Law: Heading east, for pastures new: As foreign investors move in to countries opened up by the end of the Cold War, opportunities are growing for British legal firms, says Sharon Wallach

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HUNGARY, Czechoslovakia and Poland are in the first division for foreign investors, but Russia is some way behind, according to a survey this summer of the world's leading companies. The research was conducted on behalf of, among others, the City law firm Theodore Goddard.

Some 62 per cent of the 206 companies surveyed were already active in Eastern and Central Europe, and 13 per cent are planning to invest there soon. Those surveyed believed that Hungary, Czechoslovakia and Poland would be in the European Community within 10 years, but for Russia it would take up to 15 years.

The survey's findings support the decision of Theodore Goddard, in association with Dewey Ballantine, a law firm based in the United States, to invest in offices in Budapest, Prague and Warsaw. They are far from alone; from City giants to more modest partnerships, practices are taking advantage of the opportunities in these growing marketplaces.

One such is Baker & McKenzie, the world's largest international law firm with nearly 50 offices in 28 countries. 'Hungary is a mature legal market,' says Nigel Carrington, head of the partnership's corporate finance group that deals with Central and Eastern Europe. 'We opened an office in Budapest at the end of 1987, while Communism was still in place. We had four lawyers there two- and-a-half years ago; now there are 14.'

The worldwide philosophy of Baker & McKenzie, Mr Carrington says, is to staff its offices principally with lawyers trained in the relevant jurisdictions. In parts of Central and Eastern Europe, however, it is not easy to find a wide enough pool of lawyers from whom to recruit. 'We have to put in expatriates to satisfy the expectations of clients from Western Europe,' he says.

In terms of opportunities for foreign lawyers, Hungary has a two-year lead over Poland, but there is a lot to play for in the latter, he says. 'It has a population of 50 million, compared with about 12 million in Hungary, and is therefore potentially a much bigger market.'

Baker & McKenzie opened an office in Warsaw at the beginning of July. Mr Carrington says: 'Political uncertainty is holding some back, but the Poles are determined to bring foreign investment to their country.'

The firm is also on the brink of opening an office in Prague. 'Currently, we do a large amount of work in Czechoslovakia from our London office, and we work closely with two or three correspondent lawyers there. There is a steady stream of privatisation work for large Czech enterprises as well as foreign investors,' he says.

'The market for legal services is expanding very quickly. We are giving an enormous amount of advice to clients from Western Europe on prospects in the privatisation programme; the Czechs have finished putting together the project for the first wave. Here again, things are a bit confused by the political situation, and some clients are biding their time before making a commitment.' At the other end of the scale, Woolf Seddon, an 11-partner practice in the West End of London, has had an office in Prague since April. Anthony Seddon, the principal partner behind the move, says that the firm has been involved in work in Czechoslovakia for more than two years. 'One of our clients in the property business, who happened to have Czech connections, was disenchanted with business prospects here and went to have a look over there. One thing led to another, and the opportunities we saw pointed the way forward,' he says.

One of his firm's clients has become a leading estate agency in Prague, which has generated work for the firm in the property development field. And the privatisation programme is providing work in advising local companies about how to attract foreign investors. The travel company Thomas Cook, which established a branch in Czechoslovakia this year, has appointed the firm to act for it there, and other work has come from the entertainment world, one of Woolf Seddon's areas of expertise.

'There are many areas I hadn't really expected to open up,' Mr Seddon says. 'I thought it would be mainly holding the hands of English companies, but as it turned out, that is a relatively small part of our work.

'I have high hopes because of the level at which we are being consulted in Czechoslovakia; it is not a level we would be consulted at over here. The Czech clients are not fazed by dealing with a small firm. In fact, they are mind-boggled by the size of the City firms, and even more so by the size of their fees.

'We can therefore compete well against the bigger practices. We are geared to look at relatively small businesses, which the City types may not want to touch.'

In spite of Russia's relatively poor showing in the survey, many law firms have connections in that country. Baker & McKenzie has a Moscow office staffed by 30, including 12 lawyers, and Mr Carrington says: 'The only way to operate successfully in Moscow is to have an office there with people monitoring the enormous volume of legislation pouring out weekly. From a commercial point of view, Russia is developing its legal system from scratch, and the law is changing with bewildering speed.'

Clyde & Co, a large City commercial practice, set up a joint venture in St Petersburg with a local law professor earlier this year. 'Our aim is eventually to set up a fully fledged, Western-style Russian legal practice,' says David Salt, chairman of the firm's Russian committee. The work in St Petersburg covers a broad range of commercial transactions, including joint ventures, oil and gas-related work, speculative projects and property development.

'It's very much the Wild East in legal terms over there. Academics and even law students advise on legal issues. Law offices tend to be one man and his dog, without legal back-up. Our own people are quite Western and commercially orientated,' Mr Salt says.

'Everything is still extremely confused. We don't know whether we are dealing with the right regulatory bodies; they're not sure themselves. There is a lot of jockeying for position, a lot of corruption, as in any country that is fragmenting.'

None the less, the lawyers working in the newest markets are enthusiastic about the prospects, and most would agree with Mr Carrington when he says: 'Central and Eastern Europe has been a very good market for us, and we are making good profits out of it.'