#Asialaw issues

Musings on the announced closure of Clifford Chance’s Bangkok office

At the end of last week I read with sadness the decision by Clifford Chance (CC) to close its Bangkok office. While I’m always saddened to hear that a law firm will be closing the doors on one of its offices, in the case of CC Bangkok it’s personal.

Let me take you back to 1998

The year was 1998, and what would become known as the Asian Financial Crisis (AFC) had just come crashing through the door like an unwanted drunk guest to spoil what as a pretty good party. At the time this was still known as the ‘Tom Yum Goong‘ crisis in the local Thai press and the horrific murder of Australian accountant Michael Wansley (shot 8 times) was still a few months away (10 March 1999).

In short, the full measure of the financial mess, both in Thailand and the region, was only just becoming known.

What was clear however was the fact that a number of international law firms were making serious noises about entering the local market. Allen & Overy, Linklaters, Herbert Smith, Mallesons, White & Case, Freehills, Freshfields, Coudert Brothers, as well as Clifford Chance all had some form of ‘fly-in, fly-out’ operation and were either opening a local offices or expressing an interest in doing so.

Meanwhile, Baker & McKenzie had been around for so long that almost anyone who was anyone in the local Thai legal world had ‘graduated’ from that firm.

Working with one of Thailand’s leading local firms at the time – Wirot International – I was privileged to have had a front seat to much of this activity.

If you had asked me early in that year (1998) who Wirot Poonsuwan – Founder, Managing Partner and Owner of Wirot International – would have merged with (and yes, he was fortunate enough to have several dance partners), my answer would likely have been Herbert Smith.

In the end Clifford Chance offered him a sweater that he simply couldn’t refuse and we all moved over to what would become known in Thailand as Clifford Chance Wirot (CCW) on 1 January 1999.

I often wonder what would have happened if Wirot had gone with Herbert Smith? Local legal history would have been very different, that’s for sure.

As it is, over the course of the next two years core members of what was Wirot International would leave CCW for Linklaters, Freshfields, Courdert Brothers (anyone remember them? They took on Freshfield’s operations when they departed Thailand)  and, eventually, Norton Rose (which itself was a sort of offshoot of Linklaters).

1999 would be a big year for CC. Not only was it the year the firm ‘merged’ with Wirot International, but they would also merge with Rogers & Wells in the US that year (we would joke that it was a three way merger and some may argue with the same level of success!). It would also be the year that CC’s Managing Partner at the time, Tony Williams, would step down and go on to found the highly successful Jomati Consulting (probably a wise move in hindsight).

And yet, from the start I was never quiet sure what CC’s strategic aims were in having a Bangkok office.

Were they looking to pick-up a large amount of debt recovery/restructuring work that was going on around town? Possibly, Wirot Poonsuwan had been at the forefront of discussions to changes to Thailand’s insolvency law to allow for US-style Chapter 11 restructurings to occur (Wirot wrote a weekly article in the Bangkok Post at that time [1998]).

Were they looking for the growing amount of divestment work going on? Possibly. Wirot did some of this work, but Simon Makinson and his team did more of it and they would go and join A&O (with whom Simon had a relationship as a trainee lawyer).

Were they looking for the NGO / Infrastructure work? Not really, Linklaters picked up Wilailuk Okanurak – who would go on to succeed Chris King as Managing Partner of the Bangkok office – to run a very successful infrastructure practice (although she does lots of other things).

What they did do was bring in the wonderful Andrew Matthews from Italy (along with his Ferrari if I recall correctly). But his practice at the time was aircraft financing, not the sort of thing you’d have expected to see done from Bangkok: but hey, why not…

My own view at that time then was that CCW’s strategic reasoning for being in Thailand was muddled. In part that was one reason I would leave CCW to join my good friend (and previous colleague at Wirot International) Pichitphon Eammongkolchai at Linklaters (where I would go on to enjoy 7 more years of fantastic times and memories).

Fast forward to 2017

Despite this, and despite the fact that there was some real hitters on the local scene at the time (late 1990s) in Siam Premier (to have a JV with Australia’s Allens – must be something with Allens and JVs!) and Chandler & Thonk-Ek (now part of the Japanese firm Mori Hamada & Matsumoto) to name two, the firm that was CCW would go on to to survive almost two decades.

That’s quiet and achievement in this marketplace.

And while much has changed – Wirot is no loner there, nor is Tim Jefferies; much remains the same – Andrew was there the last time I checked and current Managing partner Fergus Evans was a very junior lawyer back in the day.

So clearly something worked.

And so I will be very sad when I hear the firm has closed its doors for the last time. Particularly so given I believe the strategic decision for doing so is [probably once more] completely wrong.

Moving their ASEAN focus to Singapore is something CC should have done in 1998, not 2018. Having persevered to 2017, it seems short-sighted to close the office so shortly after the establishment of the ASEAN Economic Community (AEC) gives it access to a market of US$2.6 trillion and over 620 million people.

But that’s just my view.

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Will a ‘One Asia’ strategy work for BLP?

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I spent just over a decade in Asia between the 1990s and mid-2000s. In all the time I spent there I never considered the Region as ‘One Market’ – but rather as a multitude of diverse and different markets.

By way of example, almost everything we did in Asia was “ex-Japan“. This wasn’t because we didn’t see Japan as part of “Asia” – as it very much is – but rather because the international legal market there (NB, the Japanese local legal market is a very different issue) has far more in common with the US market than the Asian. As a result, we lumped Japan in with the US when discussing strategy (and you’re free to question that thinking/strategy).

Likewise, any strategy discussions we had that involved Singapore almost always included India, the Middle East and the Philippines. Similarly, strategy discussions that involved Hong Kong included not only mainland China but also Indonesia.

Finally, SE Asia (Thailand – where I was located, Myanmar, Laos, Cambodia and Vietnam) was its own regional discussion.

All up then, when discussing “Asian” strategy we had four or five discussions – not one.

That said, I worked with (but not for) firms (notably Herbert Smith as it was then) who operated on a fly-in fly-out basis. In my day we called this the “hub and spoke” approach, where the expertise went to the client need and, I have to assume, strategic discussions were done on a Regional basis.

While not criticising firms who took this approach – some did very well out of it – I didn’t think it worked for the firms I worked with as we held the view that, probably more so than any other market in the world, Asia operates on a relationship basis. Our experience was that relationships trumped expertise, and in the very family operated business world of Asia at that time, cost.

So why the history lesson?

Last week, in the Asian Lawyer, I read Bob Charlton – Asia Managing Partner of Berwin Leighton Paisner (BLP) – comment, following the firm’s Asian retreat, that:

“…in broad terms we agreed we must have a one Asia approach.”

Interesting, I wonder what BLP could mean by “a one Asia approach“?

Fortunately the article sets out exactly what that means:

“BLP’s “one Asia” strategy means the firm is doing away with the concept of geographic and practice area distinctions, focusing instead around sector groups. These groups include aviation, construction, oil and gas, private wealth and shipping.”

Now that really is interesting because, frankly, I’m not sure it is going to work.

A sector focus in Asia is a sensible move. A sector only approach to market in Asia is gutsy to say the least.

I say this for two reasons: (1) ‘relationships still trump in Asia’, and (2) Asia is not now, nor will it be for a very long time (if ever), one economic zone. That’s the case both for inbound and outbound work. And even if you don’t want to have people on the ground (which I would strongly recommend you do), you need to consider the geo-political economic implications separately.

And I’ve said all of this without mentioning the elephant in the room: “AdventBalance”. I wonder if they take a sector approach to their strategic thinking in Asia…

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Launched today – The Asian Business Law Institute

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Today, 21 January 2016, the Asian Business Law Institute (ABLI) was formerly launched in Singapore.

According to the ABLI’s website, the:

“…Institute based in Singapore that initiates, conducts and facilitates research and produces authoritative texts with a view to providing practical guidance in the field of Asian legal development and promoting the convergence of Asian business laws.

Among ABLI’s core tasks are:

  • to evaluate and stimulate the development of Asian law, legal policy, and practice, and in particular make proposals for the further convergence of business law among Asian Countries;
  • to study Asian approaches regarding business laws and practice in drafting legal instruments, restatements of law or model rules;
  • to conduct and facilitate pan-Asian research, in particular to draft, evaluate or improve principles and rules which are common to the Asian legal systems; and
  • to provide a forum, for discussion and cooperation, between the business community and the legal fraternity including, inter alia judges, lawyers, academics and other legal professionals, who take an active interest in Asian business law development.”

With the establishment of the ASEAN Economic Community (AEC) in December 2015 and the formal launch of the  Asian Infrastructure Investment Bank (AIIB) this month, there can be little doubt that it’s exciting times with plenty of potential for the legal industry in Asia at the moment so an initiative like ABLI should be warmly applauded.

If you’re on Twitter, the ABLI handle is @ABLIasia. Should be worth a follow.

Report: ‘HSF bets growth on Asia’

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The Australian‘s weekly Legal Affairs section is reporting (subscription required) today that global law firm “Herbert Smith Freehills will seek to more closely integrate its Australia and Asia practices.

Sorry to be blunt, but what!?!

According to the Lawyers Weekly website, HSF officially merged on 1 October 2012 to open as the “largest fully integrated law firm in Asia Pacific based on number of lawyers“.

That was 3 years ago.

This begs the question: are all of the recent global law firm entrants to Australia going through the same issues?

My guess here is “yes”. Even though nearly all of them (arguable K&L Gates used US-Australia as its strategic reason for opening in Australia) made specific mention of using Australia as a springboard into Asia, pretty much none of them – to my knowledge – has a specific liaison Business Development Manger person (or higher) located in Australia who assists with joint business development activities.

As I understand it, there may be cost related issues involved in this (who pays for the resourcing – Australia or Asia). There may also be personnel issues involved.

Who knows; but the short answer is that for the life me I cannot understand how 3 years or more (in some cases) on from when the global firms arrived in Australia they still don’t seem to:

  • have dedicated Asia-wide practice and support teams
  • be able to tell you the number of referrals across jurisdictions (inbound and outbound)
  • be able to tell you which partners are referring work [championing] across jurisdictions
  • be able to tell you how many referrals are going to other firms within the jurisdiction where they have an office – particularly where there may have been a relationship prior to the merger (in Australia’s case, would you like to take a punt that Gilbert & Tobin gets referrals from international firms with an on the ground presence in Australia?)
  • know which of their clients are referring work to them across multiple jurisdictions.

To me, this says that both the back-end and front-end operations of the merged firm are still working in geographic and practice group silos (which they most certainly would appear to be from today’s article).

Don’t get me wrong, it’s great that HSFs is seeking to more closely integrate its Australia and Asia practices. I hope other firms follow suit. I’m just frustrated that this initiative is probably about 2 and half years late!

3 more surveys on the state of the legal market were published this week

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Hot on the heels of a post I posted two weeks ago summarising three reports on the state of the legal market, the last week of August has seen the publication of a further three survey reports.

  1.  The US Survey Report 

The first survey report (Surveys Find Mixed Demand, Moderate Pay for Corporate Counsel) is out of the USA and summarises the findings from a questionnaire sent to 1,300 chief legal officers (CLOs) of the Association of Corporate Counsel (ACC) – who now have a Chapter in Australia.

This ACC survey covered wide ground, including pay rises (3%) and areas of in-house recruiting growth (compliance, contracts and corporate generalists), but probably my favourite take-out was the following two paragraphs:

“Organizations are looking for corporate counsel who can facilitate the business process, according to Peters. Counsel should become familiar with what the company does, take an interest and act as a support, instead of simply focusing on the legalities of whatever is presented to them, she said.

For example, corporate counsel might tour the company’s plant and observe the manufacturing process to better understand how the company works, according to Peters. This might allow the lawyer to help get the product to market quicker. “It behooves the lawyer to be involved and become an integral part of the company. Partnering with the business, you add and keep value,” she said.”

Private practice lawyers could move a lot further along the trusted advisor paradigm just by following that piece of advice.

2.  The UK Survey Report

The second survey report (Mind the Gap: GCs, Firms Wide Apart in Perception)  is actually a one-page infographic [downloadable here] done by the team at Briefing Magazine in the UK and provides further evidence, if ever we needed it, that there is a growing ‘value gap’ in the perception of the relationship between in-house counsel and their outside law firms & law firm managers.

This survey polled 125 GCs, 67% from companies with more than £1.1 Billion in revenue a year and more than 1000 employees, along with 86 managers (NB: Briefing Magazine‘s target readership is law firm leaders and managers) from the top 120 law firms in the UK.

Two take-outs from this survey of note are:

  • on whether the process of buying legal services had moved to the in-house legal team’s procurement department, 80% of in-house GCs said they – and not the procurement department – had the say on who to send legal work to, whereas almost three quarters (74%) of law firms said exactly the opposite (ie, procurement had the say here).
  • on the issue of AFAs (alternative fee arrangements), 76% of law firms believe that in-house GCs want to move away from the billable hour, whereas only 58% of GCs said they do.

Interesting as they are, both of these responses really highlight to me that most law firms out there are not having proper conversations with their clients around how legal services are being procured and, importantly, paid for.

3.  The Australian Survey Report

The third survey report of the week was the most comprehensive.

Authored by Joel Barolsky and published by The Melbourne Law School and Thomson Reuters Peer Monitor, the 2015 Australia: State of the Legal Market report sets out the dominant trends impacting the Australian legal market in 2015 and the key issues likely to influence the market in 2016 and beyond [a copy of which is downloadable here].

As you would imagine, a survey report of this nature (15 pages) packs a punch and there are way too many take-outs to summarises them all here so if you are interested in the finding of this report, but don’t have the time to read the whole thing, I would like to suggest you take a look at Joel’s post on LinkedIn – Key takeouts from major new legal market report – summarising the findings.

For me, it was interesting to see the survey confirm a trend I identified last year in the market, namely that the biggest competition private practising lawyers have these days is actually in-house counsel. I think this is further evidence that private practice lawyers are not doing enough to explain to their in-house counsel the benefits of using outside counsel.

In short, to my mind the conversation should not simply be: “I’m spending $150,000 on external legal each year, I can hire a lawyer and bring this work in-house“. Although I very much fear that is exactly the conversation that is taking place. And when you keep in mind that the two principal areas of concern for in-house counsel are compliance and risk, you’d think this provides external legal with exactly the right platform to have the conversation around why taking work in-house should not be a growing trend.

China, #Auslaw firms, and the $400 billion lost opportunity

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Last week I blogged that Australian law firms were missing out on a massive opportunity by not being better at selling Australian law, and Australia more broadly, as an alternative venue to London and New York. One of the things that I commented on in the post was how Australian law firms were falling short on their ability to sell venues such as the National Stock Exchange (NSX) and Australian Stock Exchange (ASX) as alternative venues on which Asian, and Chinese in particular, companies could look to to raise capital.

It could not have been more timely then that later in the same week Reserve Bank of Australia (RBA) Governor Glenn Stevens added a monetary value to the opportunity being missed here – $400 billion.

Yeap, Stevens is quoted in this article as saying:

“…capital markets should prepare for a world where China invests $400 billion a year offshore.”

So, the question I asked in my blog last week remains:

“What is your law firm doing to capitalize on this opportunity?”

Because there is absolutely no doubt in my mind that while we ponder this question others in the region are touting the benefits of Singapore, Hong Kong or a whole raft of other suitable offshore venues.