Australia boasts one of the most sophisticated markets in the world thanks to its flourishing export trade and ability to attract a highly skilled workforce. Despite a slow growth in GDP in 2017 of 2.4 per cent, the economy surpassed expectations in the first quarter of 2018, reaching a solid 1 per cent increase. In addition, 2017 proved buoyant for Australia’s legal community, who have had an interesting year in terms of innovation and development, with the implementation of new regulatory regimes, the expansion of renewable energy and diversification in the banking sector, with Australia seeing its first wave of unitranche financing. We spoke to some of the leading figures within the Australian legal market to gauge the key trends affecting practitioners across the country over the past year.
Sustained population growth coupled with high demand for passenger transport systems has driven the focus of federal and state governments towards reinforcing the country’s infrastructure. In the words of one market-leading source, “Australia chronically underinvested in infrastructure maintenance for a long time, and so it’s a relief that the authorities have finally woken up to it.” With one of the world’s strongest platforms for public private partnerships (PPP), the model is a key means of delivering infrastructure across a wide range of sectors. Despite this, there is a relatively small number of contractors able to facilitate projects on this basis. Nevertheless, practitioners are reporting an uptick in PPP activity, and predict its expanded use in the future to keep up with the “massive need” for project development.
As one of the world’s leading producers of extracted minerals, the natural resources industry within Australia plays a key role in its economic development. For the past few years, mining companies have been struggling to revive the market, following a slump in commodities prices and a drop in global demand. However, sources reported a growing optimism within the sector, with “companies finally becoming more inquisitive and looking at possibilities for organic and non-organic growth”. Given the proximity to China, the largest lithium market in the world, practitioners in Australia noted new opportunities opening up for their clients and predict an uptick in transactions in the near future.
Following a challenging 2016, the energy and utilities industries also appear to be looking up. With plentiful renewable and non-renewable sources, Australia has long been a key player in the global market. It has a relatively stable and reliable approach to power generation; however, sources reported that the past year has seen “a major shift in terms of power generation and the natural gas sector”. This is particularly prominent within the Western Australian market, as swathes of liquefied natural gas projects near completion, leading to questions about the future. One practitioner we spoke to noted: “People are starting to think strategically about whether to hold on to assets or sell out of the downstream,” signalling some very interesting transactions ahead.
The renewable energy market is also attracting considerable attention, as the world’s priorities continue to shift in response to dwindling natural resources. Lawyers we spoke to reported an influx of new financings in this space, noting “the huge amount of money looking to invest in renewables”. The past year proved an interesting year in terms of innovation within the Australian electricity sector. Following the successful completion of a 100-megawatt battery project by Tesla and Neoen in Southern Australia, in response to large-scale blackouts in 2016, Australia is tipped to be the world leader within the energy storage market. This has inspired continued innovation across the country, with the announcement of the Aurora Solar Plant in Port Augusta, South Australia, which is predicted to deliver 100 per cent of the state’s electricity requirements by 2020. These large-scale projects also signal busy times ahead for construction specialists, who predict “an explosion of work in the renewables space”, which is set to continue for many years to come.
With more than $177 billion of industry revenue, franchising plays a key role in the strength of the Australian economy, and expertise within the space is a highly sought-after commodity. The past year has been fraught with difficulty for practitioners however, with one noting: “Despite all the evidence suggesting the success of the franchise model, the industry is being overshadowed by the bad press.” In March 2018, the government announced a new inquiry into the Franchising Code of Conduct, following a plethora of scandals concerning some of the principal players in the market, including global retail chain 7-Eleven, many of whose franchisee employees were victims of widespread wage fraud. Although the issues related predominantly to the actions of franchisees, it was the franchisor itself that was held to account in the media, resulting in a fierce backlash from the public. As a result, in late 2017 added protection for vulnerable workers was implemented into the Fair Work Act, through imposing liability on franchisors to control the treatment of employees by franchisees. The recent difficulties faced by market players have led to a notable uptick in advisory work for lawyers, who highlighted the call from clients for compliance advice and training. Practitioners also reported the increasingly litigious nature of franchise work, as the number of disputes between franchisors and franchisees continue to rise, in line with the global trend.
“Australia has probably the most sophisticated adoption of alternative dispute resolution in the western world,” one leading mediator told us. Over the past decade, commercial litigation has been curtailed across the jurisdiction as a result of the pervasive nature of ADR across the country. In the mediation space in particular, as a result of budgetary constrictions, commercial organisations’ appetite for ADR has risen dramatically, leading to a surge of work for practitioners. Mediators across our research have also noted a shift in the source of their work, highlighting that “a lot more work is now coming direct from corporate counsel and consultancy firms”. As the mindset of disputes – “problems to be solved, not battles to be won” – continues to gain traction across Australia, the prioritisation of future relationships between disputing parties indicates no shortage of work for mediators in the foreseeable future.
As new entrants continue to filter into the legal market, the competition in Australia is growing increasingly fierce. Since 2012, four of the Big Six commercial law firms have merged with key international players, a development that has transformed the Australian legal landscape. Our research has found that this trend shows no sign of slowing down, with practitioners noting the “continued rush towards mergers between global players and domestic outfits”, such as the successful combination of Henry Davis York and global player Norton Rose Fulbright in December 2017. Sources also highlighted the following of this trend by medium-size players, including the February 2018 announcement of HWL Ebsworth’s plans to acquire TressCox Lawyers, and the announcement of a three-way merger between Fisher Adams Kelly Callinans and Cullens with Asia-Pacific IP specialists Spruson & Ferguson, which was described as “an interesting development to watch”.