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The New Lawyer
Foreign law firms operating in Singapore could soon practice Singapore law, after the Government announced it would be looking to award more licenses as soon as economic conditions permit.
Currently, only six international firms from the US and the UK are allowed to practice local corporate law, with other international firms, such as Australian firms, are restricted in what they can practice.
Freehills is one such firm that has been operating in Singapore since 1985 without practicing Singapore law, however its office has been used primarily as a hub for servicing other markets in the region such as Indonesia, Malaysia and India.
“We have not just focused on the Singapore market; it’s a convenient location to service other markets in the region,” said Simon Taskunas, partner at Freehills Singapore office.
However, Taskunas said more licenses for foreign firms would be a good thing for the market.
“There’s no doubt that having a license would be useful, but conversely not having one has not affected us too greatly as – as we have been operating as a foreign law firm servicing other markets from Singapore.”
He added: “They have said they will be reviewing that in about a year- to perhaps grant more licenses to other foreign law firms -as a way of growing the legal services market in Singapore to supplement the growth of the financial sector.”
Kaskunas said the market had become far more competitive in recent years as more international firms open up offices in Singapore.
“We have noticed that some of the UK firms have been far more competitive on pricing-whereas some years ago they were more expensive.”
Indeed London-based firms have expanded in Singapore even as they’ve cut jobs at home, with Clifford Chance setting up a dispute resolution practice and raising the number of lawyers in its Singapore office from 38 to 50 in the past year, while Allen & Overy hired 10 lawyers from Singapore firm Venture Law, bringing its total to 44.
London-based Norton Rose has set up a regulatory practice in Singapore, taking its total to 55 lawyers, which will expand next year when it absorbs the Singapore office of Sydney-based Deacons.
Allens Arthur Robinson is one of several Australian firms that have established partnerships with a local Singaporean firms to overcome the practice restrictions.
“The rights we enjoy are similar to those foreign firms that have licenses,” said managing partner at the Allens Singapore office, Gavin Maclaren.
Allens was the first Australian firm to open a joint venture, under a Singapore and Australia free trade agreement, with local practice TSMP Law Corporation, creating Allens Arthur Robinson TSMP on June 1 2007.
“Licenses are illustrative of the opening up of the Singapore legal market. We already enjoy those rights, we don’t see the competition that it will create as being unhealthy or problematic- our view is that the opening up of the market is a positive development,” said Maclaren.
While Singapore’s importance on the world stage has increased in recent years Maclaren does not think the government’s announcement to award more local licenses will lead to a rush of new firms opening.
“I’m not sure it will have a significant impact- the economics of the market are not as strong as other international financial centres such as London or New York, Hong Kong.”
He added: “I think what it may mean, is Singapore law will be used more commonly as a basis for doing cross boarder transactions. Firms that are able to practice Singapore law would be more inclined to document deals under Singapore law- whereas, currently most firms are more likely to use British law for documenting cross boarder deals.”
Singapore won’t “Turn Back,” will license new foreign law firms
Singapore, which allowed six foreign law firms to practice local corporate law in December, will award more licenses as soon as next year if local economic conditions permit it, Law Minister K. Shanmugam said.
“The direction has been set and we don’t intend to turn back,” he said in an interview. The government will review the progress of its liberalization program in the first six months of 2010 and could award more licenses then if the market can “digest them,” he said.
Clifford Chance LLP and the five other new licensees have increased the lawyers they have in Singapore by 20 percent from last year, Shanmugam said. With a collapse in corporate finance work, U.S. and U.K. firms have been expanding their arbitration and India practices in Singapore. The Southeast Asian city state hopes more lawyers will strengthen its financial sector.
“If you look at Hong Kong, New York, London, it’s no coincidence that they’re all leading financial industry centers,” Shanmugam, 50, said. “Legal services really grew to support the financial services industry.”
London-based firms have expanded in Singapore even as they’ve cut jobs at home, with Clifford Chance setting up a dispute resolution practice and raising the number of lawyers in its Singapore office to 50 from 38. Allen & Overy LLP hired all 10 lawyers from Singapore firm Venture Law LLC, bringing its total to 44.
Norton Rose’s plans
London-based Norton Rose LLP hired Wilson Ang from Linklaters LLP’s Hong Kong office to set up a regulatory practice in Singapore, where it has 55 lawyers. That will expand next year when it absorbs the Singapore office of Sydney-based Deacons Australia.
“We see Singapore as one of the most important hubs connecting a number of places from India to Australia and from Tokyo through to Jakarta, and also to Shanghai and Sydney,” said Norton Rose’s Chief Executive Officer Peter Martyr.
As of last month there were 95 foreign law firms with offices in Singapore, a 13 percent increase from a year earlier, according to the Law Ministry. That’s more than the 66 such firms in Hong Kong, according to the Chinese city’s Law Society. The number of lawyers working for foreign firms in Singapore rose 12 percent to 757 in July from a year earlier, while there were 1,100 foreign lawyers in Hong Kong.
Singapore’s liberalization aims to develop the city as a top arbitration center, an area where Hong Kong “has been ahead of us,” Shanmugam said. The Southeast Asian city offers tax incentives for growth in arbitration work, set up a hearing facility and attracted institutions like the American Arbitration Association.
“You’ve got a very focused, coherent, state policy designed to improve the prospects of Singapore becoming a regional arbitration hub,” said Doug Peel, a partner at New York-based White & Case LLP’s Singapore office. “This has helped us decide to move an international arbitrator to Singapore, who will lead the development of the practice.”
London-based Herbert Smith LLP and Los Angeles-based Latham & Watkins LLP were the other successful applicants from the 20 firms who bid for a license to practice corporate law and employ locally qualified lawyers in Singapore on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy.
“We probably couldn’t have chosen a more difficult economic situation to open up,” said Shanmugam, who had been a litigator with Singapore’s largest firm by number of lawyers Allen & Gledhill LLP before his appointment in May 2008.
Still, the firms made commitments to double their revenue, staffing and profits in Singapore in five years, and Shanmugam, said in the Aug. 7 interview that the government “must assume they’ll do their very best.”
Capital markets work restarted about two and a half months ago after stopping in September, with particular pent-up demand in India following the elections there, according to Mark Nelson, Singapore managing partner of Latham & Watkins. Foreign firms are banned from practicing in India.
DLA Piper LLP, the world’s biggest law firm by headcount with 3,600 attorneys and 67 offices, was “very disappointed” not to get a Singapore license last year, though it may be difficult to meet commitments made then, said Martin David, its Singapore managing partner.
Fee pressures are intense, with a U.K. firm saying that it was discounting by 20 percent and one of the largest Singapore firms saying a competitor was offering 75 percent discounts.
“The market’s slowly coming back but whether that’s sustainable remains to be seen,” David said, adding that DLA plans to apply for a Singapore license as soon as possible.
Law firms said they have benefited from government property tax rebates and cash handouts to lower wage costs. Singapore’s economy is recovering after shrinking 6.5 percent in the first half of 2009 from a year earlier, Singapore Prime Minister Lee Hsien Loong said on Aug. 9.
Singapore will eventually be as open as Hong Kong where all foreign firms are able to practice local law, said David Longstaff, a partner at Jones Day’s Singapore office. The economic crisis may slow the pace of liberalization, he said.
Singapore “isn’t as big a legal market as Hong Kong or London but there’s no question that it’s already the legal center of Southeast Asia and just needs to build on that,” Longstaff said. The Washington-based firm applied for a license, and would do so again, he said.
“I think this is just the beginning.”