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The Brussels legal market has felt the full force of the European M&A boom. For the first time, in the third quarter of 2000, Europe overtook the U.S. in deals, as measured by dollar value. At the same time, as if to mark the tenth anniversary of the introduction of European merger regulations, the European Commission has been flexing its muscles like never before. That has meant a lot of work for lawyers in the Continent’s regulatory capital, and increased competition as firms jockey for dominance in the field. In its first nine years, the commission had turned down only ten proposed deals. But since September 1999 it has vetoed three — Airtours’s $1.5 billion bid for First Choice, Volvo’s $6.9 billion attempted takeover of Scania, and WorldCom’s $115 billion offer for Sprint Communications Company. The commission has also forced concessions in a number of high-profile deals. Vivendi had to dispose of its $6 billion stake in British Sky Broadcasting Group before winning approval of the company’s $29 billion merger with The Seagram Company and Canal Plus in October. The union of America Online and Time Warner was only okayed after Time Warner abandoned plans for a joint venture with EMI Group, and AOL and Time Warner promised to cut ties with Germany’s Bertelsmann last year. And the acquisition of Bestfoods by Unilever for $21 billion was not let through until Unilever agreed to a raft of divestitures in Europe. Like the clients they represent, the legal market itself is trying to consolidate. A number of long-established Brussels firms have been swallowed up by the international firms, including 17-lawyer Forrester Norrall & Sutton, which joined White & Case in 1998; 65-lawyer Coppens van Ommeslaghe & Faures, which joined Coudert Brothers in 2000; and 202-lawyer De Bandt, van Hecke, Lagae & Loesch, which is due to merge with the U.K.’s Linklaters. Others have folded or lost key partners to the big firms. Traditionally, the legal market has been split into two segments, says Nick Bromfield, a partner in the Brussels office of the U.K.’s Lovells. In the “captive market,” the antitrust departments within international firms, such as Clifford Chance, Linklaters, and Lovells, receive work because partners in their corporate departments are advising on the transactions. The “competitive market,” on the other hand, is a free-for-all with U.S., other European firms, and Brussels boutiques, vying to win the antitrust portion of deals that are handled by firms without European Union expertise. And as deals become more complex, protracted, and scrutinized, fewer firms are able to muster the numbers needed to do the work, says Nicholas Levy, a partner in the 59-lawyer Brussels office of Cleary, Gottlieb, Steen & Hamilton. “Ten years ago, probably any of the leading 30 firms in Brussels could have a shot at handling these cases,” he says. But now a Brussels antitrust practice focuses less on consulting and lobbying, the strength of many small local Brussels firms, and more on economic analysis, which the larger firms are well equipped to provide. And as competition work has matured, it has moved from the periphery of the international firms’ practices to become big business in its own right. But there is still room for independent firms. One boutique survivor is 22-lawyer Stanbrook and Hooper, which opened in Brussels in 1978. Senior partner Clive Stanbrook admits that the ability of large firms to combine commercial and regulatory advice in great numbers is a threat. As a result, his firm, which had been content to remain small and profitable, has nearly doubled in size over the last year and is looking to add more. Still, he believes the firm can maintain its independence. “At the moment the market perceives the regulatory side as being different from the commercial side, requiring different elements,” he says. “And I think they will continue to think that.” The influx of U.K. firms has also boosted referrals for independents in Brussels. U.S. firms are often reluctant to refer European Union work to U.K. firms that increasingly are their competitors, or that might merge with a rival U.S. firm, says Andrzej Kmiecik, a partner at Brussels’s 45-lawyer Van Bael & Bellis. “Five years ago [referrals were] not a major part of our work, but now [they are] a substantial part, especially from the U.S. law firms,” he says. While the European Commission is seeking greater powers to use against cartels, it is handing day-to-day scrutiny of anticompetitive behavior back to the national governments and creating a cross-border regulatory network. Levy of Cleary, Gottlieb sees a business opportunity there for law firms that can provide advice on national law in different jurisdictions as well as E.C. law. Thus, the international firms could pick up work from firms without networks of European offices. If the pace continues, it may not be long before the European Commission, which has been keen to encourage competition and avoid market dominance, might want to take a look at what’s happening to the law firms on its own doorstep.

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