Australia

Asia’s economic growth means many Asian investors are looking at opportunities offshore, and many Australian companies are eyeing investment opportunities in Asia. “There are limits to the rate of growth in the Australian market and you can see that by the way a number of Australian corporates are pursuing one or two principal strategies: looking for growth opportunities offshore, or consolidating and growing their business by aggregation,” explains David Bateson, partner in charge of Mallesons Stephen Jaques’ Hong Kong office. While growth in many world markets remains slow, “growth rates in some Asian countries, for example, China and India, are the highest in the world – significant change leads to opportunities.”

Explaining the impetus for establishing offices in the Asia region, Bateson says, “our clients were pursuing overseas markets and they wanted us on the ground with them.” But while some of Australia’s largest firms have had offices in Asia for over two decades, other Australian practices are determined to stay put.

One such firm is Sydney-based Truman Hoyle. “Work levels have remained constant for the last 5 years,” says managing partner Shane Barber of the firm’s Asia practice. “Most of our clients in the Asian region are in the technology and communications sectors.We also handle Australian based matters for Asian clients in the intellectual property enforcement area,” says Barber, adding that “the advent of cloud computing has generated particular demand for Australian expertise in the last year.” General commercial and telecommunications regulatory advice is also in demand with clients.

Offshore challenges

Despite healthy work flows, running an Asia practice from Australia is not without its difficulties. “There are of course challenges in maintaining sufficient face to face contact to build relationships,” concedes Barber, who adds that once established, relationships are maintained through a combination of technology use and regular visits to the region. “We make sure that we use all available opportunities to visit Asia including visits by our partners to speak at industry conferences…We also seek out opportunities to participate in regional think tanks so as to contribute to policy development and meet key client prospects,” says Barber.

Large and small Australian firms resisting the move to Asia have also favoured alliances with Asian firms. For example, Gilbert + Tobin has a long-standing alliance with major Chinese firm King & Wood. Likewise, boutique Australian firm Rockwell Bates has forged a mutual referral and preferred partner relationship with Mumbai-based Rajani Associates.

Freehills, has also sought to expand its onshore presence in Asia through a network of alliances with firms in other Asian jurisdictions. John Dick, South-East Asia managing partner at Freehills, says that relationships with Asian firms have enhanced the firm’s offering to clients in Asia. “We can deliver a seamless experience to clients investing in Indonesia because of the depth of our relationship,” he says of the firm’s relationship with Indonesian firm Soemadipradja & Taher. Despite these advantages, Dick warns that the benefits do not happen overnight: “Asia is not about quick relationships. It’s about taking time and finding a balance where everyone wins… If you go into an alliance expecting a big return in 12 months you’ll be sorely disappointed.”

An onshore advantage?

Debate continues in the Australian legal sector as to whether an offshore approach to maintaining an Asia legal practice is effective. Many have questioned whether technology and lawyers with foreign language abilities, who are ready to fly overseas at a moment’s notice, are really a substitute for physical presence in a relationship-driven market like Asia. “The need to have offices in Asia really depends on what you’re trying to achieve, but if you want to leverage your skills into the region it’s almost essential to have a presence in Asia,” says Dick. “Firms with a presence in Asia are perceived in a more positive way to firms that fly in and fly out.”

Fred Kinmonth, chairman of Minter Ellison’s Asia practice, agrees, adding that a physical presence in Asia “show[s] a real commitment to Asia and Asian clients.” According to Kinmonth, other benefits include being able to serve “Australian and New Zealand clients at home and abroad,” enabling the firm to build its brand in overseas markets, and “really understanding Asian jurisdictions and enabling a true pan-Asian strategy to be identified and executed by the firm.”

“Our presence in Asia is driving a lot of transference of work,” says Bateson. “There is a high increase in cross border deals and disputes.Having lawyers on the ground in Asia with key market knowledge of issues, laws and regulations is essential.”

Outlook

With a bright economic outlook in both Asia and Australia, the latter buoyed by a continuing resources boom, deal flows both in and out of Australia look set to continue growing. Energy and resources will continue to interest Asian clients, but, much like New Zealand, sectors such as the food industry will also become increasingly attractive. It is uncertain whether other Australian law firms will open Asia offices in future, but it seems likely that there will be more. Clayton Utz resisted the move offshore for almost two decades, favouring a fly-in-fly out model, finally establishing a HongKong office in April last year.

Despite the momentum in Asia, there is little reason for a firm offshore to deviate from a model that is serving it so well. Truman Hoyle will be staying in Sydney, says Barber: “the impact on our culture as well as expense and time is not warranted when we are generating significant work in Asia without a permanent presence.”

New Zealand

Across the Tasman, New Zealand firms are also benefiting from Asia’s ongoing economic prosperity, with advising investors from across Asia, including China, Hong Kong, Japan, Korea and Singapore. “We’re typically advising these clients on the acquisition of NZ assets, particularly in the resources, agri and foodstuffs sectors,” says Bell Gully Chairman Roger Partridge. “The volume has been building over the last few years. While the type of work has not changed, the focus on agricultural assets is a relatively new trend.”

Chapman Tripp managing partner Andrew Poole says finance, technology and forestry sectors have also been of particular interest to clients from Asia, with the work performed by the firm’s Asia practice reflecting of the diverse interests that Asian parties have in New Zealand. Chapman Tripp’s usual services to Asian clients include advising on local laws, financing and structured finance matters, intellectual property and technology matters, and representing clients in New Zealand litigation. The firm also advises domestic and international clients on M&A deals in Asia and domestically. “The latter can include preparing applications to the Overseas Investment Office (OIO). In New Zealand, overseas investors must have their proposed purchases of certain assets approved by the OIO before the transaction can be completed, explains Poole.

Challenges

Although almost counter-intuitive, some New Zealand law firms seeking to receive more work from Asia have worked to foster strong relationships with Australian firms, as many instructions come via Australian firms with an onshore presence in the Asia region. Despite the importance of such trans-Tasman links, New Zealand firms cannot rely on Australia alone to bring in mandates from Asia. Firms with a strong Asia practice have also sought to foster relationships with the continent more directly.

Neither Partridge nor Poole believe a lack of a physical, permanent presence in Asia puts their respective Asia practices at a disadvantage. “Most of the challenges can be overcome with the use of technology and the willingness to hop on a plane when necessary,” says Partridge. “Our partners are regularly travelling to Asia to meet with clients and contacts. We also work very closely with a select group of Asian based law firms to help us maintain our profile in Asia.”

Poole agrees that communications technologies can make a difference: “Having the right technology is also important – we can ‘meet’ with our clients via video conference and have facilities such as virtual data rooms to facilitate sharing of information.” Yet he concedes that technology alone is not enough to build a strong Asia practice: “While technology is a valuable enabler, it can’t always substitute for face to face conversations, especially in the early stages of building a relationship with a client. So we visit Asia regularly,” says Poole. “We have a dedicated group of lawyers who are focussed on building links and ties in Asia, particularly China. We also work closely with partners who are based in Asia, for example, law firms in Malaysia, Korea and China, trade organisations and consultancies such as Mahon China.”

According to Poole, other logistical concerns are also easily addressed: “As a firm in a small country at the bottom of the world, we are used to working with clients in different time zones. Compared with Europe, the time difference with Asia is easy for us to manage.” Language barriers are also easily overcome. “Of course, our clients speak a variety of languages. We have good relationships with translators who assist with our documents, as well as in-house resources who vet our translations,” says Poole.

Outlook

New Zealand’s legal industry appears set to continue prospering from the influx of legal work from Asia. “As our referral and client network expands, we are definitely seeing an increase in work coming from Asia,” says Poole, who predicts growing investment into New Zealand, particularly in food production, resources and technology. In the coming years Poole expects many opportunities to arise from Asia’s focus on food safety: “increasingly we expect to see Asian parties interested in investing in the quality food product that New Zealand has to offer.” In addition, the free trade agreement with China is expected to promote growth in inbound and outbound investments and an increase in import and exportrelated work. Poole also predicts that the proposed partial sell down of state owned enterprises, which is expected to proceed later this year, will pique the interest of many offshore parties who will seek out local advice.  While the outlook for legal work flows from Asia is bright, New Zealand firms are determined to stay put. “At this stage an office in Asia is not part of our Asian strategy,” says Partridge. Perhaps they, like their Australian counterparts who initially resisted the move into Asia, will ultimately change their minds. What the future holds is anyone’s guess. “At present, we have no plans to open an office in Asia, but it is certainly something we could consider in the future,” says Poole. ALB

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