The recent exodus of UK and US based partners to Asia could be attributed to the sluggishness of harder-hit western economies. But China and Hong Kong were welcoming partners long before the global financial crisis, and it is likely that their attraction will outlive the current economic situation Paul Mitchard QC of Skadden recently moved from London to Hong Kong. "There definitely isn't a contracting market in the UK, we're absolutely inundated with work at the moment in the litigation group," he said. "That isn't the reason for coming here; it is to do with the pull of the Asian market."
Skadden had previously undertaken its international arbitration work in China and Hong Kong through teams located in the European and US offices. Mitchard explained that the time had come to centre the practice in Hong Kong. "This is about client needs," he said. "Particularly in arbitration, they need people here - you know what Hong Kong is like, they don't want people in transit. You are much more credible in the market if you have a presence in the region."
This echoes the attitude of other international firms operating in China. "It is very important to have an office on the ground, and we are strongly in favour of having a proper presence and service capability [in Shanghai], said Seamus Cornelius, partner at Allens Arthur Robinson. "It gives us much better ability to service our clients, helps us understand the real issues that concern our clients, and provides us with a valuable picture of what's going on in this market."
The focus upon growth in China and relocation of partners can hardly be described as a new phenomenon, but there has been a recent shift in the practice areas targeted by international firms. The Beijing office of Salans is shifting its business model from advising on FDI, M&A and investment in real estate to restructuring and arbitration. This is "driven by changing client demand," according to the managing partner, Bernd Stucken. The Salans Beijing office is also hiring and relocating lawyers from other offices to China.
Growth of restructuring practices is expected in the current economic climate, but international arbitration and dispute resolution has also received significant attention in Asia. Mitchard explains that the development of an international arbitration hub for Skadden in Hong Kong was planned over a year ago, prior to the credit crunch. "[Our move] has coincided with the downturn, which brings more dispute resolution, arbitration, litigation and investigation work," he said. "The time we started to do this was fortunate; since dispute resolution is counter-cyclical to the economy."
A similar incentive may have prompted the recent growth of Fulbright & Jaworski's Hong Kong office, to which international dispute partners Richard Hill and Stefan Ricketts relocated from London last year. "As Asian markets have matured, attracted vast amounts of foreign capital and otherwise become more integrated into the global economy, we have seen a predicable increase in complex disputes," said Jeffrey Blount, head of the Asia-Pacific practice.
The restructuring and dispute resolution practice areas may have received significant attention, but the traditional growth sectors within China have not been ignored. Freshfields has recently sent Nicholas French to its Beijing office to exercise his expertise in antitrust, competition and trade. Clifford Chance and Linklaters have similarly boosted their private equity and capital markets teams in Hong Kong respectively. Corporate and securities will receive additional attention in the Beijing office of Reed Smith with the relocation of Zack Dong from Chicago.
The Chinese market may have more promise for growth than the struggling UK and US economies, but the legal services industry is still being forced to tighten its operations. "The firms here [in Hong Kong] have still been cutting back," said Emily Lewis, managing director of Lewis Sander Legal Recruitment. "We certainly haven't seen many partners coming out from the UK or US to Asia. There are still a lot of redundancies and partners being managed out."
Recent history would support this contention, as large-scale restructuring in firms such as DLA Piper and Allen & Overy have resulted in multiple redundancies. Simmons & Simmons have also bucked the partner relocation trend, sending partners from both Hong Kong and Shanghai back to London. The 'fiercely competitive' nature of the Chinese market was cited by Hannes Snellman - the Swedish-based international law firm - as reason for recently closing its Beijing and Shanghai operations.
The push towards China and Hong Kong is still understandable, since economic stagnation is anticipated to continue in the West in the near future. "I think relatively speaking Asia is in a better position than say London or New York, but it is still a part of the global economic crisis," explains Lewis. "There isn't really anywhere in the world that isn't downsizing, there isn't a law firm in any jurisdiction which isn't under serious pressure financially."
Are lawyers jumping ship from the Western economic struggles? They aren't admitting it - apparently Asia has always been the game plan. Either way, we recommend advance bookings for business class flights to Hong Kong.