Cochrane Lishman founding partner Michael Lishman ponders the implications of Allen & Overy's recent arrival in Australia.

Globalisation of legal services has been on the agenda of Australian law firms for some time - both in terms of the threats to and opportunities for Australian lawyers. 

The major accounting firms flirted with establishing themselves as players in a global market for legal services.  But the forces that drove the globalisation of accounting services are different from those driving the globalisation of law.  Global accounting firms grew post WW2 because of the unification of accounting standards and the need for multi-national companies (mainly US-based) to have one audit firm.  Globalisation of legal services is driven by cross border capital flows. There continues to be significant local law differences and this means that law will not globalise in the same way as audit services.

The Magic Circle firms have grown off the back of London's role as a global financial services centre (starting with the growth of the Eurobond market) and the adoption of common rules across the European Union.   So their first moves out of London were to places like New York, Tokyo, Hong Kong and Brussels. London firms have since expanded to many other jurisdictions, such as the Middle East, Eastern Europe and China.

Until recently, expansion into Australia seemed to be off the agenda for many English firms. Australia was seen as a small market which was well serviced by large and good quality law firms.   As Asia has developed, these firms' interest in Australia was as a source of recruitment of legal talent to service their expanding practices in China and South East Asia, rather than as a place to set up business.

Rumours of possible mergers between Australian firms and English firms have concentrated on the first tier Australian firms and the Magic Circle firms.  In part this reflects the fact that many of the partners of the leading Australian firms have spent time working for the Magic Circle firms.   But these mergers have yet to eventuate. They may yet do so and the recent moves may act as a catalyst for such tie ups.

In the meantime, two English firms have linked with Australian firms: DLA with Phillips Fox and Norton Rose with Deacons.  Now a Magic Circle firm has moved into Australia not by a merger, but by the lateral hiring of a small number of partners from an Australian firm.  

So what is driving these moves? 

First the global financial crisis has brought into focus something that was happening anyway- a shift of economic power towards China and Asia.  Global law firms need to have a strong presence in Asia.  Whilst Tokyo is already a major financial centre, it is not as clear where the next Asian financial centre will be.   Will Singapore, Hong Kong, Shanghai or Sydney emerge as a major financial centre in our time zone?  In the mean time, Australia is a good location from which to service Asian capital markets.

Second, Australia has come out of the GFC in good shape.  Our banks are some of the largest and strongest in the world.  Our system is well regulated.  We have one of the largest pools of pension savings in the world.  Our population is growing.  Our resources industry is world class. Australia is now an attractive legal market in its own right.

Michael Lishman is a founding partner of Cochrane Lishman Carson Luscombe and was formerly Managing Partner, Operations of a leading Australian firm.