Offshore: Asia bound

Offshore law firms continue to launch offices in Asia, with Singapore and Shanghai the latest hot destinations. LB assesses the drivers behind recent openings and the challenges that lie ahead

The drive of offshore firms into Asia continues apace. Bedell Cristin opened a Singapore office in July, following Mourant Ozannes’ launch in Hong Kong at the start of the year; Appleby opened a representative Shanghai office in April; and in September, showing its own long-term commitment to South-East Asia, Maples and Calder also announced the opening of a Singapore office.

The focus of each launch is different. Bedell’s Singapore outpost will offer a range of British Virgin Islands (BVI) corporate legal services, while Maples’ Singapore office will be a full-service office providing Cayman Islands and BVI advice across the firm’s core practice areas, including hedge and mutual funds, private equity, structured and asset finance, corporate law and trusts for high-net-worth individuals. The new office will be managed by funds partner Nick Harrold, whose team includes corporate and finance partner James Burch and private equity specialist Tom Katsaros. Both Harrold and Burch are relocating from Maples’ Hong Kong office, while Katsaros has rejoined Maples and Calder – having previously worked in its Cayman office – from Kain C+C Lawyers in Adelaide.

Appleby’s specialists in Shanghai arrived to provide a fully integrated fiduciary and administration service. Over at Mourant, its Hong Kong office will service the firm’s Asia Pacific-based clients by providing multijurisdictional offshore legal advice.

The series of office openings by offshore law firms in Asia is an indicator of how interested the region is becoming in offshore products and how successful the offshore world has been at selling itself to Asian clients.

As for which offshore firms will gain the most from Asia’s spoils, some claim the advantage of arriving early, while others differ on which are the most lucrative destinations in which to establish operations.

Key drivers

The opening of Maples’ new office is part of the firm’s Asia growth strategy, which has been operating in Hong Kong since 1995 and has seen substantial growth in its business in the Asian region during that period. ‘We already have a significant South-East Asian practice,’ says Harrold, ‘and are confident that being on the ground in Singapore will enable us to better serve our existing South-East Asian clients and to grow our South-East Asian practice.’

According to Jersey-based BVI legal practice head, Simon Pascoe – who joined Bedell in 2005 from Walkers, where he was BVI managing partner – Bedell’s strategy is to keep investing and developing the firm’s service capabilities in line with existing and potential client needs. By establishing a presence in Asia, Bedell can provide comprehensive BVI legal services to its Asian clients and potential clients across the region.

With the private wealth market growing in Singapore, and business flowing from Hong Kong and Shanghai, Pascoe believes that there is currently a feelgood factor to doing business in Asia. This, coupled with Singapore’s sound economy, pro-business environment, and strong regulatory and supervisory framework, was key in encouraging Bedell to establish the office, while one of the key reasons for Maples choosing Singapore is that the jurisdiction already has a well established financial centre and acts as a hub for many international firms and financial institutions.

‘In terms of the longevity game we realised that the Singapore practice would be largely irrelevant were we not on the ground’

Explaining the choice of Singapore rather than Hong Kong, Pascoe says during the due diligence process the firm felt that Singapore presented a greater opportunity to establish a presence in line with its own requirements and that of potential clients. ‘Singapore appears to offer greater flexibility around the establishment of a presence in the area, as well as a faster approval process.’

Bedell is not offering Jersey or Guernsey law, but the Singapore office does present the firm with scope potentially to expand its services across the region. As it stands though, Bedell’s primary focus is to provide BVI legal advice relating to corporate finance work, including mainstream corporate, investment funds, joint ventures, listings, banking and capital markets transactions.

Beat you to it

Bedell was not the first Channel Islands firm to move to Singapore. In August 2011 Collas Crill, which has a strong trust and funds practice providing Jersey and Guernsey structures to institutional and high-net-worth individuals internationally, became the first to open a Singapore office. ‘In terms of the longevity game we realised that the Singapore practice would be largely irrelevant were we not on the ground,’ says Collas Crill’s trust and fiduciary specialist, Marcus Hinkley.

The work flowed in during Collas’ first year and the quality of that work is high, according to partner Sean Cheong, who relocated from Guernsey to become the Singapore head. Last month Hinkley moved from Guernsey to lead the firm’s Singapore practice and partner Leon Santos, recruited from fund manager Prosperity Capital Management, joined the office at the same time. Cheong will return to Guernsey in due course, while maintaining her ties to the region.

Having two partners on the ground helps tackle the recent increase in fiduciary work, but these moves are part of a plan to pick up new instructions in Asia that have not historically used the Channel Islands. Cheong tells LB that this is already happening. ‘Our visibility is evident and new clients are coming to us,’ she says.

It is not only the Channel Islands legal practices that have identified the opportunities on offer. Isle of Man (IOM) firm Cains opened in Singapore in 2009 and remains the only firm to offer IOM law advice in Asia.

In April 2012 Cains’ Singapore office head Mike Edwards, alongside Allen & Gledhill’s Singapore office, acted for Genting Singapore in its issue of two tranches of perpetual securities, which raised £1.17bn. The first of the two offerings, at £900m, was the largest ever single-tranche Singapore dollar bond deal.

The IOM government also recognises the region’s significance. In March 2012, it announced the opening of a representative office in Singapore, which aims to attract further inward investment from the region. Cains was selected to provide office services to the IOM government in Singapore.

‘Singapore has enjoyed massive growth and ramped itself up to compete with Hong Kong’

Commenting on Bedell’s arrival, Hinkley says: ‘In offering BVI legal services, Bedell is not a competitor to us in Singapore and its arrival is a positive move. We wouldn’t have wanted to be the only offshore law firm there and any firm practising offshore law contributes to the wider discussion of the offshore product and the quality of that product.’

Due to the increase in private client work in Asia, Bedell’s arrival in Singapore does not surprise Jeffrey Kirk, a Hong Kong-based partner at Appleby. ‘Singapore has enjoyed massive growth and ramped itself up to compete with Hong Kong,’ he says. It is a particularly attractive jurisdiction for Chinese clients because of its independence from China, as well as acting to service businesses in Indonesia, Taiwan and South Korea.

Some expect the new entrants to find it difficult to compete with the longer established offshore firms in the region, and to achieve sustainable growth in a market that is largely relationship driven.

Walkers has operated in Asia for nearly a decade. ‘Our commitment to the region and continuity of service helped us develop an extensive network of clients and referring law firms that give us a competitive advantage over new market entrants,’ says David Collins, a Singapore-based partner in Walkers’ finance and corporate group. He also believes that the BVI and Cayman remain the offshore jurisdictions of choice in Singapore. ‘Consequently, Channel Islands firms will find it extremely difficult to gain a foothold in the market without a top-tier BVI and Cayman Islands legal services offering.’

Singapore is also a key jurisdiction for Appleby, which does not rule out opening an office there. ‘But when we ask clients if they need us there on the ground they say “no”,’ explains Kirk. ‘As long as we are in the same timezone, are responsive, and travel in on an as-needs basis, then they are happy.’ Appleby has a broad offering in Asia and has had an office there for over 20 years. ‘It’s not just about where you are, but also about what you can offer,’ he says.

Others maintain that there is only so much that a market can bear. ‘Singapore is beginning to look a little heavy in offshore players for the size of that market,’ says Ogier’s Hong Kong partner, Nicholas Plowman.

As to whether other offshore practices will follow Bedell and Maples’ recent example, many offshore firms are talking about opening up there, according to Collas’ Cheong. ‘The reality is another matter and the numbers do remain small,’ she says.

Licence to bill

In response to Asia’s growth, Appleby instead opted for a Shanghai office in April.

Appleby’s Shanghai-based business development and corporate services head, Scott Reid, plays a critical role in managing the Shanghai office, and is supported by Hong Kong office managing partner Frances Woo and Farah Ballands, the global fiduciary and administration services head. Until the firm obtains a full licence to practise foreign law
in mainland China, the advice will be Hong Kong led.

‘With the growth of our Chinese client base, the time came to open up in China,’ says Kirk. One mainland Chinese office suffices – for now – and for Appleby, the logical choice was Shanghai. That is where its corporate and finance clients, and their Chinese counterparties, are based.

Appleby is not alone. In June 2011 Ogier opened a Shanghai office, becoming the first offshore legal/fiduciary firm in mainland China. Kristy Calvert, Rio Tinto Asia’s former legal director, is the Shanghai-based China managing director.

‘Kristy’s significant experience as a transactional lawyer and in-house counsel in China means that she understands clients’ needs and can formulate commercial solutions,’ says Ogier’s Plowman. Calvert being on the ground also appeals to Ogier’s mainland Chinese clients as she is available throughout the transaction process to liaise with the client, onshore lawyers and Ogier’s Hong Kong lawyers working on the deal.

In the 16 months since the Shanghai launch, Calvert has introduced several notable transactions, including the £68m April listing of Naibu Global International, a Jersey-incorporated company, on AIM. Ogier’s Hong Kong partner Nathan Powell provided Jersey legal advice as he did in August on China Chaintek’s AIM listing, again introduced via Shanghai.

Although Conyers Dill & Pearman’s managing director John Collis believes that Shanghai would be a great place to establish an office, he tells LB that it has proved impossible for the offshore firms to get licences to practise law there. ‘Anyone there is compelled to refer work back to Hong Kong or Singapore,’ he says. ‘Clients in Asia want to know who they are dealing with directly and not simply get referred to another office.’

Better late than neverAlthough a mature market, Hong Kong has also seen new arrivals. With Chinese clients becoming increasingly sophisticated, there is growing demand for tailor-made offshore structures and different types of products and financing instruments. And although listings work has died down recently, Hong Kong is still a fantastic gateway into the PRC.

In early 2012, Mourant launched a Hong Kong outpost. Paul Christopher, the office’s managing partner, relocated from Guernsey and heads the Cayman practice in Asia, while partners Alex Last and Simon Lawrenson – former Maples and Calder associates – head the Cayman and BVI practices in Asia from Hong Kong.

‘We already had clients based in the region so it was a business-driven decision to open the office’

‘We already had clients based in the region,’ says Christopher, ‘so it was a business-driven decision to open the office.’ The firm’s clients now have access to the firm in their own time zone and together with offices in other offshore centres, Mourant now spans all timezones. ‘This is of great benefit to our clients,’ says Christopher. As for choosing Hong Kong, this is where Mourant’s main contacts are, so it was an obvious choice. ‘We are looking to develop in other markets and Hong Kong is a well-placed hub for Asia.’

Commenting on Mourant’s launch, Andy Randall, Walkers’ Hong Kong managing partner, says: ‘Walkers welcomes its arrival to the region in that another offshore firm can assist with marketing the use of offshore vehicles and offshore transactions regionally.’

Appleby’s Kirk also wishes Mourant well; he believes there is scope for everybody. ‘I know how challenging it is to launch a greenfield operation in such a competitive market,’ he says.

Nonetheless, Randall believes that the challenges facing Mourant as a new entrant in Asia are substantial. ‘They are a newcomer to the practice of Cayman and BVI law, which represent the majority of offshore work in Asia and their traditional jurisdictions of legal offering have relatively little traction in the Asian market.’

Walkers has practised Cayman law since 1964 and opened in Hong Kong in 2003. As for Conyers, it has been in Hong Kong for 27 years. ‘So you could say that Mourant has arrived late in the game,’ says Conyers’ Collis. ‘It is a very demanding and reputation-driven market, such that Mourant’s arrival is unlikely to represent an immediate threat to the existing offshore law firms in Hong Kong.’

Not that Mourant thinks of itself as a newcomer to Cayman law. It has practised Cayman Islands law since 1992 and in Hong Kong it has a team of senior Cayman and BVI lawyers with many years’ experience. Nor is the firm new to the Asia market – it has worked with a significant number of Asian and international clients over many years.

Mourant is also aware of other firms in the region. ‘This could be seen as a challenge but we are enjoying the task of getting out there and offering a new option in terms of offshore service providers,’ says Christopher. ‘We have a strong team with fantastic regional experience and are working hard to raise our profile and develop further business relationships in Hong Kong and the region generally.’

Ogier’s Plowman sounds a warning to all of the newcomers to Asia. ‘Obviously there is demand for offshore legal services in Asia but the offices must be backed up by strong, locally based legal teams that know the Asian markets, client culture, and provide offshore legal services that the Asian markets actually want to buy,’ he says. ‘Latecomers to Asia selling products that are not familiar to, or in demand by, the Asian market will find it difficult to grow.’

Spreading out

Nor should the rest of the region be ignored. ‘Asia is no longer just about India and China,’ says Appleby’s Kirk. ‘South-East Asian countries, such as Indonesia, Malaysia, Singapore, Vietnam, Thailand and newcomer Myanmar are now a big part of the story.’

‘Obviously there is demand for offshore legal services in Asia but the offices must be backed up by strong, locally based legal teams’

Because of the Seychelles’ double taxation treaties, Appleby’s local office has enjoyed a steady growth of Indonesia-related work. And, as Malaysia’s businesses seek new opportunities internationally, Collis believes it will be the next country on many offshore firms’ map. He has seen increased levels of work coming from Malaysia, particularly into Singapore during the last two years.

‘South-East Asia has been a welcome surprise and there is space for all these jurisdictions as they have different focuses, which enables cross-pollination,’ says Kirk.

Collis also expects offshore firms to look at Tokyo at some point. ‘It is a financial centre that uses offshore products and is too big to be ignored by the offshore firms for long,’ he says.

The justification for coming to Asia lies in the quality of instructions picked up by offshore law firms.

In May Appleby, led by Hong Kong corporate partners Woo and Judy Lee and Cayman litigation partner Jeremy Walton, acted as Cayman counsel for Alibaba.com, a Hong Kong-listed B2B e-commerce company, on its privatisation through a Cayman law scheme of arrangement. The shareholders voted in favour of the $2.5bn buyout from parent company Alibaba Group – China’s biggest internet company – and the privatisation was sanctioned by Cayman’s Grand Court in June. With the plan approved, Alibaba acquired the remaining 27% stake in Alibaba.com and shares were delisted from the Hong Kong Stock Exchange in June.

In May Alibaba also initiated a buy back of half of Yahoo!’s 40% stake in the company for an estimated $7.1bn, making it the largest ever e-commerce M&A deal. The transaction also provided for the future divestment by Yahoo! of its remaining interest in Alibaba, following any IPO of Alibaba shares.

Led by Hong Kong-based partner Greg Knowles, Maples acted as Cayman counsel to Alibaba. ‘Alibaba was significant due to the large sum of money at stake,’ says Knowles. ‘It was structured as a share buyback, which is relatively unusual, and it had to be synchronised with a capital raising, which was overcome by providing round-the-clock, commercially oriented, technically accurate advice.’

Other recent standout Asia deals involve Conyers, led by Hong Kong partners Richard Hall and David Lamb, acting as Cayman counsel to Shanda Interactive Entertainment,
a NASDAQ-listed interactive entertainment media company, on its $2.3bn merger with
New Era Investment Holding in February. Maples’ Hong Kong partner John Trehey was Cayman counsel to Shanda’s independent board; Walkers’ Hong Kong partner Denise Wong acted as Cayman counsel to Shanda co-founder, Tianqiao Chen; while Appleby’s Kirk and fellow partner Mark Cummings acted as BVI and Cayman counsel to JPMorgan Chase Bank. In April, Walkers’ Hong Kong partners Ashley Davies and Kristen Kwok provided BVI counsel to China National Offshore Oil Corporation, one of China’s largest oil companies, on its $2bn Hong Kong Stock Exchange debt issue.

Successful strategies for Asia are key to offshore firms’ global plans. With enviable growth levels in the region and the offshore product’s profile going from strength to strength, the world’s top offshore practices will continue the hunt for Asia’s most lucrative locations. LB

julian.matteucci@legalease.co.uk