Law firms in Singapore are now facing a fairly clear choice: to react slowly – if at all – to the permanent, fundamental changes happening to the industry, or to move quickly and establish themselves as pioneers in the legal sector of the future. Two law firm leaders describe the path ahead. By Ranajit Dam
The travails of law firms in Singapore have been mentioned in these pages previously, but they still bear repeating. Competition is intensifying: An increasing number of international outfits are setting up shop in the city-state, smaller local firms are mushrooming to take their own slice of the pie, and even accounting firms are getting in on the action. Fee pressures grow more excruciating – the billable-hour model is dying, and fixed fees and retainers are taking its place. Much of the low-end work is now under threat from a combination of bulked-up legal teams and rising legal tech startups. And these factors don’t even take into account potential threats from emerging technologies like artificial intelligence (AI). In short, the legal industry in Singapore, much like the legal industry in other parts of the world, is facing disruptions like never before.
Of course, this means that it is critical for law firms in Singapore to react quickly and decisively if they don’t want to be overwhelmed by these fundamental, permanent changes. But the route to take for individual firms might depend on a variety of factors – their specific strategy, their place in the industry, and their strengths and weaknesses.
For Tan Chong Huat, managing partner of RHTLaw Taylor Wessing, law firms need to go beyond just being a law firm and instead offer clients a comprehensive suite of solutions for all their business needs. “Lawyers must create value for their clients,” he says. “Firms that strengthen their international expertise and are able to provide one-stop legal offerings across ASEAN and eventually globally are better placed to tap opportunities that globalisation brings.”
Additionally, he says that firms need to embrace technology to move their practice to the next level. “Disruptive technology is here to stay, and the only way to overcome disruption is to embrace change quickly,” notes Tan. “Algorithms, machine learning, and the use of big data and artificial intelligence will change how firms render professional services. Innovation is key to our survival in this competitive market.”
From an international law firm’s perspective, it is vital to look beyond the city-state’s shores, says Steven Lim, managing partner of Nabarro’s local office. “Singpore has a relatively small domestic legal market,” he says. Save for certain exceptions, the practice of Singapore law is restricted to Singapore law firms, and this a hurdle that international firms have to overcome. As such, “international firms in Singapore have to focus on regional work, to find markets big enough to support the growing number of international firms and lawyers in Singapore,” explains Lim.
Among the challenges for international firms in Singapore, notes Lim, are the increasing sophistication of national firms in some key jurisdictions such as India and China, and, for the smaller global firms, the growth of regional office networks of larger international firms. “Added to this is the rise in regional firms, such as Rajah & Tann and ZICOlaw, which position themselves as alternatives for regional legal work.”
Lim feels that the role for Singapore as a regional legal hub is changing as result of these developments. “International firms in Singapore have to review the case that regional clients will turn to them for higher-end cross-border work, and consequently, what role they can fill in this more sophisticated, diverse and competitive market,” he says. “This has led to some international firms to localise and regonalise their headcount in Singapore. They are hiring regional lawyers with international experience to meet the new challenges and demands of the market.”
GOVERNMENT SUPPORT
A couple of things that legal professionals in Singapore can agree on is the government’s continued support for creating the requisite infrastructure for the legal sector as well as its push for the adoption of technology among law firms. “The Singapore government is one of the few governments globally to focus on the legal sector as a strategic growth sector,” says Lim. “It sees a role for the legal sector in the growth of Singapore’s economy, as part of the regionalisation and internationalisation of the professional services industry to export these services to the region.”
As part of that initiative, the government has backed the growth of international law firms in Singapore, notes Lim. “It has actively looked to integrate international firms into a wider legal, professional and financial services ecosystem within the city state,” he adds.
“One area the government has pushed for successfully is the growth of Singapore as an international arbitration and dispute resolution centre. International law firms have, naturally, benefited from this. The government has encouraged international law firms to grow this expertise in Singapore and have given significant roles to international arbitration lawyers in Singapore.”
Tan says that recent changes in the legal landscape show that the Singapore government is keen to see law firms evolve with the times. “This is a move in the right direction,” he notes. “The establishment of the Legal Services Regulatory Authority in November 2015 was designed to modernise the regulatory regime of Singapore’s legal industry. Changes to the regulatory regime now allow law firms to attract and hire foreign lawyers and nonlegal talent who can help to strengthen their firm’s legal practice beyond the traditional areas of legal practice. These will also allow law firms to expand their practice into the region.”
In the disputes space, Tan notes the move towards third-party funding. “The Singapore government’s push to transform Singapore into an international centre for dispute resolution, as well as the move to allow third-party funding for arbitration, are changes that augur well for the dispute resolution sector,” he says.”
Additionally, a new five-year blueprint was introduced at the start of the year to encourage law firms to adopt the latest tools and software to improve operations, says Tan. The Singapore Academy of Law also unveiled a roadmap for the incubation a legal tech scene. “Taken together, these moves are highly positive for the legal industry,” he says. We can expect to see law firms adopting technology that can help streamline work processes or even work with other non-legal professionals to create new business offerings to clients.”
But it is the technology aspect that might just be the most critical part of the whole equation. “The gulf between the smaller and traditional law firms and the bigger legal players may threaten to widen significantly over time, especially if there is a lack of knowledge and resources to facilitate the harnessing of baseline legal technologies that can strengthen the practice of law,” observes Tan. “It is heartening to see the Singapore government provisioning for grants to encourage smaller law firms to adopt technology to grow their practice, especially with the growing potential for more legal services going virtual.”
Recently, the Singapore government announced a scheme called Tech Start for Law, a S$2.8 million grant programme designed to help small- and medium-sized law firms boost productivity through technology. “This is a step in the right direction and reflects the government’s seriousness in assisting law firm,” adds Tan.
Lim of Nabarro concurs. “Technology and information technology in particular, have transformed the world in the last 30 years. The legal sector is no exception,” he says. “Changes in the way information is collated and accessed have transformed, for example, the way legal research is done. There is no doubt that a law firm that wants to practice at the cutting edge needs to adopt and exploit cutting-edge legal technology.”
According to Lim, this is an area where international firms, given their size and global reach, can lead, but only for the moment. “Singapore firms and other national firms in the region are catching up fast,” he says. “One of the features of the revolution in information technology in the last 20 years has been the lowering of barriers to entry to the latest technology. Users are able to leapfrog to the latest technology, cutting through the cycle of developments.”
SINGAPORE’S FUTURE
According to Tan of RHTLaw, as law firms invest more in innovative technologies, the industry is likely to witness the proliferation of new technology harnessing big data analytics and AI to undertake previously time-consuming and manually laborious work such as basic legal research, document review and construction. “Some firms already use virtual secretaries and innovative solutions to ensure that they can share support services across several offices in the region,” he says.
He points out that such technology has made it possible for law firms to adopt a multi-nodal network approach to a truly regional practice. “This will facilitate consolidation within the industry through mergers and alliances across the region. Singapore law firms will have to decide if they wish to grow by going regional or international, or by becoming ‘boutique,’ focusing exclusively on specific practice areas.”
He also sees the government further liberalising the legal market in the coming years. “Greater liberalisation will increase pressure and competition in the legal sector, but it will also result in an overall increase in the quality and calibre of our local firms as we step up to compete with the established international law firms,” says Tan.
Meanwhile, Lim of Nabarro expects to see more convergence between Singapore firms and international firms. “The line between the two will continue to blur,” he says. “We have seen the development of ‘hybrid’ firms like Morgan Lewis Stamford, Eversheds Harry Elias and Dentons Rodyk – which are both international and local. The joint law venture and formal law alliance schemes have led to a gradual localisation of international law firms in Singapore.”
At the other end, Singapore law firms are also regionalising and internationalising to take on international firms and to fulfill their ambitions to export legal services to the region beyond Singapore’s shores, says Lim. “We will also see an increased adoption of Singapore law as a neutral law for international transactions and dispute resolution. This will add to the impetus for convergence,” he adds.
But what are the keys to success in this market going forward? For larger international firms, it is scale and size, says Lim. Singapore and other regional firms are expected to grow into very large firms in their own right, and with their regional footprint, “the larger international firms have to grow in scale and size in the region to compete,” he says.
“The smaller international firms have to be nimble and find their niche. They need to detect and exploit trends in the demand for international legal services in the region and find a niche for themselves amongst the larger international firms and big national firms for higher-value cross-border work.”
Meanwhile for Tan, technology and geographical reach are two critical factors that law firms must leverage on to succeed in this evolving market. “It boils down to the law firm’s ability to support its clients well through geography and intelligent innovative legal solutions,” he says. “Given the increasingly cross-border nature of many commercial transactions, having a solid global and regional network to support the clients is important. A law firm lacking in international presence will find itself challenged when it pitches for international deals and tenders.”