The pandemic might be (almost) over, but the sense of unease remains strong in Asia’s legal industry. While life might have returned to normal, and supply chains appear back on track, the region is continuing to experience uncertainty over slowing global economic momentum, tightening monetary policy affecting credit growth, and lingering concerns about inflation. China’s seemingly irreversible economic decline is also hanging heavy.

As M&A transactions dry up and capital markets remain patchy across the region, law firms have responded in a variety of ways. Some have taken the prudent road and looked to scale back their presence, including well-known international firms in Greater China. Others realise it could pay off to be bold at a time like this. As a result, we have seen the landscapes of key legal markets in Asia begin to shift in clear directions, with the momentum expected to accelerate in 2024.

SINGAPORE: MORE THE MERRIER?

Singapore is the golden pie that everyone wants a slice of, and the proof is in the pudding. According to the Law Society of Singapore, in 2020, there were 937 Singapore law practices. Data registered on the Legal Services Regulatory Authority website showed that figure had shot up to nearly 1,200 in 2023 - representing a 20 percent increase in the space of four years.

Meanwhile, international law firms continue to pour into the increasingly saturated market from all directions, coveting booming cross-border investment activities in Southeast Asia. Han Kun Law Offices recently became among the first PRC firms to establish a Singapore beachhead, with other new entrants including Korea’s Shin & Kim and Portugal’s Morais Leitão, Galvão Teles, Soares da Silva & Associados, and offshore firm Mourant.

“Singapore remains a magnet for foreign firms, not all of whom are looking for a slice of the existing market; some are merely following clients as part of a wider retention effort. Indeed, there is a growing number of outposts here, staffed by only a few (foreign) lawyers, with no plans to expand within Singapore.”
— Jeremiah Huang, Icon Law

“Singapore remains a magnet for foreign firms, not all of whom are looking for a slice of the existing market; some are merely following clients as part of a wider retention effort. Indeed, there is a growing number of outposts here, staffed by only a few (foreign) lawyers, with no plans to expand within Singapore,” says Jeremiah Huang, director at Icon Law, a member of the ZICO law network. However, as global economic turbulence and high interest rates continue to buffet deal flows, it’s challenging even for Singapore, dubbed the regional finance hub of tomorrow largely insulated from geopolitical malaise, to remain unscathed.

As a result, “not all international firms are consistently busy, particularly those with niche practice areas or whose primary focus are large cross-border deals. In the same way that they can be simply floored with work, they sometimes find themselves with little to do during lull periods, owing to the nature of their files,” says Huang.

Fatim Jumabhoy, Singapore managing partner at Herbert Smith Free-hills, agrees that it’s been a relatively slower year for corporate deals in the city-state. “The headwinds have definitey impacted the amount of business that’s being done; the value of assets on demand has dropped by around 10 percent.”

Certain firms, though, Jumabhoy believes, are better placed to weather the storm. “What is putting some firms in a stronger position than others is if they had already refocused and centralised their efforts, particularly those that have a strong capability, focus and growth in the private equity, energy transition, and the arbitration space,” she says, adding that it’s also been easier for firms to navigate this period if they have a regional platform rather than a smaller, Singapore-specific domain.

Despite the challenges and the accompanying pressure for outposts of global law firms to maintain a lean and nimble structure, lateral hirings have been occurring, particularly in strategic areas. For instance, London-headquartered Watson Farley & Williams made three partner hires to its dispute resolution practice. U.S. firm Baker Botts, meanwhile, raided the UK’s Ashurst for three partners specialising in energy and infrastructure projects since setting foot in Singapore last year.

“Certain international law firms are intensifying their focus on energy and infrastructure projects partners with the aim of capitalising on the surge in work in Singapore and the Asia-Pacific region. They are counting on this practice to bolster the firm financially as they navigate through challenging times. Because apart from transactional commercial work on a retained basis, there hasn’t been as much work from maybe June onwards,” says Linus Choo, regional executive director at Ethos BeathChapman, an executive recruitment agency.

Amidst this tricky economic climate, general disputes has been another key practice sustaining law firms across the board, according to Choo. Coinciding with that observation, waves of new dispute and arbitration boutiques set up by former star partners at big domestic outlets have been making their presence felt in the market.

Notable examples include Setia Law, founded by ex-Rajah & Tann dispute duo Danny Ong and Wern-Jhien Yam, as well as Chua & Partners, helmed by a former co-deputy head of international arbitration at Allen & Gledhill, Chua Kee Loon. Christopher Chuah, famed construction partner at another major firm, WongPartnership, also struck out to set up his own shop.

A big factor driving these new entrants appears to be an increased focus from clients on costs. “This is in response predominantly to a challenging market, and clients becoming very price-sensitive,” says Paras Lalwani, a director and head of international arbitration at Bayfront Law, which operates in a formal law alliance with Japan’s Nishimura & Asahi.

Alfred Lim, managing director at Meritus Law, agrees. “When clients engage a law firm for disputes, typically they would be served by one senior partner and a team of associates. From the client’s standpoint, there’s no difference whether this setup is in a big or a smaller firm, but they may benefit from the latter in terms of cost consideration.”

“Customarily, the big firms may have an advantage because they have a certain number of senior counsels, the tradition, expertise of the teams, etc. But you now have very experienced partners setting up their boutique firms, so I would imagine that the big firms will get a hit,” adds Lim.

Choo thinks the exodus will likely continue, and more new firms could be in the offing. “If a big firm had lost a big rainmaking partner – like in Chuah’s case, himself a construction partner who attracts good work from international clients as well as the SMEs – there’s greater threat coming down to the remaining partners to deliver. I may be wrong, but the knock-on effect to this could be the uncertainty to some of the mid-level associates, leading to some movement next year,” says Choo.

Most industry insiders see the symptoms of a growingly fragmented legal market as a proactive response of marquee partners at big outlets either aiming to tap the previously unreachable corners of the market or simply to protect the fruit of their own work from being hollowed out by a hierarchical partnership. But others believe that the end game for most of those boutiques is actually a tie-up with an international firm.

“If you look at Setia Law, for example, it wouldn’t surprise me if you’d wait a little bit longer to find that’s not just a boutique Singapore law firm trying to do work for Singapore clients,” says a managing partner at an international firm in Singapore who prefers not to be named.

“There is an amount you can grow, but as a two, three, four-man band, you don’t have the economy of scale to compete for really big work.”