Research Trends and Conclusions: Trade & Customs 2012

With the benefit of over 15 years of research and tens of thousands of votes from clients and private practitioners, Who’s Who Legal takes a closer look at developing trends in the trade and customs marketplace worldwide.

The flow of trade and customs work is defined by a range of factors, and the sector has been characterised as “35 per cent law and 65 per cent politics and economics”. In general terms, trade work is said to be counter-cyclical with legal work increasing as economic activity declines, and, unlike for some other traditionally counter-cyclical practice areas such as insolvency, this has proved to be the case once again in recent years. Factors such as changing regulation, increasing enforcement and the rise of protectionism have all combined to keep the leading lawyers busy.

The sector’s leading lawyers inhabit a particularly active marketplace at the moment. At the time of writing in October 2012 there had already been three times as many WTO cases filed as there were in all of 2011, and it is clear that countries are now more focused on taking action rather than seeking to resolve their disputes through bilateral negotiations. Protectionism is once again the word on everybody’s lips as the global economy slows, and the WTO and European Union have both issued recent reports charting a worrying upward trend, despite calls to their members to resist such temptations. Russia and Argentina have been singled out for their actions in this regard, and China continues to be the subject of scrutiny. Already the world’s largest exporter, it is predicted to become the largest importer by 2014, and work relating to the country formed a staple part of the diet for a large proportion of the lawyers listed in this edition.

Against the backdrop of the forthcoming presidential elections, the US and China are squaring up at the WTO with increasing frequency; the first half of this year saw the start of 40 trade remedy investigations into Chinese export, up by 38 per cent year-on-year. As a result law firms with recognised WTO practices are extremely busy, and the WTO director-general, Pascal Lamy, was quoted in the Financial Times as saying “If you want to make sure China abides by the rules, the place is the WTO. There’s no other place.”

Trade-related activity covers a huge range of industries, but some stand out. Solar panels are the subject of much scrutiny, both at the WTO and the European Commission, which launched an investigation into suspected dumping of solar panels by Chinese producers in September 2012. Anti-dumping and trade remedy work in general is keeping lawyers extremely busy, with the quality of cases filed, as well as the products they relate to, on the up. Related areas such as Foreign Corrupt Practices Act and IP related ‘337’ conflicts are also increasingly a focus for clients and their counsel, requiring a wider range of skills and experience from the firms called upon to meet this demand.

Leading practitioners also cited a much higher awareness of – and demand for advice on – sanctions from their clients. Enforcement is becoming increasingly zealous across the board, as exemplified by the US$340 million settlement agreed by Standard Chartered bank with New York State Department of Financial Services, which had accused it of hiding US$250 billion of transactions with Iran. Demand for expert external counsel in this field has “blown up in the last two years”, with lawyers in a range of countries asked to help clients in relation to deals that potentially contravene domestic and EU security council sanctions against countries such as Iran, Syria and Libya.

In the US, lawyers spoke of the end of the exclusive focus on security following the 9/11 terrorist attacks and a widening of enforcement efforts to include multiple agencies, which in turn throw up a broader range of issues for clients. With economic and political motivations lining up behind the increase in sanctions, law firms expect to see even greater levels of work in this sector in the near future.

The activity in the trade and customs sector is having an effect on the legal marketplace that serves it. It was suggested to researchers that in recent years there has been a movement away from very large trade practices in law firms based in the US and Europe, which has been balanced with an increase in local expertise elsewhere. This is borne out by our findings: this edition includes experts from 41 countries, an increase of 10 from the 2010 edition.

In many places around the world large law firms are still trying to find the correct post-recession business model, and most are being more conservative with their money. Recent years have seen a reduction in trade teams in some of the world’s leading firms, and it has become much less of an emphasis for many. However, having a practice in this sector has a range of advantages for larger firms, particularly international ones. Having such a geographical range is becoming increasingly necessary for firms looking to offer a leading practice in this area, with a presence in Brussels, Washington DC and Beijing particularly coveted and with Russia, Brazil, Korea and – eventually – India also cited as beneficial. The more local expertise a firm can provide, the greater the opportunities for new client work will be, as countries around the world awaken to the possibilities of trade remedies and are increasingly inclined to use them.

The growing prominence of sanctions, which can affect global clients in a wide range of ways, as well as the ever increasing number of trade agreements that now apply, mean that “full-service” law firms are rapidly reaching the point where a trade and customs capability is necessary in order to justify the description and meet their clients’ expectations.

Furthermore, there are only a few practice groups able to offer firms a ‘foot in the door’ with potential clients, and having an international trade practice is one such attractive option. In addition, such a capability ensures the coverage of existing clients in an area where they are increasingly concerned; having to refer work to rival firms for your major international clients isn’t desirable for big firms.

On the boutique side, while there were reports of an increase in demand for strategic counselling work from an ever broadening range of countries, and we received reports of price pressures and conflict issues driving large clients to call upon more niche outside counsel than they had previously retained. The cost advantage is particularly persuasive, especially for more basic trade remedy work, but there remains enough demand for sophisticated advice in higher end WTO and compliance issues to keep the leading lawyers in all types of firm busy.

There were reports of a polarisation in the legal market, with work moving to the outstanding boutique and full-service firms at either end of the spectrum and away from mid-size players in the middle. While accounting and auditing firms are also becoming more involved, in the main the demand is focused both on firms that can offer global breadth and boots on the ground, and on those with smaller overheads and specific in depth expertise in certain areas, and we have charted a certain amount of lateral movement between the two.

Taken as a whole, Europe remains the largest economy in the world and there continues to be a focus on its nerve-centre in Brussels with several lateral moves taking place. Laurent Ruessman switched to Crowell & Moring in early 2011, and other firms such as Jones Day and Holman Fenwick & Willan have made also prominent moves in recent years. Other firms are also expected to launch into the Belgian market in the trade and competition space in the near future.

An increasing number of the leading firms are being called upon for their lobbying expertise where the political and legal spheres intersect, and there was anecdotal evidence of an increase in the traditional practice of hiring government agency personnel – on both sides of the Atlantic and beyond - by law firms looking to increase their capacity in this sector.

In the face of the high levels of work relating to China, Western law firms are looking to secure instructions from local clients. It is a very competitive market, with many pursuing work that is often moved between providers, regularly difficult and relatively low paying. Smaller local cases tend to be handled by domestic firms, but in larger cases Chinese clients are increasingly happy to take on international firms, subject to a rigorous checking process. The relationship is often said to be demanding, the clients hard negotiators, and the work legally complex but once it is successfully completed and a reputation achieved the work flow can be strong.

In recent years there has been an increased tendency towards compliance from formerly protectionist countries in the trade arena and this has seen a drop-off in some types of work. However, the ongoing global financial crisis means that it remains possible that a disposition towards defensive measures could return. Shorter term the balance is predicted to tip towards trade remedy work, if only due to the size of some of the cases recently brought, but there is also a move in more general terms towards the acquisition of trade and customs expertise for both international firms looking to meet client demand, and smaller firms looking to further develop their practices. The political and economic factors that drive this practice area are showing no sign of relaxing their grip just yet; in fact there may be greater upheaval still to come.

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Nominees have been selected based upon comprehensive, independent survey work with both general counsel and private practice lawyers worldwide. Only specialists who have met independent international research criteria are listed.

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