Unrestricted free trade

Sweden may recently have rejected the Euro but its neighbour Norway, going one better, has somehow managed to resist the charms of the European Union (EU) altogether. Not that Norway is insular, economically speaking. Its trade with the EU accounts for a far higher proportion of its overall trade than is the case with the UK, or even Germany. But Norway has often been slow to open up its industries to overseas competition – the restrictions on foreign ownership of its law firms being just one example.

Norway-watchers will, therefore, have noted with interest last year's announcement that a government-appointed committee had recommended that foreign law firms be permitted, in principle, to buy into Norwegian firms. Norway's Department of Justice is currently considering whether and how to implement the recommendations and no one is yet certain how it will proceed given the equivocal nature of key aspects of the committee's report.

The committee was split on the extent of foreign ownership that should be permitted, with three out of the eight members suggesting this be limited to just 50%. The committee also proposed that any foreign ownership should be conditional on the relevant foreign firm being organised in a 'comparative' way to the Norwegian firm in which it was taking an interest. It is not yet clear how this would work in practice.

Most Norwegian lawyers, especially those from the larger commercial firms, seem to view the proposals as inevitable. "The legal business in Norway needs to be liberalised just as other industries have been, but this issue is of most interest to the largest firms and they have been the ones pressing for it," says one. Helge Aarset, chairman of the Norwegian Bar Association, accepts that "cross-border co-operation between law firms is a reality today and this must be reflected in the new legislation".

Others are more enthusiastic. Peter Simonsen, of Simonsen Foyen, sees the move as "a good development for our legal community and a good opportunity for Norwegian lawyers. Increased competition will make everyone sharpen up", he adds.

But few are expecting a stampede of incoming foreign law firms once the proposals are implemented. The feeling seems to be that there could be some pan-Scandinavian consolidation of the market in legal services coming – perhaps leading to more European consolidation – but that international law firms are more likely to head for Stockholm than Oslo in the foreseeable future.

Nevertheless, UK firms, particularly those with oil and shipping interests, will be watching developments closely. DLA is one firm with Norwegian interests and an association with pan-Scandinavian firm Lindh Stabell Horten (LSH), which has two offices in Norway. LSH Norway partner Espen Moe, has "no objections in principle" to liberalisation of the ownership rules. "All the bigger firms are looking closely at this," he says.

Eastern promise

Just as foreign firms have failed so far to make their mark on Norway, Norwegian firms have rarely made waves on the international stage in the past few years. The news that Wikborg Rein & Co had recruited its first English-qualified partner in former Watson Farley & Williams Singapore managing partner Stephen Fordham, therefore, caused more raised eyebrows than usual on the Asian legal scene.

The move came in an expansionary year for Norway's most – some would say only – international law firm. Wikborg Rein has doubled the size of its Singapore operation in the past 12 months and now has six lawyers in the office, three practising Norwegian and three English law. Other key recruits were star finance partner Finn Bjornstad, who moved from the firm's Oslo office last December to head up Singapore and former Watdon Farley associate Chuen Yee.

Wikborg Rein is Norway's pre-eminent shipping law firm. According to Bjornstad, as the Norwegian shipping industry has steadily contracted domestically, the work that more and more shipping companies – and, by extension, their law firms – are doing is based outside Norway. This helps to explain the importance to Wikborg Rein of its offices in London and Singapore. Shipping law is the main focus of its Singapore office, along with banking, while the other Asian offices are mainly concerned with advising Norwegian banks and companies on local investments. "With English law capability we can do more for our existing clients, especially in shipping and offshore work," Bjornstad explains. "The plan is to expand this capability not just here but also in our other offices, for the benefit of existing clients. We are not trying to compete with English firms."

As many UK firms have found to their cost, opening up overseas is a big step. But Wikborg Rein has maintained overseas offices for many years – it opened in Japan, in Kobe, for example, some 40 years ago, an experience that gave the firm the confidence to open further Asian offices in Shanghai and Singapore, while other Norwegian firms have not got beyond London.

Rivals see sense in the firm's latest move: "It looks sensible. They have the right clients in Norway to do this – it fits with their very specific practice and their other Asian offices," says one Norwegian lawyer.

Making rain

The proposed $4.8bn merger of Norway's two biggest banks, Den norske Bank and Gjensidige NOR ASA, has unsurprisingly been the source of a wealth of work for the country's two undisputed corporate heavyweight law firms.

Den norske has been advised by a team from Bugge Arentz-Hansen & Rasmussen (BA-HR) – "the most reputable firm in Norway", according to one rival – led by highly-rated corporate partner Knut Brundtland. A Thommessen Krefting Greve Lund team, led by Hans Cappelen Arnesen, has advised its smaller rival, Gjensidige.

Den norske is a long-standing banking client of BA-HR but has traditionally provided fewer instructions on the corporate side. The instruction represented something of a role reversal: last year Thommessen Krefting advised Den norske on its aborted merger with life insurer Storibrand, with BA-HR acting on the other side. But as Arnesen points out, Thommessen Krefting has advised Gjensidige for many years, including acting on the bank's demutualisation and listing last year.

The deal is currently awaiting clearance – expected later this year – from the Norwegian competition authority and the Ministry of Finance. Apart from the outstanding clearance issues, the merger has involved some major challenges, according to Brundtland. For one, there were political sensitivities. Den norske is currently controlled by a state-owned investment fund – set up in the early 1990s when the bank was in financial trouble – and the Norwegian Parliament recently resolved that it should remain at least one-third owned by this fund. Under the initial agreement, the fund was to end up with less than one-third of the shares in the merged entity.

Unable to negotiate directly with Parliament – and it was not in the gift of the (minority) government to waive this requirement – the parties ended up restructuring the deal. The fund was given the right to subscribe for new shares in the combined entity, on market terms, via a rights issue. Then, the merger agreement had to be revised at a late stage to reflect improved terms for Gjensidige's shareholders, after it became clear they were not otherwise going to approve the deal.

Brundtland is bullish about the corporate legal scene generally: "I do not think Nordic financial sector integration has come to an end with this deal and I expect we will soon see some pan-Scandinavian restructuring." He also points to the recent relaxation of the ownership rules for financial institutions that, among other things, allows larger investments to be made without triggering full take-over requirements. "This should loosen the market up even further," he adds.

A divestment of interests

This summer it was announced that the Norwegian branch of PricewaterhouseCooper's (PwC) legal arm was to shed its managing partner, Peter Simonsen, and a team of around 30 company lawyers, after taking a decision to focus on tax. Simonsen has since taken his team, including seven other partners, to Simonsen Foyen, leaving PwC with 12 partners and a total of 65 lawyers.

The news did not come as much of a surprise to rivals, who seem satisfied with PwC's assurances that the move came out of an international strategic decision, post-Enron, not to offer general business law capability as a core service.

"It was an international decision but one that we fully agreed with here," says Knut Ekern, PwC's new managing partner in Norway. "The process has gone pretty smoothly and so far it seems a good decision both for PwC and the lawyers who have left." The firm was always best known for its strong tax practice.

The move is somewhat of a homecoming for Peter Simonsen; he was a partner at Simonsen Musaus (which merged with Foyen to form Simonsen Foyen) for nine years prior to joining PwC. But he also cites a strategic fit and the fact that Simonsen Foyen "are a modern firm with a professional management structure" as key factors in the decision.

Simonsen says the firm's strategy is now "to continue to grow in numbers and become one of the main players in Norway. We have taken the first step in that direction and are considering making an international connection. We have a lot of international business but no links or associations with overseas firms".

So it looks like Simonsen Foyen will face another major strategic decision in the near future.