Why aren't foreign law firms rushing to Israel?

Joey Shabot  photo: Eyal Yitzhar

Three years after they were allowed to do so, few foreign law firms have opened offices in Israel, but among those that have is Greenberg Traurig.

Three years have passed since Israeli legislation first allowed law firms that specialize in the law of a foreign country to open in Israel. Three years later, one can hardly say that the large international law firms have swamped the Israeli market, but nevertheless some notable names have opened modest representative offices here. Which foreign firms operate in Israel, how have they set up their Israel representation, and how does Israel look from their perspective?

Israel is small, its economy is small, and the opening of a representative office in Israel is not exactly top of the list of priorities of the leaders of most major law firms in the world. Nevertheless, some do show a certain interest in Israel, and can also tell us how the business world here appears to an outside observer.

Representative offices of up to seven attorneys

Twelve international law firms have representative offices in Israel, according to data collected by Nishlis Legal Marketing. Between them, they offer legal services in the law of four countries: six offices advise on US law, four on English law, one on French law and one, Yingke, on Chinese law.

Two firms in Israel that specialize in foreign law are full-size operations: Asserson, which specializes in English law; and S. Wimpfheimer, Aronoff & Co., (SWA), which has branches in Jerusalem and Ramat Gan (and also a smaller office in New York), and specializes in US law. Both these firms employ new immigrants, licensed to practice law in England and the United States and, according to Nishlis, both have about 10 active attorneys.

Among the large international firms, the largest is Greenberg Traurig. It is a huge firm that employs about 1,800 attorneys in 37 offices worldwide. The Israeli office is located in Azrieli Towers and has seven attorneys.

Giant firm DLA Piper has a two-attorney representative office in Israel. So too do Fox Rothschild, Mintz Levin, and Zeichner Ellman & Krause. “In most offices where there is representation by one attorney, that representative actually engages in business development and in identifying Israeli clients who have legal needs overseas, so that in practice real legal advice is not given in Israel,” explains Adv. Idan Nishlis, CEO of Nishlis Legal Marketing.

As well as offices that have a physical presence in Israel, many firms around the world maintain an Israel desk in their offices abroad. Nishlis has collected data on 74 such offices.

“Israel is business-friendly”

Adv. Joey Shabot is a partner at Greenberg Traurig, the international firm that maintains the most significant office in Israel.

Among its clients are various Israeli and international companies, from the Delek Group to Intercontinental Exchange Group, which owns the New York Stock Exchange, to a large global retail chain that will shortly start operations in Israel.

Shabot thinks that Israel appears friendly to foreign businesspeople, more so than many seem to think. But there is room for improvement, he says, especially when it comes to working with regulators in Israel, and particularly on meeting schedules.

In recent years, Shabot has represented a number of international entities and large investors in their transactions in Israel, ranging from mergers and acquisitions to large investment transactions and various commercial contracts. He says the transactions in which he was involved demonstrate the confidence of his clients in Israeli thinking, Israeli manpower, and the stability of the Israeli economy.

There is widespread talk among Israel’s senior attorneys of a negative atmosphere for business, about regulatory chaos and a fear of investors leaving. They say that Israel is no longer business-friendly. Does this sound familiar to you?

"Overall I feel that my clients have great faith in Israel. I can’t say that I encounter in them any talk of an anti-business atmosphere in Israel. If anything, I can mention a few points that indicate the opposite. Take, for example, how the state has behaved towards Intel in the last few years over expansion of its activity here. Intel, by the way, is not a client of ours for its Israeli operations. The mere fact that the state conducts negotiations with Intel on taxation shows that the government is pro-business, that its starting point is that the country needs Intel, and therefore needs to maintain a dialog with the company on the terms under which it will operate in Israel. This is a business-friendly attitude, without going into the question of whether or not they did enough to secure Intel’s maximum possible activity in Israel. “Another example is Citibank, which set up a development center in Israel. The state created a series of concessions for research and development in Fintech, and the result is that the only place in the world that Citibank maintains a development center outside of the United States is Israel - so talk of a lack of friendliness to business may be a little exaggerated. Something that I do encounter, and about which I have also heard my clients complain, is the uncertainty that prevails when the client has to come into contact with regulators, and the unpredictable behavior of officials.”

Do you have examples?

“I won’t go into specific examples, but my clients have needs from the Tax Authority, such as pre-ruling procedures, they need to communicate with the Chief Scientist and the Antitrust Authority. I’m talking more about a cultural matter, about the conduct of officials who sometimes display indifference to business entities that are compelled to use their services. The biggest problem is the uncertainty over timetables in working with the authorities in Israel.”

“It’s not like India or China”

Shabot has recently been advising an international retailing giant due to start operations in Israel. Shabot recounts that preparing such a client for doing business in Israel sometimes actually involves explaining to the client that he is operating in a business environment that is similar to what he is used to. “We have a presentation we give to new clients about business in Israel. The first thing we make clear is that doing business in Israel is quite similar to doing business in any other Western country, so that there is no need to think in terms of a totally different business culture, such as is required of anyone wanting to do business in India or China,” Shabot says.

Many people talk about an expected rise in investment in high-tech, alongside an expected decline in "real” investment. Do you share the feeling that much of the investment in Israel is in intellectual property, in assets of the type that can be packed up and taken abroad?

“I don't share this sentiment. For example, about a year ago, I was involved in representing a buyer of an Israeli company that employs hundreds of workers in Israel, a company that was acquired for hundreds of millions of dollars. True, the company’s biggest asset is technological not physical, but the company retains a whole staff of programmers and service providers in Israel. The investor, who is a well-known businessman at the international level, and as such is very experienced, knew this when he acquired the company, and it did not deter him - on the contrary. To the best of my knowledge, he intends to keep his Israeli workforce.”

Surprisingly low pay

Adv. Shabot thinks that one of the surprising things in the Israeli legal profession is the prevailing salary level for attorneys in the big firms.

“Salaries are very low in comparison to the standard I know,” he says. “I’m used to a way of thinking that for legal work of the best kind, one should pay salaries that provide a real incentive to attorneys. From what I hear and read, Israeli attorneys’ income levels are pretty average. This may explain the relatively large number of good boutique firms there are here, because people are not content with the salaries paid to them.”

According to Adv. Shabot, most of the Israeli attorneys with whom he has had a chance to work are of an impressive professional standard, even when measured against the giant American firms. “In particular I was pleasantly surprised to see that many boutique firms have excellent attorneys.”

“The Israeli economy demonstrated financial stability during the global financial crisis”

One of the international firms operating in Israel is DLA Piper. This firm claims the title of the “the world’s largest” in terms of the number of its attorneys, with more than 4,200 attorneys in 79 offices spread across 31 countries. The firm maintains a small representative office in Israel. Since 2009, a senior partner who works in Israel, Adv. Jeremy Lustman, has represented the firm and, more recently, the office has taken on a second attorney. DLA Piper is located in Azrieli Towers in Tel Aviv.

Lustman, who began operations of the office precisely at the height of the global financial crisis, tells of the positive surprise the Israeli economy provided. “At a time when the United States and most countries in the world experienced the peak of the financial crisis, the Israeli economy demonstrated financial stability, and its status in the global economy was upgraded with its inclusion into the OECD. Also, local businesses began to expand abroad and the flow of foreign investments grew. It was an excellent point at which to arrive in Israel,” he says.

As the firm’s representative in Israel, Lustman’s role does not end with ordinary legal representation of clients, but includes leveraging the office’s connections for the good of its Israeli clients. “I believe our real value lies in the fact that we are able ‘to join up the dots’ and use the fabric of our global relationships to promote our clients through pro-active initiatives, rather than simply reacting to business and legal moves,” Lustman says.

Published by Globes [online], Israel business news - www.globes-online.com - on July 9, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Joey Shabot  photo: Eyal Yitzhar
Joey Shabot photo: Eyal Yitzhar
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