Law firms are struggling to choose between Hong Kong and Singapore
By Robert Sawhney, Managing Director, SRC Associates
Foreign law firms continue to open offices in Asia in a manner that follows the old adage of law firm expansion: follow clients or do what the competition is doing.
Olswang is set to open an office in Singapore this year as it focuses on ‘international integration’. Withers intends to add a Singapore office to the one it opened it Hong Kong only a few years ago. Mayer Brown JSM, the merged entity of US firm Mayer Brown and Hong Kong stalwart Johnson Stokes & Master, is also slated to open a Singapore office by the end of 2011. Berwin Leighton Paisner is set to open an office in Hong Kong this year as well, on top of its recently-expanded Singapore office.
There is little doubt that Hong Kong and Singapore are now vying for the title of Asia’s financial centre; the two have certainly upped the ante when it comes to attracting legal business.
Hong Kong has its advantages in terms of access to China (although law firms are now skipping Hong Kong and opening directly in the mainland). It also has a more open legal market, whereby foreign law firms can practice local law upon meeting certain stipulations.
Singapore continues to open up its legal market and is planning to expand the number of firms that can apply for a foreign law firm license and hire local lawyers. Another point of interest for Singapore is the preference among Indian businesses to go through it when investing overseas. The Singapore-Indian chamber of commerce expects around 4,000 Indian businesses to invest in Singapore by the end of 2014.
Battle over arbitration
A key area in which the two cities do battle is arbitration. Singapore has been relentless in promoting itself as a centre of alternative dispute resolution, highlighted by its state-of-the-art Maxwell Chambers arbitration complex.
The Singapore International Arbitration Centre (SIAC) administered around 140 disputes in 2010, compared to 291 by the HK International Arbitration Centre (HKIAC). These numbers can be misleading, however, as Hong Kong is down by around a third on 2009, whereas Singapore has experienced 100 per cent growth since 2008.
While Hong Kong probably has a stronger array of arbitration counsel available than Singapore, it still seems to suffer from the misperception that Chinese parties have an advantage in arbitration cases held in the city.
Having spent time at both centres and dealt with those involved in promoting Hong Kong as an arbitration centre, I can see why Singapore is catching up. The HK centre is run down and, with the hands-off approach often employed by the HK government, the efforts to promote HK are disjointed, lack a clear strategy and, in my opinion, are poorly managed.
That may change however now that Huen Wong, former president of the HK Law Society, has taken over the chairmanship of the HKIAC. One major initiative that should help is the new ordinance in HK that closes the gap between domestic and international arbitration although, as Wong recognises, this is only part of the puzzle.
Capital markets competition
Capital markets is another obvious area of competition. Hong Kong has benefited greatly from its link to mainland China, as Chinese firms continue to lead the world in raising capital. Much of that business has gone to the Hong Kong stock exchange, although the Shenzhen Stock Exchange that leads the way in terms of numbers of deals.
Hong Kong continues to be aggressive in trying to attract different industries, good examples being the recent listings of Rusal (natural resources) and Prada (luxury goods), as well as those in heavy industries, such as China Rongsheng Heavy Industries Group Holdings (shipbuilding).
According to Bloomberg, total proceeds from IPOs in Singapore totalled around US$6bn in 2010, whereas HK led the world with proceeds of around US$50bn.
No clear winner
With around 100 foreign law firms in Singapore and 70 or so in Hong Kong, it seems the battle to be recognised as the leading financial centre in Asia will continue.
While Hong Kong may hold the lead on big-ticket deals and access to China, Singapore, with the interventionist approach of its government, continues to carve its own path as a base to nearby emerging economies and the place of choice for companies in developing sectors such as TMT, bio sciences and maritime.Tags: