Ten years have passed since Israeli legislation first allowed law firms that specialize in the law of a foreign country to open in Israel. In an article featured in Israeli financial paper “Globes”, on the third anniversary of the legislation, it was said that “one can hardly say that the large international law firms have swamped the Israeli market, but nevertheless some notable names have opened modest representative offices here.” At that time,12 international law firms had representative offices in Israel, according to data collected by Nishlis Legal Marketing. Furthermore, an estimated 90 law firms had an Israel Desks, mostly U.S. law firms.
Number of Israel Desks doubled in a decade
Fast forward ten years and the numbers have nearly doubled. According to recent data, compiled by Nishlis Legal Marketing, there are 160 law firms with an Israel Desk, out of which 22 have presence in Israel.
Interestingly, Covid-19 pandemic accelerated Israel business development dramatically. In 2020 there was an estimated 130 international law firms with an Israel Desk, 17 actually in Israel. This translates to an increase of nearly 40% of international law firms on the ground and 23% jump in international firms with an Israel Desk.
Why did more global law firms take a greater interest between 2020-22?
There were three principal factors at play that attracted foreign firms:
- Israeli firms became more sophisticated and strategic with regards to their international business development and referrals. Until 2019, there were a handful of Israeli firms that had the bulk of the referral work and most of these firms referred the legal work in a tactical manner (who do I know that I can refer to). Only then did firms start to treat their referrals more strategically and allocate them by various criteria, collect and track the data.
- Covid provided new opportunities for Israeli companies globally. Aside from the obvious rise in the Healthtech/Medtech, sector, there were two other sectors where Israeli companies dominated. With more of business and life going online, there was a greater need for cyber security and fintech (with related practices such as data privacy and protection). This saw sizable legal activity, outbound, such as investments, M&A, regulation and capital raising.
- More Israeli law firms engaged in outbound work. Closely related to the second point, once clients are seeking global mandates and pursuing opportunities outbound, law firms representing them need to follow through. Thus, law firms who were previously domestic by nature (mostly mid-sized firms), found themselves referring work and collaborating with international law firms.
As can be seen in the 2022 IsraelDesks infographic, there are 160 international law firms with an Israel focus: 100 firmshave a proclaimed desk/practice (and 617 lawyers are affiliated to those firms) and 60 firms unofficially have Israel capabilities. Nonetheless, all 160 firms have referral work and close relationships with Israeli firms and companies. 70% of those law firms are U.S. based, 20% UK-based, with the remainder spread around the world.
Is this growth justified?
Well, yes – the numbers back this up nicely.
According to Nishlis Legal Marketing’s IsraelDesks platform, there were 1,868 referrals in 2021, in data collected from 40 international law firms (mid-size to large) across 11 main practice areas. Thus, this data pertains to only 25% of the referral market.
On a wider macro view, the market has returned to consistent growth, albeit not the numbers from 2021. Foreign investors are investing in earlier rounds and leading U.S. venture capital firms have continued to invest in the Israeli ecosystem since 2020. Furthermore, Israel has maintained its ranking as the 5th largest tech ecosystem worldwide and at 2nd globally in producing new unicorns.
In summary, we see a constant rise in international law firms opening an Israel Desk and we are often approached by these law firms who are exploring their next steps – including how to open a rep office in Israel. With the increasing amount of work (e.g. referrals), more Israeli law firms involved, and the growing sophistication of the market, we would expect this trend to continue.
