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The smell of fresh paint fills the air, and there’s hardly a scratch on the newly laid wood floor. In the waiting area, the blue leather chairs feel stiff and unworn. Welcome to Shaw Pittman’s new office. It’s an unusually warm and sunny day in the heart of London’s financial district, and Shaw Pittman technology group attorneys Chris Holder and Andrew Dunlop are in a good mood. The two recent British recruits have plenty of reason to be in high spirits — their practice, which focuses on counseling major corporations on technology outsourcing agreements, is going, in the words of the firm’s managing partner Paul Mickey Jr., “like gangbusters.” They’re not the only ones doing well. An upturn in European mergers and acquisitions activity, the increasing importance of the European Commission’s merger approval power, and the emergence of e-commerce and Internet businesses in Europe can all be credited for the boom in European deal, regulatory, and legislative work at many U.S.-based firms. Aside from Shaw Pittman, a handful of other Washington, D.C., firms are enjoying greater visibility and respect within the European legal community, as well as significant growth in practice size and deal work. Arnold & Porter; Covington & Burling; Wilmer, Cutler & Pickering; and Hogan & Hartson are all investing heavily in new office space abroad or lateral hires from top-notch European firms. Meanwhile, Akin, Gump, Strauss, Hauer & Feld and Crowell & Moring are on the hunt for European-based merger partners, while Steptoe & Johnson recently set up a one-man shop in Brussels. More are expected to follow — Howrey Simon Arnold & White managing partner Robert Ruyak says his firm hopes to open a European outpost soon. As little as three years ago, D.C. firms were scaling back their European operations. Many had jumped into the market in the early ’90s when the European Union promised to create a new system of centralized legislation and regulatory control. U.S. firms quickly realized they had overestimated the amount of work to be tapped in Europe and underestimated how hard it would be to overcome the cultural hurdles. “We tried to be aggressive in local markets, and for a whole lot of reasons, it was very difficult for us,” says Akin, Gump chairman R. Bruce McLean about his firm’s initial experience in Brussels. But with the introduction of the euro in January 1999 and the harmonization and liberalization of European merger laws, the M&A market abroad has taken off. The consolidation has been most dramatic in the telecommunications and energy industries, where privatization has triggered a wave of mergers. It’s no wonder that the European offices of Akin, Gump and Hogan & Hartson, both of which have strong telecom and energy practice groups, are reporting tremendous growth in those areas. For example, Hogan partner Raymond Batla Jr. and 14 other firm lawyers recently worked on telecom client MediaOne International’s $2 billion sale of its interests in Polish wireless and Hungarian wireless to Deutsche Telekom. Meanwhile, as the increasingly global marketplace forces businesses to expand abroad, U.S. law firms in Europe are positioned to do international deals. Wilmer, Cutler managing partner William Perlstein says his firm’s London-based corporate transactions practice is doing increasing amounts of cross-border work representing U.S. clients in Europe and European clients in the United States. “In the last three years, the practice has exploded,” Perlstein says. Most analysts are predicting that the upsurge in European deals will continue. According to Richard Peterson, an analyst with Thompson Financial Securities Data in Newark, N.J., European M&A activity topped $327 billion in the first quarter of 2000, and is predicted to climb to as much as $1.4 trillion this year. That’s an increase of about 25 percent over last year’s $1.06 trillion, and a 235 percent increase over 1998′s $595 billion. In the United States, deal volume is expected to total anywhere from $1.6 trillion to $2 trillion this year, compared with $1.7 trillion and $1.6 trillion in 1999 and 1998, respectively. “Growth rates in Europe are higher than in the U.S., which have flattened a bit,” says Peterson. AMERICANS GET ANTITRUST WORK Of course, an upturn in deal flow doesn’t mean anything to D.C. firms unless they get a sizeable chunk of the action. While D.C. firms aren’t snagging the high-end corporate work, they are landing jobs as antitrust — or, as it is known in Europe, competition — counsel in other deals with significant European components. Wilmer, Cutler’s Brussels office, for example, is representing AOL Inc. at the European Commission in its $140 billion-plus acquisition of Time Warner Inc., and Arnold & Porter’s London office is handling the European filing of Computer Associates International Inc.’s $4 billion acquisition of Sterling Software Inc. Covington partner Stuart Stock says that the shift of merger approval from agencies within the 15 member states to the European Commission has opened the door for U.S.-based firms that have experience in dealing with federal systems. “We found very quickly that, even though there are a lot of very good European lawyers, that [our lawyers] were able to adapt themselves very quickly,” says Stock. “Many American companies found that American lawyers were able to deal with European regulators better than their European counterparts.” Indeed, one of the biggest powerhouses among competition attorneys in Europe is Wilmer, Cutler’s James Venit, a U.S.-born, Brussels-based specialist who landed a number of last year’s megamergers, including the AOL deal and AlliedSignal Corp.’s acquisition of Honeywell International Inc. HOME COURT ADVANTAGE Still, being European has its advantages. While most U.S.-trained lawyers in Europe can appear before the Commission and advise clients with limited restrictions, almost all are prohibited from appearing in the courts of the member states. More important, Europeans often have an edge over Americans in using personal connections with in-house counsel to generate legal work. As Akin, Gump’s Brussels managing partner Jacques Langlois says, “Europeans tend to interact with Europeans in a different way.” Then again, asks Wilmer, Cutler’s Venit, dressed impeccably in a gray suit and blue shirt with white French cuffs, “When you’ve been here for 20 years and your children don’t speak English, are you still an American?” Hilary Prescott, a British attorney who joined Covington & Burling’s London office in 1993, is responsible for building the firm’s corporate practice. She recently landed the European end of Qualcomm’s acquisition of a research and development unit of Tellit Communications. “We worked the whole night through [on the deal] until 1:30 p.m.,” recalls the time-pressed Prescott, on a midmorning break to refuel on a cup of coffee and a butter cookie. “U.S. [attorneys are] more proactive and pushier in trying to get the deal done, and are more commercially aware,” she says before heading back to Covington’s offices, located in the former headquarters of MI-5, Britain’s domestic counterintelligence agency. Akin, Gump, like almost all D.C.-based firms in Europe, is boosting efforts to recruit European lawyers, who, for the first time, are making the jump to U.S. firms. Where U.S. firms were once perceived as sweatshops with uncertain futures, these days their higher pay and international deal work are enticing many lawyers from Europe’s top firms to make the switch. Christopher Sweeney, a headhunter for New York- and London-based ZSA Legal Recruitment, says 90 percent of the U.K.-trained lawyers being recruited are at the senior level. Partners in U.K. firms make the equivalent of $550,000 to $710,000 on average; London-based partners in U.S. firms take home $710,000 to $870,000. “The reputable U.S. firms are better placed to develop a high-end, dual-law capability than their U.K. counterparts primarily because they are more profitable and better able to attract top-tier talent,” says Sweeney, adding, “It seems to be a pattern that’s unstoppable.” Take, for example, Kees Jan Kuilwijk, who recently left U.K.-based Herbert Smith in Brussels to become Steptoe & Johnson’s man in the European capital. “My colleagues thought I was crazy. They said American lawyers are crazy, they just work all the time,” says Jan Kuilwijk. Although Jan Kuilwijk is indeed putting in longer hours, he says being able to work on high-tech issues such as the EU’s e-commerce taxation proposals with attorneys who have had considerable experience in the burgeoning industry makes the extra effort worthwhile. Since U.S.-based companies pioneered most of the e-commerce and Internet-related innovations driving the global economy, European businesses and governments continue to take their cues from the United States. As a result, says, David Harfst, a partner in Covington’s 12-lawyer Brussels office, “the U.S. has faced some issues a bit earlier, and the debate has unfolded a bit earlier, which has given American lawyers an advantage.” But AOL Europe’s General Counsel Clare Gilbert doesn’t buy that argument. “Our real need is for local lawyers who have a real understanding of the local legal systems and regulators,” says Gilbert. “In Europe, we’ve had a few years of experience with e-commerce.” IT, IP TAKE OFF Nevertheless, most D.C. firms are pinning their new European strategies on the reputation of U.S. lawyers as high-tech experts. Even though D.C.-area firms have only recently started building their technology law practices, they are still leagues ahead of most European firms. The fastest-growing groups in most of the D.C.-based firms’ European offices are centered on grabbing high-tech-related work. Shaw Pittman’s London office is made up exclusively of information technology and intellectual property lawyers. Since September 1999, when Shaw Pittman first opened its doors in London, the office has grown to 12 lawyers, with another two on the way. It is already generating a good buzz from top general counsel in the area, including AOL’s Gilbert. “They’re doing very well, I think,” she says. Arnold & Porter is adding lawyers to its IT/IP practice, and Covington has created a niche for itself busting software piracy rings on behalf of the Business Software Alliance and longtime client Microsoft Corp. Brian Diner, one of two partners in Finnegan, Henderson, Farabow, Garrett & Dunner’s Brussels office, says his European clients come to him for advice on obtaining U.S. patents. “If someone has a question on U.S. patent law at 9 a.m., they don’t have to wait until 3 p.m. to get an answer,” says Diner, lounging in his corner office in one of the European capital’s only skyscrapers, the Blue Tower. Besides being able to give “the morning advice” to such firm clients as the Franco-German drug group Aventis SA and the French cosmetics maker Loreal SA, Diner believes that being able to meet with clients face-to-face gives him an advantage over other IP attorneys based in the United States. Of course, not all D.C.-based firms with significant international practices — Arent Fox Kintner Plotkin & Kahn and Patton Boggs, to name two — think it’s necessary or profitable to operate offices in the European Union member countries. “The cost of maintaining an office in either [Brussels or London] is very high, and we do not see at this time the need for an additional U.S. law firm in either city,” says Robert Huey, head of the international department at Arent Fox, which does have an outpost in Bucharest. Even without an office within Western Europe, Huey says his 35-lawyer group was busier than ever last year, landing a number of international communications and energy projects, and recently added seven international trade lawyers. Still, Hogan & Hartson managing partner Robert Glen Odle, in the middle of a quick tour of his firm’s European offices, thinks now is a great time to be a U.S. firm invested in Europe. “I’ve been roaming around over here, and I’m struck by the development of e-commerce,” he says. “The last thing to do is to miss out on the emergence of this field in Europe.”

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