The pandemic might be (almost) over, but the sense of unease remains strong in Asia’s legal industry. While life might have returned to normal, and supply chains appear back on track, the region is continuing to experience uncertainty over slowing global economic momentum, tightening monetary policy affecting credit growth, and lingering concerns about inflation. China’s seemingly irreversible economic decline is also hanging heavy.
As M&A transactions dry up and capital markets remain patchy across the region, law firms have responded in a variety of ways. Some have taken the prudent road and looked to scale back their presence, including well-known international firms in Greater China. Others realise it could pay off to be bold at a time like this. As a result, we have seen the landscapes of key legal markets in Asia begin to shift in clear directions, with the momentum expected to accelerate in 2024.
JAPAN: OUTWARD BOUND
A huge amount of dry powder combined with next-to-growth at home meant that despite a weaker yen, Japan’s corporates sought returns overseas, and the country’s law firms expanded internationally just as aggressively. Large and mid-size firms also hired international lawyers to compete for inbound legal work, creating more competition for foreign law firms in the country.
Japanese companies, like others around the world, have been rethink-ing their China strategy in the last year, with investments slowly moving out of the PRC and moving increasingly into Europe and Southeast Asia.
And lawyers are following their clients around the world, says Tony Andriotis, the head of DLA Piper’s international arbitration practice in Japan. Anderson Mori & Tomotsune opened a second European office in Brussels in October, following a Lon-don launch last year. Mori Hamada & Matsumoto has announced plans to open a New York outpost, following in the footsteps of Nishimura & Asahi and Nagashima Ohno & Tsunematsu. And TMI Associates opened a second European office in Paris to go with its London outpost.
Even a relatively newer law firm like Miura & Partners has been expanding aggressively, announcing international office launches in Jakarta, London and San Francisco with plans to open in Ho Chi Minh City in 2024.
A lot of the focus has been Southeast Asia, says Andriotis. Japanese clients and law firms have had long-standing and stable relationships in Southeast Asia as a result of which the region naturally becomes the recipient of outbound business from Japan, he explains. This only grew in 2023, as Nagashima Ohno also established a Jakarta presence, and Anderson Mori set up shop in Hanoi; it had already launched an HCMC presence in 2015. Domestically, clients have also gotten a lot more sophisticated, leading to the demand for niche legal services and an increased sese of competition in the Japanese legal market, says Andriotis.
“Now they’re actually making much more careful decisions on which law firms hire. The sophistication of clients has led to more competition in the domestic market. The clients are now much more familiar with international standards and are already familiar with their local market. While the sig-nificance of relationships has not gone away, if a smaller or boutique firm can show quality and cost-effectiveness, clients may be more inclined to work with them,” explains Andriotis.
This has led to the emergence of a larger market for mid-size, small, and boutique firms in the country, which can now compete for work with the six largest firms.
Post-pandemic Japan is a symbol of slow, stable and real growth, prompting global investors to consider the country a stable investment destination. While global inbound work goes primarily to foreign law firms with a presence in the country, local firms have revamped their structures to capture a part of this inbound market. Nishimura & Asahi became the second major Japanese law firm to allow foreign lawyers to become full equity partners, after Anderson Mori in 2021. “Japanese law firms are hiring more international lawyers so that they can handle inbound legal work and represent Japanese companies abroad on their own and compete with international law firms that clients tend to otherwise rope in,” adds Andriotis. The key to this is also that Japan, unlike some firms in South Korea, has not “Americanised” its partner rates, even for its international partners based in Tokyo. Firms in Japan still offer a considerable discount on lawyer fees even to foreign clients, as compared to global counterparts with a Japan office, Andriotis explains.
Lastly, Andriotis also points out that Japanese law firms are becoming more aware of the importance of brand recognition and are “embracing a more international model of marketing.” Firms are hiring more marketing professionals, and partners are seeing a lot more cooperation with marketing teams. “You’re seeing real growth and appreciation of this kind of branding,” he says.