France’s economy performed well in 2017 compared to previous years, with GDP exceeding expectations by reaching 1.6 per cent. This was a significant increase from the 1.1 per cent growth of 2016 and has been driven largely by private investment. Although France is still below the eurozone average of 2.5 per cent, its GDP growth is expected to continue and is predicted to reach 1.7 per cent in 2018. Lawyers reported a significant uptick in transactions, which is expected to contribute to this growth, and predict a busy year for practitioners in France.
Interviewees reported “a slow start” to 2017 in the run-up to the country’s general elections. However, following Emmanuel Macron’s election as president in May, “the market has really picked up” and there has been a significant uptick in merger and acquisition transactions. As one source told us, “This is a very positive trend and we already see some very interesting transactions in the pipeline for 2018. It is sure to be a very strong year for transactional work.” Part of this is attributed to President Macron being “very business-focused and someone who understands the commercial market very well”. This has renewed French clients’ confidence, given them “a great deal of optimism for the coming years” and contributed to the uptick in transactional activity.
Elsewhere, fortunes have varied in financial-oriented practice areas A source told us “The finance market is suffering, but we have a lot of activity on the general banking side.” Meanwhile, capital markets lawyers have been “very active with restructurings” and described hybrid capital transactions as “a hot topic” for upcoming years. Similarly, in the private funds space, “France is back on track after a few nightmare years” and has seen large players, including tech funds, return to the market.
Francophone Africa continues to be a fruitful source of work, with sources telling us that “business on the [African] continent is growing and growing”. In response, “practically every major law firm in Paris has introduced an Africa desk, and there are a lot of strong competitors”. In particular, PPP projects, although not especially common in France, are an area of high activity across Africa and Asia. Energy projects in Africa are a very active area, ranging from solar and electricity plants to mining and deep-sea gas discovery. The rise in activity in the region has also meant that it is “a key region for growth” in international arbitration, with practitioners highlighting an increased use of African seats compared to 10 years ago, when most tribunals sat in Europe.
According to sources, compliance is currently “the hot topic for clients” across a broad range of practice areas. On 9 December 2016 “Sapin II” No. 2016-1691 was enacted, with the aim of enhancing transparency and combating corruption in the French economy. The act introduces a duty for corporations to prevent corruption and makes compliance programmes mandatory for French companies and industrial and commercial establishments with over 500 employees and an annual turnover of €100 million. It also imposes penalties for failure to comply. These increased safeguarding requirementshave led to “a significant number of clients seeking to strengthen their compliance structure” over the past 12 months. Business crime defence lawyers have witnessed strong activity in the area, most notably in the construction space but also across an array of other industries.
Compliance has also been an area of notable importance in the private client space. “Given the global context of the Panama Papers, there is an increased drive to gather information on taxpayers to determine the control of tax structures”, said one lawyer in the area, who added that, “As the authorities are being more heavy-handed, clients are spending more time ensuring compliance.” Similarly, in the corporate tax arena, the use of digital accounting has given rise to an elevated number of compliance issues in the face of “a bombardment of EU and domestic litigation”. GDPR enters into force on 25 May 2018, and data protection lawyers are active in assisting companies to prepare and ensure adherence to the new regime.
Increased media pressure on healthcare product manufacturers and authorities has resulted in authorities adopting “an extremely strict stance” with manufacturers to avoid potential liability. Lawyers stated that “this has significantly altered how clients interact with authorities” and resulted in a great deal of compliance and regulatory advice. Environmental and social governance (ESG) is a “huge trend” in the market, and companies are placing emphasis on ensuring products and services are procured from jurisdictions which meet high environmental standards. This has resulted in high volumes of due diligence work for environmental lawyers.
The volume of compliance work in competition law “has been particularly high in 2017”, continuing an existing trend in this aspect of competition lawyers’ practice. There has been a significant uptick in private enforcement actions, with “victims extremely keen to initiate such claims”. EU Directive 2014/104/EU has facilitated this and set down rules governing national law actions for damages. As one market source said, “This is really something which French companies have integrated into their strategy. They are not hesitating to bring such claims.”
The French legal market is “very dynamic and is characterised by the coexistence of international firms and very strong independent French firms”, according to sources. This remains true across the full range of practice areas, where domestic and international firms compete fiercely among themselves and each other. Practitioners have observed an uptick in US and UK firms entering the market with one noting, “This is in line with client needs – as business becomes increasingly international, working with firms with a global reach can be advantageous.” Domestic firms remain very strong, however, and “the most high-profile transactions often go to independent firms”. One competition lawyer noted, “French firms have historically been, and continue to be, at the top of the market” for antitrust and merger control work.
The legal market is growing and “it has been an incredibly busy year all round”, according to interviewees. In the arbitration space, sources observed the “fracturing of larger practices” across continental Europe, as practitioners move towards smaller firms with fewer conflict issues. Competition lawyers also reported numerous lateral moves, with some practice groups being almost totally overhauled. At the same time, a generational change, where “new faces are appearing, and older practitioners are stepping aside” has led to “a very open market with lots of opportunities”.
The life sciences market accommodated multiple new entrants over the past year, and small and large firms alike have placed emphasis on developing their practices in the area. According to respondents, “Size doesn’t impact the quality of services” so competition between players of various sizes is fierce, yet collegial. For IP matters, the market is home to many “highly competitive and successful” boutique firms, while in environmental law, small and medium-sized law firms perform well. In this market, “clients seek highly specialised advice from lawyers who are also involved in developing and making the law.” Economists and tax advisers observed that the entry of the Big Four accounting firms has “caused a big shift in the market”. Competition for capital markets work is fierce as France is home to “numerous quality firms and very talented lawyers”. One restructuring lawyer stressed the importance of “the human factor” and gaining work based on recommendations and visibility, particularly considering strict advertising constraints in France.
In keeping with the global trend, clients in France are increasingly cost-sensitive, “with every year seeing a reduction in the amount of fees they are willing to pay”. The ability to compete in terms of fees “is certainly linked to the agility of firms”, said one lawyer, who added that independent firms are often more competitive in terms of fee arrangements.
As the French markets shifts, “law firms have to adapt to the changes”. As one lawyer put it, “We need to be as reactive and proactive as our clients are.” In this competitive legal market, it is essential for law firms to remain versatile in order to meet client demands and keep up with ongoing regulatory and market developments. However, it is clear from the economic and regulatory landscape that lawyers will continue to have much work to do in the coming year.