Herbert Smith is formally withdrawing from its alliance with European partners Gleiss Lutz and Stibbe in the wake of its failed merger bid with the two firms.

Herbert Smith decided to pull out of the alliance yesterday (23 November) at a meeting of its limited liability partnership council (LLPC).

The move comes less than a week after partners at Germany's Gleiss and Benelux firm Stibbe decided against pursuing a merger with Herber Smith at meetings last weekend (19-20 November).

It is understood there is likely to be a wind-down period of around a year, according to the terms of the alliance, which was initially agreed with Gleiss in 2000 and Stibbe in 2002.

Herbert Smith put proposals for a full three-way merger with financial integration to Gleiss and Stibbe around six weeks ago following a review of its international strategy launched earlier this year, dubbed Project Blue Sky.

In an internal announcement issued earlier this morning the firm said that it had been prepared for its alliance partners to reject the proposals and said that it would now push ahead with its own international plans – including developing some form of presence in Germany.

Other priorities include New York, where Herbert Smith's litigators have been pressing for a formal presence. It is understood the launch of a New York office was particularly unpopular with Gleiss, with the German partners concerned about the loss of referrals from US law firms. Stibbe already has a presence in New York offering Dutch law advice.

In its internal announcement Herbert Smith said: "We put in place a structured process to implement the [international] plan, and one of the first actions was to talk to our alliance colleagues at Gleiss Lutz and Stibbe to test whether they would wish to merge with Herbert Smith. From the outset we were prepared for either outcome. But we have built some special and close relationships over our 10 years together and wanted to give them the opportunity to join with us. We felt this was important before pursuing our own plans.

"The LLPC met yesterday in the wake of the decisions made by Gleiss and Stibbe, and concluded that we should inform our alliance partners that we will give notice to leave the alliance. We can now press on with developing our international offering, including our approach to an integrated capability in Germany.

"Our decision to draw to a close the alliance does not mean that we will cease working with them. We will continue to have good relationships with both firms and to work together to look after the clients we share."

Stibbe managing partner Heleen Kersten said: "The termination of the alliance is not unexpected in light of the recent developments regarding a merger. It won't change that much for us because it was never an exclusive arrangement, and we have always found it important to work with all leading law firms, which we will continue to do.

She added: "The most important thing for us to do now is for all three firms to sit down and discuss the future. We will of course remain friends and I expect the relationship to continue in some form or another, but just not in the same formal way that it has been."

Commenting on the failure of the merger talks a partner at one magic circle firm in Germany said:"I don't see it as particularly surprising that Gleiss and Stibbe have opted not to go for further integration. If you have cooperated in this form for so long it is probably quite difficult to take that step. As such, it may have been better to try to do it sooner."