For all the global firms' talk of the end of the 'flags on maps' school of international expansion, a lot of time and money is being spent on investment outside their home markets. Wall Street is occupying the attentions of London's elite, substantial investment in China is now mandatory and then there is the lure of buoyant emerging markets such as Dubai. Which surely means a domestic Belgian practice starts to slip down the list of priorities.

Still, all of London's magic circle, save Slaughter and May, maintain significant local practices in Brussels – despite the country generating some of the lowest fees in western Europe.

Many partners at Brussels' indigenous firms raise an eyebrow when questioned as to why London's legal elite maintains such high numbers at their local Brussels practices.

"Linklaters and Allen & Overy (A&O) are doing a great job but it is difficult for them to grow the number of partners they have because they have to remain profitable by London standards," says one partner at an independent firm.

Despite a population of just 10 million and gross domestic product growth of only 1.5% last year, most local partners at UK firms in Brussels still see Belgium as an essential element of any international firm's European network, but concede that remaining lean and mean is essential to cut it in the competitive local market.

London leaders keep it lean

With the exception of Cleary Gottlieb Steen & Hamilton's longstanding Brussels presence and White & Case's Belgian offering, the vast majority of US firms have steered clear of building substantial Belgian law capabilities, choosing instead to focus purely on their competition practices – built on the back of mounting US client demand for European Union (EU) law advice.

However, the UK firms have shown far more interest in the diminutive jurisdiction. When the UK firms began their Continental onslaught in the late 1990s, many used Belgium as a springboard to moving into the bigger jurisdictions. But none of the major players have since pulled out.

A&O and Linklaters, known locally as Linklaters De Bandt, have the largest Belgium practices of the magic circle and are both well thought of by their Brussels rivals. Both gatecrashed the market with high-profile mergers. In 2000, A&O took on Belgium's biggest firm, Loeff Claeys Verbeke, having absorbed its Dutch arm the previous year, while Linklaters absorbed respected local outfit De Bandt van Hecke Lagae & Loesch in 2001.

At its peak, Linklaters De Bandt had around 200 lawyers; this was cut to 150 after the global downturn in 2001 but has since edged back up to the 165 mark.

"Mergers of law firms give a chance to have a good, hard look at partner performance. It is really important to keep a tight focus in this market," says Link-laters Belgium managing partner Jean-Pierre Blumberg.

Blumberg remains convinced that a Belgian presence is essential for all the top UK firms. "For the foreseeable future, we need to maintain a prominent presence in the traditional markets. About 80% of Linklaters' turnover comes from western Europe, so it is vital to the model," he adds.

As well as keeping its focus tight, Linklaters operates a country weighting model in Brussels that de-values the equity points achieved by its local partners. Likewise, A&O has also modified its remuneration system, with partners in Brussels and Amsterdam joining the equity ladder at a lower point than their London counterparts – an obvious answer to maintaining a significant presence while dealing with the fact that Belgian partners can not bring in as much cash as their London or New York counterparts.

It has to be said that such local commitments have not always proved popular internally at either firm, with A&O in particular facing criticism that its European network is overly-focused on the Benelux region.

And not all of London's elite have opted for such a hefty headcount. Freshfields Bruckhaus Deringer, which has been in the market since 1989, has a far smaller team in Brussels than A&O and Linklaters. Its 80 lawyers are split roughly equally between its local practice and much-vaunted competition team, with the latter camp being strongly international in focus.

This year, Freshfields announced plans to trim its firm-wide partner-ship across a number of offices as part of a bid to raise its profitability – a strategy that will also see the introduction of non-equity partners for the first time.

Former partners and rivals have cited Brussels as one of the offices most likely to take a hit as full partners are asked to move down to non-equity status.

"The UK firms have realised that Belgium is a difficult market for them because the fees are lower. The trend will be for them to downsize in Brussels," claims one partner at a local rival.

"It is not a coincidence that Brussels is one of the offices that will be heavily affected by the Freshfields de-equitisation programme."

Freshfields' local partners, perhaps unsurprisingly, refute claims that the office suffer more than other locations.

Brussels corporate partner Vincent Macq counters: "Any equity restructuring will be made on an individual basis and, while we cannot exclude Brussels at this point, there is no plan to focus on a particular office group or practice area."

Macq also points out that while lower rates do have a significant impact on the bottom line, it is not the only driver. "Proper gearing, an appropriate equity structure and the right business strategy are the major drivers to the profitability of an office, certainly as important as the local fee rates," he says.

Another issue for London's giants operating is Brussels to deal with is conflicts. A&O Brussels managing partner Wim Dejonghe explains: "Because the market is so small, conflicts are an issue. It is very frustrating. But in terms of profitability, there are no problems. We are able to keep up with London."

A&O has also maintained a streamlined approach to its competition practice, with lateral hires being few and far between. One notable addition, however, was the high-profile recruitment of Martin Bechtold from Clifford Chance (CC) in October.

Bechtold became the seventh partner in A&O's 20-lawyer local competition team. But the move was in part a response to the departure of competition partner David Harrison, who quit to launch Berwin Leighton Paisner's Brussels office in 2005, rather than a desire at A&O to grow its practice.

CC head defects to Cleary

CC saw its local practice further dented last month by the defection of its much-touted Brussels managing partner Laurent Legein to Cleary's local practice.

While the move was undoubtedly a coup for Cleary's already well-regarded Brussels practice, many in the market were surprised. One rival speaks for many when he asks: "Why would you want to go from being the number one at CC to being the number two at Cleary?"

Others claim the move represents shrewd thinking by the US firm, with Legein being taken as a long-term successor to the New York firm's established rainmaker Jan Meyers. At 38, Legein has time on his side and Cleary's partners are not in any hurry to quash this theory.

Fellow corporate partner Jacques Reding comments: "That was not the motivation behind the hire but it would be great if that is what happens. Jan has been a central figure here."

Legein remains confident he made the right move and argues that his old firm will retain its place in the Belgian market without his services.

"CC still has the strongest finance practice in town and a good corporate team," he argues.

Other headline-grabbing moves this year saw expansive Washington DC firm Howrey beef up its Brussels profile with several senior appointments. Notable additions include that of Freshfields partners Michael Schutte and Marc Reysen, who joined the US firm in September.

These appointments came on the back of the recruitment of NautaDutilh's highly rated intellectual property partner Benoit Strowel, who previously headed the Benelux leader's Brussels arm, and competition partner Maarten Meulenbelt, who joined in July.

Stay local

The success stories among Brussels' independent firms have largely been the boutiques. While trade specialist Van Bael & Bellis is held in high regard in competition, Hanotiau & van den Berg and Liedekerke Wolters Waelbroeck Kirkpatrick punch above their weight in dispute resolution.

The full-service firms have been more of a mixed bag. Eubelius continues to be the go-to firm for top-tier London and New York firms which do not have the required capabilities in Belgium.

But life has been more turbulent at fellow full-service independent Lawfort. Formerly the country's biggest independent, the former Landwell network member's headcount has plummeted over the last 12 months, with around 25 lawyers heading for the exit. This is despite last year's February merger with 15-lawyer boutique Bertouille & Partners, which created a 125-lawyer practice with offices in Brussels, Antwerp, Ghent and Liege.

Rivals have cited the end of its relationship with PricewaterhouseCoopers (PwC) as the cause of the firm's woes. One ex partner sums up the opinion of many when he says: "Once PwC stopped feeding them, they were arguably going to struggle."

But Lawfort managing partner Marc Vandemeulebroeke is very bullish about the situation. He says: "We have had our best year this year and have been contacted by many UK firms which are interested in merging with us."

One such international suitor was reported to be Eversheds. While Vandemeulebroeke concedes that there had been contact between the two firms, despite speculation in the local media, no deals were on the table.

The UK firm, which currently has 25 lawyers in Brussels, has remained tight-lipped over the affair but has not ruled out the move completely.

John Grayston, who has been based in Brussels since 1989 and heads both Eversheds' office in the Belgian capital and its international trade and EU regulatory team, says: "The growth of the office has mainly been organic but we are always interested in looking at opportunities."

For a market that many assume to be low on the list of international firms' priorities, this year's activity would certainly suggest otherwise. High-profile lateral hires are often a sign of a buoyant market and there have been plenty of them this year.

But where both the international firms and local independents go from now is uncertain. The economy does not promise the kind of growth being seen further east in Europe partnerships are not likely to grow much more as a result, local firms seem best off with a boutique offering. Will Brussels practices be at an impasse next year? Business as usual is the current mantra for 2007. Reassuring perhaps, but not quite inspirational.