The view from Fort Canning Hill is telling. You stand next to an early 20th century lighthouse, a testament to Singapore’s early success as a maritime trade hub. It shut in 1958, as the skyscrapers vaulting up rendered it hardly visible from the sea – a port at the crossroads of India and China was becoming a major financial centre.
Today instead of the sea, the view is of dozens of buildings hosting international banks, insurers, manufacturers, tech companies… and of course, lawyers. A city-state of just five and a half million is home to almost 1,000 national and 150 international law firms, making it one of Asia’s two dominant global hubs alongside old rival Hong Kong.
‘This is the most competitive market I have ever worked in,’ says Herbert Smith Freehills (HSF) South-East Asia managing partner Alastair Henderson, who has carved out a career across London, Hong Kong and Bangkok, before moving to Singapore. ‘It is questionable whether there is enough work here to sustain everybody profitably. That leads to cut-throat competition.’
The point is echoed in dozens of conversations in the offices around Marina Bay, where lawyers gripe about myriad smaller rivals prepared to accept any mandates. And there is the ban on local law for foreign firms.
Such conditions have bred casualties. Norton Rose Fulbright (NRF)’s once ‘fabulous’ finance brand is felt by many to have faded recently, although Singapore managing partner Yu-En Ong says he is not cutting down its 70-strong team. A shift to new premises in December is aimed at reducing costs and the firm’s ten-partner finance team is expected to benefit from the current rise in fintech.
Freshfields Bruckhaus Deringer came back to Singapore in 2012 after a five-year absence and only keeps a few dozen lawyers on the ground to control costs, although it is relatively successful in its focus on cross-border mandates.
South-East Asia has some of the fastest-growing economies in the world, not to mention the proximity to India, where foreign players are still prohibited from even setting up shop.
The only city where legacy Herbert Smith and Freehills both had offices, post-merger HSF trimmed in Singapore in 2013, although its headcount is back above the 50-lawyer mark today. Morgan, Lewis & Bockius has more than halved its headcount from 80 to less than 40 after acquiring a third of the well-established local player Stamford Law Corporation in 2015. High-profile Singapore head Suet-Fern Lee stepped down in June 2017 amid a row between her husband and his brother, the country’s prime minister Lee Hsien Loong, who accused Stamford of being involved in drafting their late father’s will. (Overlapping family, social and business links are a striking feature of the Singapore business and professional community, even by the standards of South-East Asia). Stamford denies the claims. She now works between Hong Kong and Singapore as head of Morgan Lewis’ international leadership team, and the firm points to a shift to cross-border work as the reason for the departure of a number of partners focused on domestic matters.
It is tempting to conclude that Singapore conforms to the image of Asia as a closed shop failing to deliver on its early promise for the Western legal profession. But the reality is far more nuanced. ‘Four to five years ago people said: “This market is unsustainable. Many firms will close down.” But that’s not happened,’ says Henderson. ‘That speaks to the fact that the market has achieved a degree of equilibrium. Most of the law firms that are here have found a model for survival.’
First, none of the large international firms are in Singapore for domestic work. South-East Asia’s 11 nations include some of the fastest-growing economies in the world, not to mention the proximity to India, where foreign players are still prohibited from even setting up shop.
Second, the city-state’s growing reputation as an arbitration hub travels far beyond Asia. Indian, Russian and even Chinese companies are regulars to the Singapore International Arbitration Centre (SIAC), seen as more impartial and reliable than local equivalents. It goes without saying that you do not need to practise local law to register at the SIAC.
Moreover, foreign disputes teams can count on the growing influence of the Singapore International Commercial Court (SICC), set to benefit from legislation passed this year to extend its jurisdiction over cases arising from both the SIAC and the High Court. ‘They are trying to transfer as many cases to the SICC as possible,’ says Baker McKenzie’s Andy Leck.
For the partners positioned well to benefit from Singapore’s heavy investment and slick legal infrastructure, there are rich pickings; one Singapore-based disputes partner at an UK-based law firm notes that there have been years when he has billed over $6m.
But Singapore’s key distinguishing strength is its government’s attitude: rather than pandering to protectionist lobbying, it has sought to engage foreign advisers to help export the state’s brand and law in the region.
‘The fact that all the big UK and US firms are in Singapore and very active in the region allows us to pitch Singapore as a legal centre for the region,’ says Sushil Nair, deputy chief executive of leading independent Drew & Napier. ‘That’s good because if Singapore is seen as the place to execute those mandates, it means there is more work for everybody.’
There are a lot of options for firms to operate in most areas of Singapore law. Nine hold qualifying foreign legal practice (QFLP) licences: Allen & Overy (A&O), Clifford Chance (CC), Latham & Watkins, NRF and White & Case have had theirs since 2009 (the first batch awarded). Linklaters, Sidley Austin, Jones Day and Gibson, Dunn & Crutcher since 2013, when a second
wave were given out. Reviewed every five years, firms have to comply with Singapore-qualified lawyer quotas and revenue targets from Singapore law mandates.
‘This is not designed to see us compete with domestic firms, but bring in work and teams, and execute our international deals under Singapore law,’ says Linklaters’ local head Christopher Bradley. ‘Historically, cross-border work would have been governed by English or US law. Now we are increasingly seeing Singapore law in high-value deals.’
The rewards for QFLP holders can be substantial. According to the most recent data available, the group generated nearly $300m in 2016-17. Linklaters’ Singapore base counts 80 lawyers, a third of them Singapore-qualified, and generates roughly 20% of the City giant’s substantial Asia business. A&O’s local arm, of a similar size, is also regarded as a clear success story. CC, meanwhile, has by far the largest office among London’s big four, its team more than doubling from 55 to over 120 in the last decade and contributing a large chunk of the firm’s £280m in Asia-Pacific last year.
This is not to say that targets are easy to meet. HSF’s post-merger restructuring cost the firm its licence. It decided to give up its QFLP when it came up for renewal in 2014 (the government had offered the firm a one-year extension to meet its revenue targets).
The second batch was originally due for renewal this year but the Ministry of Law deferred its decision to 2020, as performances fell short of their earlier commitments amid Asian economies’ weaker-than-expected growth (a characteristic sign of pragmatic flexibility offered to foreign firms from the justice ministry).
‘Historically, cross-border work would have been governed by English or US law. Now we are increasingly seeing Singapore law.’
Even those that are not part of the exclusive club can find their way into Singapore law. They can establish formal law alliances (FLAs) with local players (often small shops made up of their own former lawyers), allowing them to co-brand and issue joint bills while keeping separate accounts. Or they can acquire a 50% stake in joint law ventures (JLVs), bringing together lawyers from international and Singapore firms.
Bakers has by consensus built a strong brand thanks to its pioneering 17-year-old, 150-strong joint venture with Wong & Leow, while arbitration veteran Henderson has effectively driven HSF’s post-2014 relaunch in its formal alliance with Prolegis after abandoning the QFLP structure. Simmons & Simmons launched its own JV in November 2016, which has since built into a 25-lawyer operation focused on finance.
Verein firms also have the option of welcoming local players into their brand. The standout is Dentons’ 2016 deal with 155-year-old Rodyk & Davidson. The 200-lawyer practice has a solid reputation in disputes and Philip Jeyaretnam, now Dentons global vice chair, is among the best-regarded litigators in the city-state. Foreign firms can also acquire 33% of a local outfit, hence Morgan Lewis Stamford and, since 2017, the 100-strong Eversheds Harry Elias.
As important, regulators are known to strike a constructive stance with foreign firms (Legal Business knows of one international firm owning 100% of a JLV, for example). Nevertheless, some partners describe the current system as complex and confusing, and highlight the risk that the government will at some point either clamp down on FLAs and JLVs or simply open up the market.
But as things stand, firms with no local law capability are the exception rather than the norm (Milbank, Tweed, Hadley & McCloy’s 30-strong branch is considered the most successful among them). Local hierarchies have been impacted.
Sure enough, local champions Rajah & Tann (R&T), Allen & Gledhill (A&G), WongPartnership and Drew & Napier are here to stay, all generating around the $100m mark and annual growth in the high single digits. But the competition for talent from international players has forced them to modernise with varying success. Such firms have generally expanded their equity, once only made up of a handful of partners (one of the elements that got in the way of the attempted A&O-A&G merger back in 2013), and expanded across the region. R&T is considered the most advanced in the process, having surged to over 600 lawyers across ten Asian countries, with one in three a partner. Likewise, the consensus in terms of practice heft is that R&T has strengthened its hand in recent years while the once unchallenged might of A&G as Singapore’s top corporate player has faded.
Beyond the big four, it is hard to find credible local players that are not in some form of tie-up with a global player, including well-regarded, 100-strong Lee & Lee’s JLV with Hogan Lovells.
‘Singapore firms are increasingly recognising that the domestic market is small,’ observes WongPartnership’s Teck Wee Tiong. ‘Many have built or are looking to build regional or international networks.’
Current trends are, if anything, raising the profile of Singapore for international firms, especially as Hong Kong increasingly attracts the Chinese domestic firms. Current proposals to double the domestic lawyer quota for foreign firms underlines how Hong Kong has become less welcoming to Western players. Throw in sky-high operating costs and the relative attraction of Singapore is clear.
A local partner sums up a common sentiment: ‘Historically, Singapore was pretty small and Hong Kong regional [for Asia Pacific]. Now Hong Kong is increasingly about China and the regional stuff is done in Singapore.’
Decades after the lighthouse at Fort Canning shut, the influx to the little city-state looks likely to further grow. In a global economy defined by an increasingly unreliable reception for foreign businesses and their lawyers, Singapore’s long campaign to become Asia’s premier global hub has never looked more potent.