In Asia, Is It Back to Business or Still Too Soon?

It feels almost surreal to say out loud that we hosted our ninth Asia Legal Awards, 2022 at the Island Shangri-La in Hong Kong last week. It was our first in-person ceremony in over two years and it was the first major event in quite a while where I had the honor of playing host and emcee.

The event went well if I do say so myself—in part because we were finally able to gather as a group of industry players—over 100 attendees in Hong Kong, where no more than 120 are permitted in one place. It was great to see all the lawyers let their guard down and go home fairly happy. Who would have thought that possible? (I am joking, of course.)

Mind you, I have written some pretty prickly stories about the attending firms and their lawyers over the past year, so I anticipated some confrontations. But no one accosted me. They were gracious and I was relieved.

This year’s awards reflected a trend I’ve been drumming on about in my coverage of the industry for a long time. The market is shifting. In Hong Kong, for example, U.S. firms are gaining—a fact that became clear as I handed out the awards.

The biggest winners were firms like Davis Polk & Wardwell, which won both Securities Firm of the Year and IPO Lawyer of the Year—both categories traditionally dominated by their British counterparts. Simpson Thacher & Bartlett also took home Investment Funds Firm of the Year and Investment Funds Lawyer of the Year.

And that’s not all. With the exception of Herbert Smith Freehills, which won Dispute Resolution Firm of the Year, none of the other winners were U.K. firms. All the other categories, including TMT, M&A, Finance, IP Firm and Lawyer of the Year, went to U.S. and Asian law firms.

Now, before you start thinking I’m just biased, I should point out I have written about this trend on a number of occasions. It shouldn’t come as a surprise. You can read some of those stories here, here and here.

I’d love to dive more deeply into what went wrong for the Brits but I can’t do that here. That warrants a whole other feature story. What I will say is that the U.K. firms best figure out soon what’s amiss before it’s too late.

There are signs they may be doing just that. I heard the other day from a regional managing partner that the largest U.K. firms are planning to double down in mainland China and in Singapore—all to mitigate the risks that their Hong Kong practices face.

I separately had a chat with a mainland China-based partner who works at a verein firm with a local operation. To no one’s surprise, the partner conceded that the Shanghai lockdown has substantially affected M&A work. But as firms emerge from lockdown and as deals start to pick back up, the competition is getting intense. Magic Circle firms, in particular, have been noted to even substantially discount their fee quotes to win work, some charging a whole one-third less than their verein competitors.

On that front, U.S. firms, while flourishing in Hong Kong, are losing traction in mainland China. The U.S.–China standoff is a tale as old as time but the Chinese government’s ”In China, For China” strategy, which is predicated on the size of China’s domestic market, means that on the fee-front, U.S. firms are facing competition not just from U.K. firms but also from local Chinese practices. U.S. firms also don’t hold the same level of appeal to local talent as they would in Hong Kong.

How Long Can This Go On?

It wouldn’t surprise me if more U.S. firms call it quits in Greater China in the latter half of this year and into the first half of 2023.

I’ve long believed that the firms that have been ultra-focused on certain sectors and practice areas are the ones that make their mark in this era. There’s clear blue water between the elites and the mid-tiers, and even that has an entirely different meaning in Asia.  

The success of Wall Street firms and Magic Circle firms in their home jurisdictions often do not reflect their performance in Asia. Over the past decade, these firms have expanded and downsized, and some of the firms with the highest revenue and profits globally have failed to make their mark in Asia. To say that the Asian market is a hard one to read would be an understatement.

I have been looking closely at New York-based Pillsbury Winthrop Shaw Pittman, which ranks among the Top 100 in both our Global 200 and Am Law 100 rankings. The firm has about a dozen lawyers in Shanghai and Beijing—a fair number. But last year it lost its Hong Kong managing partner and now no longer has lawyers in that office. The firm has said it will not shutter its Hong Kong office, but it’s been more than six months and it still hasn’t managed to fill that position. I’ve followed up on multiple occasions and there has been no change.

Meanwhile, Paul, Weiss, Rifkind, Wharton & Garrison, a Top 30 firm in the Global 200 and Am Law 100, lost its China head to Linklaters last year and a successor has yet to be appointed. Recruiters tell me that Paul Weiss has been extremely picky but still, you wouldn’t think a firm like Paul, Weiss would struggle to find talent. That, once again, shows just how precarious the Asia market is.

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