SJ Berwin announced the opening of its twelth office in Luxembourg at the start of the year, in what was described as an ‘obvious’ choice of jurisdiction for the firm given the strength of its European fund formation practice.
The firm launched its office through the hire of two new partners: former Allen & Overy (A&O) lawyer Alexandrine Armstrong-Cerfontaine and tax specialist Geoffrey Scardoni, from Benelux firm Loyens & Loeff. Armstrong-Cerfontaine said the new office would focus on corporate, finance, private equity, funds and tax, and concentrate on building its relationships across the region.
Michael Halford, London head of the International Funds group at SJ Berwin, added that the country was the obvious destination for the firm because it is an important jurisdiction for funds and investors that are setting up intermediate holding companies.
SJ Berwin’s arrival is the latest in a steady trickle of international firms into Luxembourg in recent years, including Baker & McKenzie, CMS and Stibbe in 2010, Speechly Bircham in 2011 and Ogier at the start of 2012.
Magic Circle firms Linklaters, A&O and Clifford Chance have been in Luxembourg for some time. A stable political and economic environment has made the jurisdiction popular with investment funds, insurers and banks, and the firms have followed.
‘You need lawyers who are bilingual; you can’t just relocate lawyers from London.’
Michael Lingens, Speechly Bircham
Luxembourg is particularly attractive to UK-based firms as it is within the European Union and has an unrivalled set of double tax treaties, with agreements in place with 64 countries and negotiations underway with another 30. It has adopted a corporate structure that is surprisingly straightforward and is recognised in various jurisdictions, often using English law.
Graeme Bruce, a partner at Dundas & Wilson, said that English law is used in documentation such as shareholder agreements, which makes business a lot easier when negotiating with multiple investors.
Dundas & Wilson does not have its own office in the region, but works very closely with local firm Wildgen. Bruce added that expansion is not on the cards for Dundas & Wilson there because of its strong working relationship with Wildgen.
‘It’s interesting that other firms are moving into Luxembourg. Whether we refer work to other firms based there is down to personal relationships and what our clients want,’ said Bruce. ‘I don’t know if UK firms moving into this region will add competition or opportunity.’
Bruce said that the firm’s funds practice has been particularly busy as more clients are setting up private structures there. He added that clients prefer Luxembourg not only because it has tax advantages but also because there are fewer challenges associated with fund formation there.
‘The issue is that most lenders start to get nervous when they see wacky structures being used. Luxembourg is one place where the major lenders tend to be more comfortable,’ said Bruce.
However, rivals warn that Luxembourg is still a difficult jurisdiction to break into, with intense competition between local and international firms, so SJ Berwin may find it tricky to establish a meaningful presence there. Very few quality local lawyers are available for lateral hiring, so building the right team presents the biggest challenge to UK firms striving to provide a quality offering.
Speechly Bircham managing partner Michael Lingens said: ‘There is an international community in Luxembourg now. The business language in the corporate world is English speaking, but everything else – the tax authorities, regulators and the courts – these are all in French. So you need lawyers who are bilingual; you can’t just relocate lawyers from London.
‘The key is to have local lawyers that understand the regulatory regime, can speak French to the local regulator and can obtain the rulings from the tax authorities.’
Speechly Bircham was fortunate; the office opened with two partners and has grown to a team of eight in less than 18 months. The firm is still recruiting and expects to have one partner and four associates join within the next six months.
While a firm can bring in externally trained people to do support work, the team has to consist of Luxembourg lawyers who have the right local contacts. Offshore firm Ogier followed this model when it opened its first onshore office in Luxembourg in April last year. Partner Daniel Richards relocated from Jersey to set up the new office, along with a team of eight associates and the firm hired local managing partner François Pfister from Luxembourg firm OPF Partners to head the office. The firm was planning to launch a fiduciary services arm in the Grand Duchy at press time.
‘We were lucky as we already had a team of lawyers with around five to ten years’ experience at least,’ said Pfister. ‘This is very important in a jurisdiction like Luxembourg, where the market is niche and the number of local lawyers is low. Going forward, we probably will recruit more junior lawyers for transactional work, as the majority of our work falls under this area.’
The increase in interest in Luxembourg products to Russian clients was identified as one of the key drivers behind local Luxembourg firm Arendt & Medernach’s move to open its own representative office in Moscow in 2012, adding to its Hong Kong office that opened in 2009. Local rival Elvinger, Hoss & Prussen also recognised the attraction of Luxembourg to Asian clients, opening its own Hong Kong office in May last year. Many Asian and Middle East clients have opted for Luxembourg as a preferred jurisdiction to base their European operations.