As the debt crisis in Europe grinds on, transactional legal work remains paralysed by uncertainty. But market volatility is creating opportunities for Australian lawyers as they mobilise their global networks and help businesses escape the squeeze on capital. Stephanie Quine reports

As we approach the final furlong of 2011, financial trouble in Europe appears far from over. Despite the efforts of political leaders to resolve the eurozone debt crisis, market anxiety continues and law firms wait to see how the gloom will pan out.

Clifford Chance Sydney finance partner Scott Bache says his team has felt the “paralysis of the market” over the last four to six weeks, but there has still been an increase in work compared to the firm’s previous financial year (which begins from 1 May).

“We have found a significant uptick in work right through to summer, particularly in continental Europe, which is quite surprising if you read the press,” says Bache.

This can be partly attributed to cashed-up European companies looking to deploy their assets in other parts of the world.

Given the underperformance in sections of the European economy and changes to the regulatory landscape for banks, Bache says he is beginning to see signs across a range of industries in Europe of businesses looking to “potentially divest assets and bring that money back to shore up their own balance sheets”.

Baker & McKenzie, which opened an office in Luxembourg last year and an office in Istanbul this month, is experiencing a freeze on large corporate deals already in the pipeline. The national managing partner of Bakers’ Australian offices, Chris Freeland, explains that while 39 per cent of the firm’s global revenue intake came from Europe (inclusive of the Middle East and the firm’s only African office in Cairo), the growth has not been what it has been in Asia.

“We’re hoping that by Christmas there will be some more clarity around the economic situation globally, because [the market in Europe] has definitely been getting tougher in recent times,” he says. German domination

For Europe’s biggest economy, the turmoil has produced multiple side effects. With a falling currency and low interest rates, German businesses are paying lower risk premiums and benefiting from the European Central Bank’s (ECB) historically low benchmark interest rate.

“Germany is very busy across a whole heap of areas, especially in M&A and financial-related products,” says Clifford Chance partner Danny Simmons. Clifford Chance has 62 partners in Frankfurt alone who act for many industrial companies. Simmons says that Germany has a long history of investing in resources and in manufacturing in Australia.

Spanish energy

With Italy and Spain’s combined government debt resting at $3.5 trillion dollars, according to Global Economist Ken Courtis, Spain’s economy is performing dramatically worse than Germany’s.

Despite high levels of activity in the European renewable energy market – an area where Spanish companies are quite sophisticated (second only to Germany in terms of installed capacity of renewable energy in the world) – Bakers associate Megan Flynn says “there is little opportunity for [Spanish companies in this industry] to grow in Spain”.

Flynn recently returned from a five-month secondment in Barcelona where she advised clients, across a range of sectors, on doing business in Australia.

“I advised on distribution arrangements – because they are quite unique in Australia compared to the European market – taxation queries and general corporate and government compliance issues,” says Flynn.

Australia falls “very, very far behind” Spain’s level of renewables capacity, explains Flynn, so there are “currently and likely to be more Spanish renewable project developers in Australia” in the near future, which is handy, given the recent passing of Australia’s carbon tax.

However, Spain is relatively unsophisticated in terms of carbon trading and other climate change law, explains Flynn.

“Part of my secondment involved giving lots of presentations on the basics of emissions trading ... to try to educate our existing and potential new clients on ways for them to engage in that market,” she says.

“Because in Australia, that area of law is more advanced, or we are perhaps more aware of it,” she says. Clifford Chance Sydney corporate partner Richard

Graham, who also works in the renewables space, has observed “quite a deal of activity” in the firm’s European and London offices in terms of work sourced from the engineering and procurement side for assets such as wind farms, as well as the refinancing of those assets.

Global connections

Flynn says she utilised the resources of Bakers’ Sydney office in order to answer particular queries for her Spanish clients in the same way lawyers in other global firms, such as Clifford Chance, are mobilising their networks to leverage legal work off the back of European instability.

“We were the firm that advised on the set-up of the European stability fund,” explains Bache, adding that there is much work being done around the fund and its structure at the moment.

Clifford Chance is also involved with work surrounding the international derivatives broker MF Global, which filed we landed for various clients post-Lehmans,” says Bache.

“On our firm intranet site there is now an MF Global page and people are plugging into that page for regular updates as to what’s happening with each of the MF global businesses in their relevant jurisdictions … There are very few firms who are equipped to be able to handle this scale of work globally,” says Bache.

Cautious hires

After a positive start for recruitment in early 2011, the mood is now more cautious, according to legal recruiters.

Largely due to ongoing economic uncertainty in Europe, Taylor Root’s International associate director Karlie Connellan says most of the roles in Europe now are in private practice and “require very specific experience and language skills”.

Michelle Mills, a director in the London office of Marsden Group, says that in terms of specific experience, finance lawyers with skills in project finance, leveraged finance, derivatives, asset finance and structured finance “have all been in demand in recent months”.

Whilst Taylor Root recruits for in-house roles in the UK and Europe, Connellan says these roles can be sourced in the local market and are typically not open to foreign lawyers.

“Many lawyers are now considering multiple locations [in Europe] in the quest to move abroad,” says Conellan.