their network at 1.49 – higher in importance than the CEE average ranking of 1.81, and the highest ranking in the region.
A final set of data may provide Slovak law firms a metaphorical pat on the back. Happily, the 2014 Handbook reported that CLOs in Slovakia are more satisfied by the quality of service they receive from external counsel than the CEE average.
The 2014 CEE Corporate Counsel Handbook, supported by Edwards Wildman, CMS, Freshfields, Tuca Zbarcea & Asociatii, and Stratula Mocanu & Asociatii, included the responses of 69 CLOs responsible for Slovakia.
The 2015 CEE Corporate Counsel Handbook, supported by DLA Piper, Gide Loyrette Nouel, and Wolf Theiss, included the responses of 72 CLOs responsible for Slovakia.
This Article was originally published in Issue 3.1. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.