Firm shakes off Hungary in refocus of CEE strategy but Clifford Chance says it remains committed to the region

Clifford Chance (CC) has become the latest magic circle firm to retrench in Central and Eastern Europe (CEE), with the firm opting to close in Budapest.

The Hungary office will spin off from CC at the end of July to form Lakatos Koves & Partners, which will continue to work with CC in a 'best friends' relationship. The spin-off practice will see all 29 Hungary-based fee earners, as well as staff, join the new firm.

CC said the firm had decided to close the office to tie in with its strategy of refocusing on those locations most important to its major international clients. The policy mirrors the reasoning given by magic circle rival Linklaters when it spun off four of its CEE offices last year.

CC's exit comes only two months after it finalised a full merger with its Romanian alliance firm and six months after launching a Ukraine office.

CC regional head Michael Cuthbert stressed that the firm was committed to its CEE practice as a whole, commenting: "Budapest was a separate issue as there was no real business case for a standalone office in Hungary. We view each country separately and Romania is a growth economy despite the recession."

The decision to pull out leaves CC – which was ranked by Mergermarket as the most active firm in the CEE during the first half of 2009 by volume – with CEE offices in Prague, Kiev and Bucharest.

Freshfields Bruckhaus Deringer became the first magic circle firm to retrench in the CEE, closing in Prague in 2002, Budapest in 2007 and Bratislava in March this year. However, outside the magic circle international firms including Baker & McKenzie, Bird & Bird, CMS Cameron McKenna and DLA Piper remain committed to the region.

Duncan Weston, former CEE head and now firmwide managing partner at CMS Cameron McKenna, commented:  "For us, the CEE is a very big market which makes us a lot of money and is very successful. We have 25% of our lawyers in the CEE contributing 30% of our revenues.

"CC has a global strategy and they need to manage a large cost base. Looking after smaller offices is
time-consuming and can be loss-making."

At DLA Piper, which made redundancies in both Budapest and Prague last year, CEE head Ivo Deskovic said: "Most of the firms which have closed offices in the CEE are magic circle firms. It may be that they have more of a focus on their larger locations now in the economic situation."

Separately, Linklaters CEE spin-off Kinstellar has made its first partner promotions since the split last year,
with three counsel joining the partnership.

Managing partner and former Linklaters CEE head Jason Mogg said: "Within Linklaters these markets were not a strategic priority and partners could not be made up regardless of how good they were. We obviously
are focused only on these markets."