Euro experience still shapes City thinking but it won't deliver in emerging economies

Have international law firms really adjusted to a world in which national Bar restrictions will be a severe impediment to their ambitions rather than just a minor irritant? After all, the substantial internationalisation of the UK legal profession since the late 1990s was closely linked to assumptions about the development and integration of a single market within the European Union.

In essence, the huge strategic bet that City law firms took was based upon the prediction that Europe would develop into a genuinely unified trading block. This was symbolised more than anything by the aggressive push into Germany between 1999 and 2002, which saw foreign law firms come to dominate the top end of the commercial market.

A similar pattern was repeated in other Western economies, if not quite so dramatically. Now that push seems quaintly of a different age – indeed, City firms, having won their prize, have been quietly retrenching and pruning their European practices for five years while EU integration has yet to live up to the hype. But the question remains whether this experience has really geared up City law firms to address a world in which the international jurisdictions they increasingly covet are blocked by Bar rules often applied with protectionist intent.

Of the BRIC economies, only Russia is anything close to a liberalised legal market. In some cases, City firms have appeared downright naive in their attempts to gain access to foreign markets. Nowhere is this more apparent than in India. Four years ago many City firms were convinced that some substantial measure of liberalisation was within their grasp.

In reality, the situation has gone backwards, with national courts seeking to apply farther-reaching sanctions to international firms, even when they are clearly advising on foreign law. Indian governments have become adept at telling foreign industries what they want to hear regarding liberalisation while in many cases doing nothing to deliver.

In many ways, however, India remains an outlier in terms of Bar restrictions. China and Brazil have struck a more pragmatic stance, and one that has almost certainly delivered more in terms of their national economic interest. China has become a master at allowing foreign firms in just far enough to stimulate the market while protecting still-immature domestic champions.

Brazil has walked a similar path, even if the recent spat regarding formal foreign/local firm alliances illustrates the ability of local Bars to twist their own rules to defend their patch. But while this must be frustrating to foreign law firms, the uncomfortable truth to be drawn from comparing the experience of Europe is that such countries are on to something in protecting their immature legal industries. German law firms fell so quickly to foreign invaders in part because federal regulation had left them relatively unsophisticated and ill-prepared to cope with the City influx.

In contrast, China shows what an effective tool the use of Bar restrictions can be if deployed skillfully. The BRIC legal markets will only become more significant, and US and UK firms will have to update the playbook. If the old approach didn't deliver during the credit boom, it certainly won't while the economies of China and Brazil are trouncing Western nations.

International firms should stop believing that goodwill and the glory of the free market will carry the day and start thinking about what kind of hard, pragmatic bargaining will get them the access they crave. The bottom line is that they should only expect to get what they want if they can offer something compelling in return.