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October 24, 2008 10:48 AM

Divorce, Italian Style

Posted by Ed Shanahan

By Alex Novarese, LegalWeek

Forget France's much-touted cultural exceptionalism. In Europe, the country that truly ignores the established rules of international legal practice is Italy. The roll call of firms that have seen major splits or walk-outs in Italy includes Clifford Chance, Allen & Overy, Freshfields Bruckhaus Deringer, Linklaters, McDermott Will & Emery, and Simmons & Simmons. Evidently, the Italian profession's blend of self-conscious individualism, rainmaker-friendly pay, and nepotistic capitalism is still more than a match for the brute strength of the average global law firm. Put another way, many Italians still recoil from the idea of practicing within the restrictive confines of corporatized international giants.

But even by Italian standards, this week's events, which have seen two major international law firms pull back from the national market, are noteworthy. The more dramatic of two incidents saw White & Case pull the plug on its 15-lawyer Italian practice, based in Milan. On one level this seems understandable. The New York-law firm has struggled locally since entering the market in 2001 with its merger with Varrenti & Associati. It had been a difficult union from the start and a decision to close its Rome practice in 2005 to focus on Milan didn't deliver. A Turin launch in 2004 with the takeover of Morano & Associati only made things worse, with the practice breaking away the following year.

Yet there still remains something faintly shocking about witnessing a poster boy for global law pull out of one of Europe's largest economies. White & Case, which apparently had been considering a last-ditch attempt to revive the practice, argues that it was no longer worth the investment it would have taken to get the practice to deliver. And despite an ongoing review of the firm by McKinsey, which is expected to result in some trimming of White & Case's sprawling network, it appears the decision to withdraw from Italy was taken largely on local grounds.

In contrast, the announcement this week that Skadden, Arps, Slate, Meagher & Flom and Chiomenti are to downgrade their exclusive alliance to an informal referral relationship is less of a departure. The seven-year old alliance was always regarded as a makeshift solution that allowed Skadden to get coverage in a major market without budging too far from its conservative growth strategy. For its part, Chiomenti gained some insurance at a time when it looked like foreign firms could sweep the market, which would have left full independence a risky bet. But take the fear factor away, and most Italian firms would rather play the field than be tied to one partner.

The knee-jerk reaction to these latest developments is to conclude that the prospect of international firms retrenching in the face of a Eurozone recession is great news for Italian independents, but that is not yet a given. Internal strife in the last two years at local leaders like Gianni, Origoni, Grippo & Partners and Bonelli Erede Pappalardo suggests that the individualism of Italian lawyers can prove almost as much of a burden to ambitious national practices as it has to foreign firms.

It could be that those foreign players that stay the course will be in an excellent position to benefit as the Italian economy eventually modernizes. Personally, I like the pedigree of the Italian teams at Cleary Gottlieb Steen & Hamilton and Latham & Watkins. I hear the latter firm has some guy called Novarese.

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