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Insights into the Singaporean Legal Market

Who’s Who Legal recently visited Singapore to take a closer look at the Singaporean legal market and conduct interviews with the leading international, national and specialist firms to see what changes are taking place and what impact the latest developments are having on the country’s legal market resulting in the following exclusive report.

"With the market filling up fast, competition is fierce, and firms must hone their Singapore strategy to differentiate themselves in the market."

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Credit: istock.com/platongkoh

Singapore has grown at record speed as a hub for Southeast Asian work and remains a popular destination for Western companies due to its common law regime and similar practices to the English legal system. However, it is only in recent times that the government has made a concerted effort to open up what was once a tightly regulated legal market. Also, the impact of globalisation and growth in the international financial sector has led to the steady liberalisation of the industry. For a decade now, a number of avenues have been open to international law firms looking to gain a significant foothold in the country, and competition remains fierce for the desired alliances and licences on offer. Current options include establishing a licensed foreign practice, a qualifying foreign law practice, a joint law venture/formal law alliance or a representative office. All of these require a licence from the attorney general, and firms remain limited in terms of which areas they are allowed to practise.

As a result, the number of foreign law firms and foreign lawyers in Singapore has increased drastically, with the latter nearly doubling from 630 in 2007 to 1,200 in 2012, according to an analysis of Singapore market data published by The Lawyer. This trend has only intensified as, in addition to the traditional UK and US firms, practitioners from all over the globe have been setting their sights on the jurisdiction, including Japanese and offshore firms. The Singapore International Arbitration Centre (SIAC) which was established in July 1991, today plays a leading role in the Asia-Pacific arbitration scene, with clients flocking to have their cases heard here. The volume of business including at least one Asian country has cemented Singapore’s position as a leading seat for resolution, and the jurisdiction’s common law tradition has also led to a number of English barrister sets establishing a presence.

With the market filling up fast, competition is fierce, and firms must hone their Singapore strategy to differentiate themselves in the market.

The International Firm Perspective

Singapore’s international legal community has become increasingly diverse over the years, with a number of foreign law firms putting boots on the ground. In nearly all cases, the opening of a local presence followed the establishment of an outpost in Hong Kong. As Hong Kong work becomes increasingly linked to mainland China, and China’s political influence over the administrative region grows, there is a desire to service other Asian clients via Singapore. “The island nation is seen by companies as an attractive alternative to Hong Kong, given questions over possible political influence of Beijing on the independence of Hong Kong’s judiciary,” according to a Financial Times article, published in March 2015. This view was supported by nearly all of our foreign law firm interviewees, who note the growing sophistication in corporate work in Singapore. That said, struggles with its stock market and sluggish capital markets growth has led to stagnation, meaning that Singapore remains at a disadvantage in challenging Hong Kong for the crown of finance work.

While the number of law firm entrants has increased competition, many of the lawyers that we spoke to noted that the client pool has grown along with it. Our interviewees stated that an ever increasing number of corporates are seeing Singapore as a springboard to the Southeast Asia region and the past few years have seen a number of new companies establish a presence there for the first time – for example, Chinese e-commerce powerhouse Alibaba officially launched its Taobao marketplace in Singapore in 2012. In this climate, law firms remain confident that work is available for those who have the expertise to provide the legal services required.

However, diversification in the investment and business communities has led to subtle changes in the market. A number of the international firms said that they have gone from having to instruct their local counterparts to act for them to seeing them on the other side of the table. A blurring of the lines between the traditional divisions of work has started, but there is evidently a long way to go: all of our interviewees confirmed that the tendency is still for international companies to instruct international firms and for Singaporean companies to appoint local counsel. The challenge now according to one lawyer we spoke to is “to remind the domestic clients that international firms can do the work”, although it remains to be seen whether this aim will be met.

There are also vast differences in terms of the capabilities of foreign firms in the jurisdiction. There are currently nine qualifying foreign law practice licences in Singapore; the success rate for the most recent round of applications was just 17 per cent. Pinsent Masons and Clifford Chance opted to set up a joint venture and a foreign law alliance, respectively, to increase their local law services. In early 2015 the legal press reported on a new alliance between US giant Morgan Lewis & Bockius and Singaporean firm Stamford Law. At the time of the merger, the senior director Suet-Fern Lee said: “This combination is unprecedented in extent and structure, and it represents a true integration between a Singapore-based premier law practice with an established and entrenched presence in the Asia region, and a global legal powerhouse.” The first of its kind, the newly created Morgan Lewis Stamford can practise areas of law normally off-limits to foreign law firms, and this tie-up may pave the way for other novel methods of international firms expanding their offering in the region. Indeed, 2016 has seen Dentons formalise a combination with Rodyk which will expand both firms’ service offerings. International firms without some kind of alliance or link to a local firm have noted the increasing difficulty with which they compete for work. Many see it as a “real stumbling block”, and it remains an important box to tick for those who wish to remain viable.

However, now that work is picking up across the globe and recovery following the recession ramps up, it is expected that some law firms will withdraw from the market, to focus on the increasing amounts of work in their own jurisdictions. This is particularly the case for the US firms, whose typically aggressive approach may see them pulling the plug first to focus on more lucrative areas closer to home.

The globalisation of legal services has not gone unnoticed among the Singapore bar and given the strength and popularity of SIAC, the Singapore International Arbitration Centre, a number of sets have entered the Singapore market over the past decade. With the recent launch of Singapore’s international commercial court, the SICC, the barristers that we spoke to anticipate even more to make the crossover. Barristers and clerks remain optimistic that the globalisation of work along with the liberalisation of domestic markets will increase the opportunities available, of which “Singapore is merely the first step”. 

The National Firm Perspective

National firms have met the government’s efforts to open the market with positivity, and have welcomed the introduction of foreign law firms in their midst. Despite arguments to the contrary, the vast majority of our interviewees do not believe Singapore is over-lawyered yet. While there have been many new entrants to the market, there have also been a number who have departed, as their expectations have not matched up to the reality. As one local law firm partner stated: “There is room for everyone. The question is how much it costs to be here, compared to not. How law firms operate will need to be constantly evaluated.”

 A question of mindset, most local law firms continue to greet the new entrants with optimism as they help to “grow the pie” and enhance the quality of legal work being done in the jurisdiction.

From a local perspective, Southeast Asia is the next obstacle to tackle. As one source stated: “The legal market is far less tied to the individual jurisdiction and is now more regional.” Thanks to this regional outlook, clients are less concerned about where advisors are located and more so about having the right team. A number of the leading national firms have already made headway into Southeast Asia. “Singapore is always going to be a key hub, though less work is being done physically in the jurisdiction,” one source said. The experts we spoke to predict a growth in opportunities and expect a number of Asian-based companies to “come into their own”, which will represent significant workflow for law firms in the region.

Liberalisation is also on the cards regionally, as the Association of Southeast Asian Nations (ASEAN) has met a number of times to discuss the future of legal services across its countries. The ASEAN economic community seeks to transform the member states into a single market and to that end governments have called for the “progressive liberalisation of trade in legal services”. This policy statement is steadily being acted on, as a number of local firms (including all of the big four) have opened at least one additional office in Southeast Asia.

The interplay between international and local firms has remained largely the same, according to local partners. Practitioners confirm that there is an inherent level of competition from foreign firms because of the existing relationships they may have with overseas clients. But many local firms remain unconcerned, as they continue to be retained to advise on certain local aspects of transactions.

In conclusion, local players welcome the growing maturity of the Singapore market and remain positive about what this entails. The number of new domestic firms setting up has decreased, and established firms are now turning towards processes such as branding to promote themselves – all signs of the increasing sophistication of the legal market in Singapore. 

The Offshore Firm Perspective

Since Conyers Dill & Pearman became the first offshore firm to enter the market in 2001 there has been a steady flow of new entrants to Singapore, thanks to the budding opportunities presented in areas in which these firms specialise.

According to a number of those we spoke to, Singapore is fast becoming one of the hottest jurisdictions for private client work and more specifically, centring trust structures. As the Swiss finance sector has been hit hard in the aftermath of a tax evasion scandal, clients are looking to other finance centres, including Singapore. As one private client lawyer stated, “Singapore entered the game later than the others, and so sees what happens when you push your luck too far. The key is to maintain a good reputation, and the clients will come flocking.”

On the funds side, Singapore has successfully developed the infrastructure to establish itself as a hub in Southeast Asia. One particular trend is the growing percentage of Chinese work coming through to Singapore as opposed to Hong Kong, as Chinese clients “increasingly want to be completely outside China”. The robustness of the Hong Kong stock exchange, however, means that Singapore will “most likely always remain the little sister in the capital markets”. Despite this, funds are starting to invest all over Southeast Asia, and this is likely to continue as long as the regional economies continue to grow.

According to a number of the local firms practising in this space, the introduction of new offshore firms has not made much of an impact. As one lawyer stated: “They need Singapore more than Singapore needs them.” It has been suggested that some may offshore firms find it necessary to move out of Singapore, focusing instead on their already established Hong Kong bases. This sentiment is affirmed by the offshore market. “Any offshore firm is only going to get so big,” said one partner we spoke to. With what is evidently a finite market, offshore firms must be committed and work hard to gain traction. 

The Future

As well as establishing itself as a major disputes resolution hub, Singapore is also continuing to develop as a major finance centre, with an influx of foreign and offshore companies in the financial services sector. As Singapore’s legal market, which was already ahead of many of its regional counterparts, becomes more sophisticated, it will be necessary to ensure that compliance with international standards remains a priority. Greater cross-border transparency and cooperation is likely to continue, and local and foreign firms expect to see more emphasis on harmonising enforcement rules and regulations. Singapore is well poised to be a solution for the international investment community.

Many interviewees noted the great potential in the introduction of the SICC with a number of foreign clients interested in using a more familiar court system. As Singapore proves its growing flexibility in terms of how it is regulating the legal market, sources are optimistic that the SICC will be a good adjunct to the SIAC and will further increase the flow of international corporate work into the jurisdiction. 

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