Ireland – Céad míle fáilte

Shanghai’s location at the estuary of the Yangtze River attracts rainfall for a third of the year. Lawyers from the region will feel at home in Ireland then, a country not renowned for its weather. Earlier this year, law firm A&L Goodbody officially launched its pioneering Chinese Lawyer Exchange Programme, signing agreements with 15 Chinese law firms and universities, such as Beijing’s King & Wood Mallesons and Shanghai’s East China University of Political Science and Law. The programme will provide six-month placements at the firm’s Dublin office as well as in-house experience with clients such as Pfizer, Bank of Ireland and Telefónica O2. Such is the initiative that Irish Prime Minister Enda Kenny applauded the firm for its ‘enterprise’ and ‘courage’.

The purpose of the project is to promote inbound and outbound investment between the two countries. Foreign direct investment (FDI) into Ireland has long been a bright spot for the Irish economy, with headline multinationals such as Microsoft and Google choosing Ireland to base their European operations during the 1990s. More recently, however, there has been a surge in momentum.

Brian O’Gorman, managing partner of Arthur Cox, explains: ‘During the boom years, Ireland became less competitive internationally. FDI seemed to become less important. But since the downturn we have gone back to basics and have realised what made us competitive in the first place. So there has been a re-focusing on the need to attract more FDI.’

‘Ireland’s economic problems at home have actually been somewhat helpful from a FDI perspective,’ adds Justin McGettigan, head of tax at Eversheds, Dublin. ‘The Irish cost base has been steadily reducing, for example, labour and rent costs, and these are factors that many overseas companies have identified as being key to coming here.’

McGettigan points to the latest figures as evidence of Ireland’s impressive performance in attracting FDI. Data published by the US Department of Commerce in June showed US investment into Ireland reached record levels in 2011, standing at $188bn, a rise of $30bn on the previous year. Total FDI from all countries increased by 30%, creating 13,000 new jobs in 2011 and 5,000 more in the first half of 2012, according to Ireland’s Industrial Development Authority (IDA).

There is an overwhelming sense that all corners of Ireland Inc – business leaders, politicians, educators, and professional advisers – are pulling together to heave Ireland out of its domestic fiscal abyss. Deficit stood at 9.3% above GDP in 2011 and a second EU/International Monetary Fund (IMF) bailout remains a distinct possibility. FDI has been identified as essential to Ireland’s recovery, and few are better placed to facilitate inward investment than Ireland’s legal elite.

John Cronin, chairman of McCann FitzGerald, says: ‘As a country we’re really working hard at trying to attract new business to this location, and McCann FitzGerald and one or two other firms are a resource for the government and other bodies who require the technical backing and knowhow to facilitate business, to assist those who want to go from the general to the specific. I’d like to think that we are part of the weaponry that Ireland has to deploy.’

‘Financial services industries are part of the broader mosaic of international interest in Ireland as a friendly jurisdiction to do business.’ – Garry Ferguson, Walkers

Matheson Ormsby Prentice (MOP) has one of the most established and dedicated FDI practices in the market, a legacy of managing partner Liam Quirke’s area of expertise before assuming leadership of the firm almost a decade ago. Such is the firm’s commitment, it commissioned the Economist Intelligence Unit (EIU) to undertake a report of global investors’ (both current and potential) attitudes towards Ireland.

‘My own personal belief is that the Irish government and policy makers had become complacent and unfocused in relation to Ireland’s FDI offering over the course of the Celtic Tiger years, so we are pleased to see the renewed focus on it, especially by the Irish Prime Minister,’ says Quirke. ‘Such complacency and lack of direction are the principal reasons why we commissioned the EIU report. If Ireland is serious about competing for mobile FDI, it is critical that there is informed debate concerning the needs of mobile foreign investors and how Ireland can meet these needs better than our competitors. Our EIU study is the first of several we have committed to undertaking over the next number of years. Quite simply, our objective is to ensure FDI stays at the top of the policy-making agenda.’

Notably, 52% of survey respondents identified professional advisers as their main source of information on potential new markets, illustrating the lead part to be played by Ireland’s law firms. Andrew Quinn, head of tax at international firm Maples and Calder, notes: ‘The law firms in Ireland that are in the space of servicing FDI, such as us and others, play a really important role and the IDA recognises this. We are out on the road the whole time, selling Ireland, so we are very proactive. Lawyers are central to the growth of FDI to Ireland.’
The role extends far beyond providing technical legal advice. ‘A lot of it is a hand-holding and supportive role,’ explains David Carthy, partner within William Fry’s long-established FDI group. ‘Companies that are looking to set up here are looking for the reassurance that you have done this before and recognise the pitfalls, that you can introduce them to the right people and that it can all be done quickly. So it’s a very broad role.’

Networking is key, demonstrating the importance of international relationships. Corporate partner Andreas McConnell at Philip Lee, a member of international network Multilaw, says: ‘We have been instrumental in the establishment of a new Multilaw initiative focused on attracting FDI from India. All of this work has enabled us to identify companies seeking to enter or strengthen their position in the European market and to provide them with the information that they need when deciding where to locate. The IDA and related bodies have had a significant success attracting big-ticket companies like Google, PayPal, Eli Lilly, Amgen, etc. There is also a huge amount of activity, with smaller companies operating in similar sectors deciding to locate close to the larger marquee names.’

One example is US online game developer Red 5 Studios, a client of William Fry, which in May announced plans to establish its European headquarters in Cork, a hub for ICT, biopharmaceuticals and medical technology companies.

Computing, software, medical devices, cleantech, pharmaceuticals, financial services and agri-food are Ireland’s key sectors, while Facebook, Twitter, LinkedIn, Pfizer, Stryker, Allianz and Ericsson are just some of the household names to have made Ireland their European home. Financial services may not be an FDI industry in the strictest sense, but it certainly brings international companies into the country and creates jobs. ‘The funds and financial services industries are part of the broader mosaic of international interest in Ireland as a friendly jurisdiction to do business from a regulatory and tax point of view,’ explains Garry Ferguson, finance partner at Walkers Global.

Unique selling point

So why Ireland? The EIU report identifies Ireland’s four main competitive advantages as: access to EU markets; a competitive corporate tax infrastructure (not just the headline rate of 12.5% but extensive double tax treaties and additional sector-specific incentives, such as research and development credits); a talented and well-educated workforce, both indigenous and foreign; and a stable regulatory framework. It states: ‘The survey suggests that investors see Ireland’s unique selling proposition as not a single factor, but the powerful combination of these benefits.’

McCann’s Cronin adds: ‘There is tremendous goodwill towards Ireland internationally. It has been attracting investment since the 1960s and Irish state agencies have majored in how to attract foreign businesses. And an English-speaking, highly-educated workforce also helps.’

Cronin also highlights the international perception that Ireland is standing up well to adverse conditions – the country has so far met all its commitments under the Troika (EU/IMF/European Central Bank) agreements – and the fact that Ireland has sharpened its competitiveness in terms of cost base.

Emer Gilvarry, managing partner at Mason Hayes & Curran, is able to shed light on the meaning of ‘talented workforce’, a term regularly bandied about but rarely qualified. ‘Third-level education is on the increase here, and there is very good conversation between education and business as to the needs of business,’ she says. ‘We don’t just educate people for Irish jobs, but for the global economy, and we are ramping up on technology and engineering graduates to supply the ever-increasing technology sector in Ireland.’

Access to EU markets is the overriding motivation in coming to Ireland, according to EIU respondents (46%), with Ireland perceived as an important gateway to Europe. ‘We’re seeing continued levels of enquiries from US companies looking to expand their international presence,’ confirms Cian McCourt, head of A&L Goodbody’s New York office. ‘They still look upon Europe as a wealthy and highly-populated market, despite its troubles, and an important market for their goods and services.’ The firm acted for Jazz Pharmaceuticals on its entry into the Irish market last autumn, via a reverse takeover of Dublin-based Azur Pharma.

Ireland is ranked highly among various surveys for ease of doing business. ‘One of the first fact-finding missions for potential new entrants to Ireland is to sit down with the Central Bank to discuss potential new projects,’ explains Anthony Smyth, tax partner at Walkers Global. ‘We receive consistent feedback from our clients about the willingness of senior figures at the bank to do this, which is greatly appreciated by clients.’

Maples and Calder’s head of corporate Edward Miller neatly sums up the Irish offering: ‘Beyond [the tax rates], there is an ecosystem here in Ireland with 30 years’ experience in catering for the needs of overseas corporates. Ireland has a network of professional service providers, like us, who have been providing services to international corporates for a long time, so we are tried and tested.’

Among potential stumbling blocks for FDI growth are the instability of the eurozone and Ireland’s size: its population is less than 4.5 million. Another issue is the country’s unbalanced income tax system. The average worker in Ireland pays a tax rate that is among the lowest in the OECD, while top earners pay among the highest. Companies moving to Ireland could struggle in employing senior executives to run their new ventures. ‘In my world, talent is the surest route to competitive advantage,’ claims Quirke at MOP. ‘Ireland ought to be waging a war for talent not waging a war on talent, especially the foreign talent that is mission critical to Ireland’s offering as the most user-friendly gateway jurisdiction to the EU internal market. Our talent should be as important to us as Lionel Messi is to Barcelona.’

‘A small company with 10-15 employees is already thinking about how to get its corporate structure more efficient.’ – Cian McCourt, A&L Goodbody

Efforts are being made to address the issue, with the introduction of the Special Assignee Relief Programme (SARP) giving exemption to 30% of income between E75,000 and €500,000 for employees assigned to work in Ireland.

Emmet Scully, head of the business department at LK Shields, identifies further, albeit lesser, obstacles to FDI growth: ‘In certain areas there are some challenges, such as finding the required number of people to employ in some sectors, for example, software development and roles requiring foreign languages. So there will be a pinch point on FDI in those areas. And there are other issues, such as large office space in Dublin for big companies, a market that is under pressure and heading towards a supply problem. The IDA is working with the National Asset Management Agency (NAMA) to see what can be done in this respect.’ Facebook, PayPal, Google and LinkedIn all recently signed new lease agreements for offices in Dublin.

Room for all

The Irish legal market is infamously competitive, and the race for FDI business is a marathon, not a sprint. William Fry’s Carthy explains: ‘Nowadays everyone claims to be doing FDI work, but what matters is how much focus you give it and how long you have been doing it. We have being doing this for 20 years and there are only one or two other firms who have made the same long-term commitment. There is often a long lead time to FDI projects, it can be as much as a couple of years, so law firms have to demonstrate a lot of patience and commitment to the client.’ The firm has advised UPMC, Biomarin Pharmaceutical and Unum Group on their entry into Ireland and all are now flourishing.

However, FDI-related work is by no means exclusive to Ireland’s Big Six law firms (A&L Goodbody, Arthur Cox, McCann FitzGerald, Mason Hayes & Curran, MOP and William Fry). Factors including a shift in focus of the IDA towards smaller investing companies, and a trend for foreign companies to consider international strategy far earlier in their lifecycle, mean there is valuable work for the country’s leading second tier firms. Eugene F. Collins (EFC) is one such firm. Corporate and banking partner John Olden explains that the IDA, having gained a strong foothold in the US and Canada attracting major companies in obvious sectors such as ICT and pharma, is now focusing on two growth areas: emerging markets and emerging companies. Mumbai, Bangalore and Shanghai are just some of the locations the IDA has opened offices in recent months. ‘Yes, the big firms have a permanent presence in America and they do see the greatest foothold but the nature of FDI projects has changed, so they don’t have the field to themselves, not by any means,’ says Olden.

EFC is also one of the few firms in the market with an established corporate immigration practice, led by David Cantrell. He notes: ‘There is a recognised brain drain in areas such as the sciences, maths, and technology, with a shortage of skilled talent for the likes of Microsoft and Google that are here. We are trying to fight that battle, and can offer incoming companies a complete immigration package. There are not many firms here that can do that’.

The trend for international expansion among fledgling companies also spreads work more evenly across the Irish market. ‘What has become apparent over the last few years is that corporates are looking to put into place their international structures at a far earlier stage than a decade ago,’ says Maples and Calder’s Miller. ‘For example, US technology companies may do this before IPO, or even just after Series A or B venture funding. So overall, the value of potential projects is increasing and this means that we have to be alive to where those opportunities lie.’

A&L Goodbody’s McCourt, who sees these companies on the ground in the firm’s New York office, illustrates the point: ‘A small company here with 10-15 employees is already thinking about how to get its corporate structure more efficient.’

The most obvious initiative of law firms to cultivate international business is to establish foreign offices. London, New York and California are the primary locations for Irish branch operations, the most recent openings being A&L Goodbody’s launch in Palo Alto at the end of last year, joining MOP and William Fry there, and a new offering in the Cayman Islands in April for leading investment funds firm, Dillon Eustace.

‘All law firms recognise the opportunities available from FDI,’ notes Gilvarry at Mason Hayes & Curran. ‘We have advised 35% of the new investors into Ireland so far this year, so it is an important source of work. We are a very outward-looking country, maybe because we are an island and a small country, so we simply cannot be insular, hence our offices in London and New York.’

Eversheds’ network of 45 offices worldwide clearly steals a march in terms of international coverage. Dublin managing partner Alan Murphy says: ‘I think the mantra of the majority of leading Irish firms is that they are the firm of choice for companies doing business in or through Ireland. But it’s for the client to look beneath that, and see what service you can give and the resources you have. Eversheds’ international coverage gives the firm a very strong basis for that claim and a strong foundation from which to build that offering.’

Philip Lee, which has a leading EU and competition law practice, is the only firm in Ireland with an office in Brussels, while Ireland’s top investment funds firms, including Dillon Eustace, Maples and Calder and relative newcomer Walkers Global, have a foothold in the world’s major fund locations.

‘Walkers is a microcosm of those parts of the Irish economy, and FDI in a broader sense, that are working well,’ says Ferguson. ‘We entered the market in 2010 and our growth areas reflect what is working in the Irish economy, for example, the funds industry, aircraft finance, the tech and pharma sectors. All those activities have come from outside of Ireland. Our firm’s growth from zero to almost 30 lawyers in two years is almost exclusively down to international interest in Ireland.’

Cultivating friendships

All the Big Six indigenous firms deny there is pressure to open offices in Europe, even if Ireland continues to grow in its status as gateway to the continent. A reluctance to bite the hand that feeds is the main reason cited. ‘Most of our work in Europe comes in through our relationships with major UK firms or leading independent firms in each EU jurisdiction so it does not make sense for us to put partners on the ground in those countries,’ explains O’Gorman at Arthur Cox. ‘We don’t believe there is merit in having offices in those jurisdictions, except London and New York, which are so important that we need to be there.’

FDI marketing can be a challenge for those firms without overseas offices, who instead rely on referral and reputation. ‘The work we are doing for existing clients is a good marketing tool for the firm,’ says David Phelan, managing partner of Hayes Solicitors. ‘We are focused on making sure the offering we have for potential investors is focused on what they really need to know – the market and the legal framework.’

Robert Ryan, managing partner at Doherty Ryan & Associates, adds: ‘We have longstanding involvement with the commercial section of the US Embassy in Dublin as well as key relationships with well known US, UK and Asian commercial law firms,which gives us access to international companies seeking to invest or establish in Ireland. This in turn gives us the opportunity to compete with the largest firms on legal services cost and service delivery.’

‘As the saying goes,’ notes LK Shields’ managing partner Hugh Garvey, ‘no one ever got fired for hiring IBM, so it is inevitable that occasionally some large companies look to the larger firms when entering the market. But, as we frequently find, if they are not getting the service, or are made to feel like just a number, then they will start looking for alternative lawyers.’

Beauchamps Solicitors, top ten in Ireland based on size but without international offices of its own, has increased its FDI offering by acquiring the Irish branch of Landwell Solicitors, the international network of law firms affiliated to PwC. The move adds three corporate partners and five additional solicitors to the 70-strong firm. Beauchamps’ managing partner John White reveals the strategy behind the acquisition was based largely on the growing interest of international companies in Ireland. ‘We felt we had to tool-up to respond to that need, which is why we had the strategic tie-up with Landwell. The three partners have worldwide links through both Landwell and PwC,’ he says.

Other law firm initiatives to aid the FDI cause and build the international client base include accompanying the government and enterprise bodies on a series of trade and investment missions abroad. In March, 90 Irish companies accompanied government representatives, including the Prime Minister (Taoiseach), on a trade mission to China, during which €35m-worth of contracts and commitments were signed, including agreements with the leasing arm of the world’s largest bank, ICBC, which already has €1.5bn in airline assets operating from Dublin.

‘We’re not masters of our own destiny so it is important there is more direction and leadership shown in Europe.’ – John White, Beauchamps Solicitors

McCann FitzGerald was among the law firms to attend. ‘It was very notable how welcoming government and business were towards the Taoiseach personally and towards Ireland generally,’ says Cronin. ‘From China’s perspective, Ireland doesn’t threaten anybody.’

In another display of unprecedented marketing enterprise, McCanns boldly emblazoned its Dublin riverside offices during the summer with a promotional campaign in support of the Euroscience Open Forum, Europe’s largest general science meeting, that took place directly opposite the firm. Cronin says the firm believes that science, technology and innovation will be key drivers in Ireland’s future economic recovery.

However, old-fashioned personal networking remains the number one strategy for attracting international new business. Irish lawyers talk consistently about being ‘out on the road’. In the US, ‘there are really good things going on’, according to Goodbody’s McCourt. He says: ‘A large number of service providers are out here, lawyers, accountants, and banks, for example, who are out and about banging on doors. It really is a tripling of forces for Ireland Inc, and the more people out here banging the drum, the better it is
for Ireland.’

While much effort is being made to cultivate links with a number of emerging capital exporting countries, such as China, India and the Middle East, the US remains the overwhelming source of FDI into Ireland. There are 515 US companies in Ireland, compared to 96 from Germany and 91 from the UK, the next largest investors, according to the IDA.

Gilvarry suggests that corporate America’s faith in the Irish economy was probably an influencing factor when Fairfax Financial Holdings and others invested €1.1bn in Bank of Ireland last year. ‘We have some of the world’s largest companies making the deepest form of investment, FDI,’ she says. ‘So it follows that those who invest in bonds and banks are likely to conclude that this is a country worth the investment.’

Not surprisingly, the US is a core area of focus for law firm managers and the primary focus for some firms. O’Gorman at Arthur Cox explains: ‘We’ve always had a strong network in the EU and other jurisdictions and clearly we will continue to focus on those jurisdictions. But our primary focus in the past two years has been the US. That is where the action is and the greatest source of legal work globally is coming from the US.’

It’s a sentiment shared by MOP, which considers the US to be ‘where it’s at in terms of Ireland’s gateway offering’, according to Quirke. He adds: ‘I don’t see our emphasis on the US as a risk for two reasons. First, I do not believe there is any Irish law firm more attuned to Ireland’s gateway offering than MOP, it’s why we exist. Second, I have tremendous faith in the ability of American companies to compete.’

Inward investment must grow, whatever the country of source. Ireland is ripe for opportunity as it emerges from the crisis years, a green and fertile land awash with professional talent. ‘The key thing is, we’re not masters of our own destiny so it is very important there is more direction and leadership shown in Europe,’ concludes Beauchamps’ White. ‘When that happens, we are very well placed in Ireland to turn things around quickly, because of the amount of expertise that is here.’

What the Chinese lawyers at A&L Goodbody will make of their new home along Dublin’s River Liffey, only time will tell. But in this Year of the Dragon, many hope for a re-emergence of the Celtic Tiger, albeit a more restrained one. LB

kate.durcan@legalease.co.uk