Every day we see an increasing number of transactions between Spain and Portugal. The official figures published in both countries show that Spain and Portugal are increasing their imports and exports and the flow of direct investment with each other. Some of the largest Spanish companies have made significant investments in key economic areas of Portugal. It is clear that the Spanish companies are naturally expanding their business to the Portuguese market. Portuguese companies are also increasing their investments in Spain and are more actively searching for new business opportunities.

There are about 3,000 Spanish companies established in Portugal and around 300 Portuguese companies established in Spain. The cross-border investment between Portugal and Spain has created a large number of jobs in both countries. It is likely that the cross-border investments and the creation of new jobs will continue to increase in the future.

This means that Spain and Portugal have become extremely important markets to each other. There is a new flow of migrant workers between the two countries which consists of highly-qualified personnel that takes mid-to-upper level positions in multinationals.

It should be noted that there is an increasing number of Portuguese citizens (usually living within a few miles from the border) that work in Spain and travel in and out every day. Others prefer to stay in Spain and spend the weekend at their homes in Portugal.

The Spanish-Portuguese Chamber has decided to create an Arbitration Court to be focused on disputes between Spanish and Portuguese companies. This is a result of a substantial growth in the imports/exports between the two countries which causes an increase in the number of disputes.

The co-operation between the governments of Portugal and Spain is also improving and there are certain key areas in which these two countries are co-ordinating and putting together their efforts and synergies.

There are clear examples of such co-ordination at high level between Spain and Portugal. The Mercado Iberico de Electricidad is the Iberian electricity market that has been created and enables Portuguese companies to sell electricity in Spain and Spanish companies to sell in Portugal under the same framework. Instead of having two separate markets, the authorities of both countries are creating a strong single market for the production, transport, distribution and supply of electricity. This shows how linked the Spanish and Portuguese economies are at present. Spain and Portugal have already agreed to create a single market for natural gas.

It is worth mentioning that Spain and Portugal agreed to build new rail infrastructures to support the high-speed train to enable the connection between the two countries, in particular Madrid to Lisbon and Lisbon to Oporto to the north of Spain. This implies huge investment from both countries and the European Union (EU) has agreed to grant funds to be invested in the construction of the necessary infrastructures.

This clearly shows that at the EU level certain projects are being analysed on an integrated basis by Spain, Portugal and the European Commission.

At a more regional level, especially in regions close to the Spanish/Portuguese border, the local authorities of both countries are promoting joint initiatives to deal with certain problems and needs that the central governments have not been able to resolve.

It is worth noting that following the reform of the Portuguese National Health System, Portuguese pregnant women living in certain regions of Alentejo in Portugal are allowed to give birth in Badajoz (a Spanish city located close to the border).

It is not a surprise that the number of passengers flying between Portugal and Spain has grown substantially in the past few years. New airline companies have recently entered the market operating new connections between the two countries.

It is interesting to note that Portugal and Spain are proud of their own languages and have undertaken various initiatives to promote them internationally. Although similar, Portuguese and Spanish (Castellano) are distinct languages which on many occasions have caused terrible misunderstandings. There is a growing number of Portuguese that are learning Spanish in Portugal, in order that they can apply for Spanish Universities (especially medicine courses) and companies. After English (first foreign language), Spanish is becoming the second foreign language for many Portuguese students. The teaching of French language in Portugal has been declining in particular during the last decade.

The above examples show that the Iberian market is not merely a trend, but a process of continuing economic integration between Spain and Portugal.

It is a matter of fact that many international corporations see Spain and Portugal as a single market and therefore are centralising multiple services/departments in one of these countries.

Accordingly, one should question whether such market perception should cause any impact on the strategy of law firms. During the past few years there have been various mergers between Spanish and Portuguese law firms, as well as the establishment of Spanish law firms in Portugal. Law firms quite often follow their major/strategic clients. The increasing number of Spanish companies establishing their business in Portugal has certainly influenced the international strategy and geographic expansion of Spanish law firms into Portugal.

Most of the largest Spanish law firms have either merged to Portuguese law firms or established themselves in Portugal. Other Spanish law firms opted to have alliances or informal agreements with Portuguese law firms to assist their clients in Portugal.

The Iberian legal market has significant differences when compared to the legal market in Britain. London-based law firms rarely have offices in other cities in Britain. In contrast, many Spanish law firms have various offices in Spain, especially in Madrid, Barcelona, Valencia and Sevilla. The same applies in Portugal where some of the largest law firms have offices in Lisbon, Oporto and Madeira. This shows that the typical Spanish/Portuguese clients demand proximity from their legal advisers and give a particular importance to the degree of confidence and personal relationship. On many occasions, the personal relationship between the client and a particular lawyer becomes more important than the law firm and therefore certain clients tend to follow their lawyers if they move to another law firm. However, this does not mean that such clients do not demand high-quality work and time delivery from their legal advisers.

Various clients have reported that on various occasions in the past they have come across communication problems and misunderstandings with their legal advisers. This may have been caused by an inadequate language proficiency of the legal advisers, as well as a lack of knowledge and understanding of the local cultural and economic environment. Clearly, the Iberian market has specificities that can only be dealt with properly if one is well aware of the local cultural, historic, social and economic affairs. Such a degree of knowledge is a process that naturally requires proximity.

Nuno Miguel Prata is a partner at Simmons & Simmons in Madrid.