Elections, political tensions, accelerated regulation and shifting sands of opportunity are some of the factors influencing law firm movements in the region. Like never before, the turnstyle of firm exits and entries provides a pulse count of regional business, writes Brian Yap
Law firms across Asia are experiencing differing challenges and opportunities in light of today’s events, which range from elections and regulatory changes to rising interest rates and US-China tensions. In China, while talk of exits by global law firms amid the country’s strained relations with the US has flooded mass media, a reverse trend of expansion into the world’s second-largest economy by other international law firms has been in motion.
India has also been bucking a trend by running a robust equity capital market during a general downturn in initial public offerings across Asia under a high interest rate environment.
The Philippines has moved into the limelight as a previously overlooked market, with two of Japan’s largest law firms having recently established outposts in the country. Thanks to regulatory changes and government-led economic initiatives, law firms in the country have been benefitting from growing deal activity in sectors including energy, infrastructure and construction.
Regulatory changes in Thailand and South Korea in the capital markets and financial technology sectors, respectively, have been keeping investors on edge. But the regulatory tightening measures have also sent companies knocking on law firms’ doors.
Law firms have also been reaching out to an increasing amount of investment by Japanese and Chinese companies in Southeast Asia amid China’s economic slowdown.
For some Vietnamese firms, the growing amount of Southeast Asia-bound investment has been significant enough to consider striking strategic alliances with Chinese law firm partners to tap into a wider pool of Chinese investors.
Indonesia has been suffering from sluggish activity in the IPO market, but a smooth presidential election in February has led to a gradual pickup in market sentiment and deals. Along with an active flow of inbound M&A deals by foreign strategic investors, new regulations in the insurance space could trigger more corporate work, according to local lawyers.
China
Mainland China’s legal market has been marked by a series of exits and retrenchments by international law firms, particularly those headquartered in the US, amid continuing tensions between the US and China.
But while news including Akin Gump Strauss Hauer & Feld’s Beijing office closure and Dentons’ end of its alliance with Dacheng Law Offices have made headlines in the past year, a number of global and regional law firms are reversing this trend and have set their sights on opportunities in China, particularly in the country’s Guangdong-Hong Kong-Macau Greater Bay Area (GBA).
These foreign players, many of whom have already been running operations in China for years, have been expanding their presence in the world’s second-largest economy with new office launches or strategic lateral partner hires.
Senior partners at those firms told Asia Business Law Journal that, particularly with the recent expansion of the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone, a special economic area in southern China, there is a fresh spring of legal work ranging from dispute resolution and intellectual property to shipping, technology and aviation for foreign law firms to tap into.
“As a firm, we are structured to be sector-focused, so that includes aviation, shipping, construction, commodities, insurance, energy and six of the pillars, and these are all core areas of China’s economy,” says Justin Sun, a partner at Holman Fenwick Willan and the chief representative of the firm’s newly launched Qianhai office.
In the past year, Holman Fenwick Willan, Morgan Lewis & Bockius, Bird & Bird, Quinn Emanuel Urquhart & Sullivan and Allen & Gledhill have opened new offices in China. Malaysia-based firm Ricky Tan & Co and Cyprus-based Areti Charidemou & Associates also received approval from China’s Ministry of Justice last year to launch operations in the country.
Morgan Lewis and Bird & Bird, which run offices in Hong Kong, Beijing and Shanghai, both launched new offices in Shenzhen, known as China’s technology capital and home to conglomerates such as Huawei, ZTE Corporation and Tencent Holdings.
Both firms expanded into Shenzhen intending to tap into the deep pool of Chinese technology and life sciences companies there. In Morgan Lewis’ case, its Shenzhen office “will expand the firm’s intellectual property reach in China, with the team litigating the full range of IP cases, including patent and trade secrets disputes”, among other things, according to the firm.
Holman Fenwick Willan, which has offices in Shanghai and Hong Kong, specifically picked Shenzhen’s Qianhai for its China expansion because the development initiatives set for the special economic zone match the bread-and-butter offerings of the UK firm.
“Shenzhen itself has a strategy of developing its ocean economy, and we are the number one shipping law firm in the world. When we started thinking about it, the partners in Hong Kong collectively felt that was where we should be doing something,” says Sun.
For regional players such as Rajah & Tann and Allen & Gledhill, two of Singapore’s largest law firms and both with offices in Shanghai, there is and will continue to be outbound investment work coming out of China into the Southeast Asian region that can be seized.
Kelvin Poon, a deputy managing partner of Rajah & Tann in Singapore and head of the firm’s international arbitration practice, says: “One key market that we see likely to be powering and driving the growth of the dispute resolution practice market in Singapore is actually North Asia and, particularly, the Greater China influence.”
Rajah & Tann’s recent hiring of international arbitration partner, Hew Kian Heong, from Shanghai-based Kewei Firm, Herbert Smith Freehills’ joint operation firm in China, is an example of the Singapore firm’s effort to sharpen its offering to Chinese companies.
“Hew is an industry veteran and has been in China for a long time. [Through him] we can have a much closer touch point with clients across China and new sectors, and bring more of our partners into relationships with these clients,” says Poon.
That closeness is important for securing mandates from Chinese companies for their investments into Southeast Asia, including those for energy and infrastructure projects. “We are not in China to practise domestic Chinese law, with Hew and his team acting for Chinese clients on projects overseas.
“As far as dispute resolution is concerned, the facility is usually something outside of China and that usually involves arbitration in Singapore,” says Poon.
India
India, the world’s fifth-largest economy, took the international legal market by surprise in March last year when the Bar Council of India announced the liberalisation of the country’s legal market to admit foreign law firms. One year on, both Asia-based and Western law firms have generally remained in wait-and-see mode, awaiting relevant rules to be clarified and a regulatory framework to be established before any office launches.
Meanwhile, the Indian legal market, according to senior partners at both domestic and international law firms, is very active in work relating to equity capital markets, cross-border M&A and leveraged finance.
Affected by high interest rates and other issues, bourses in Asian markets such as Thailand, Singapore, Hong Kong and the Philippines have been suffering from a continuing slowdown in IPOs. But, thanks to strong domestic growth and robust retail markets, India has seen law firms in the country benefitting from a strong pickup in capital raising and IPO work by Indian companies, says Cyril Shroff, the managing partner of Cyril Amarchand Mangaldas (CAM) in Mumbai.
Global law firms such as Allen & Overy, which has an established India practice in Singapore, have also benefitted from a high volume of legal work from areas including equity capital markets.
Pallavi Gopinath Aney, a partner in the international capital markets practice of Allen & Overy’s Singapore office and joint chair of the firm’s India group, says: “In the equity capital markets space, we are seeing different types of issuers looking to list, ranging from homegrown new-age technology companies or unicorns to the Indian subsidiaries of large foreign multinational companies.”
The Bombay Stock Exchange and the National Stock Exchange recorded 31 IPOs in the fourth quarter of last year, representing a 72% increase over the same period in 2022, according to statistics from EY India. South Korea’s Hyundai Motor has also recently been reported to be considering listing its India unit to raise at least USD3 billion.
“The younger technology companies tend to have a large investor base in the capital structure looking for an exit. We are also seeing other IPOs being driven by private equity exits,” says Aney.
The cross-border M&A space recently stole the limelight with news of the Walt Disney Company’s USD8.5 billion merger with Reliance Industries in India. This blockbuster merger has brought together six international and domestic Indian law firms.
Skadden Arps Slate Meagher & Flom, as well as Khaitan & Co, and Shardul Amarchand Mangaldas & Co are advising Reliance Industries and Viacom18 Media on the transaction. Cleary Gottlieb Steen & Hamilton, Covington & Burling, and AZB & Partners are representing Disney in the deal.
Rabindra Jhunjhunwala, a partner and senior member in the corporate and commercial practice group of Khaitan & Co in Mumbai, says his firm has been occupied with M&A work coming from information technology, manufacturing, financial services and healthcare.
“These are the sectors that have seen the maximum push from the government of India, which is why private capital also backed these sectors, resulting in increased deal activity,” he says.
An increase in investment coming from US and Japanese companies amid a slowdown in China’s economy has also been fuelling work in the M&A and investment space, along with employment, disputes and intellectual property matters, according to Shroff, of CAM.
The Philippines
The Philippines has been overlooked in Asia, with neighbours such as Indonesia, Vietnam and Thailand often favoured by multinationals for large-scale investments. But the perception of the Philippines lacking the capacity for big-ticket deals is changing, and law firms in the country are feeling the impact of the shift.
In recent months, Nishimura & Asahi and Mori Hamada & Matsumoto, two of Japan’s largest law firms and each with offices across Asia and in the US, have established presences in the Philippines via strategic alliances with domestic law firms. In the case of Nishimura, Japan’s largest law firm by headcount, the Tokyo-based firm also hired Philippine and New York-qualified partner Jason Jose R Jiao from Oh-Ebashi LPC & Partners last year.
Agustin Montilla, a senior partner at Romulo and a member of the firm’s securities department in Manila, says: “The Japanese have always been strong investors in the Philippines. Especially with the strength of their economy now, they continue to look outbound for opportunities. Law firms will follow their clients, and two of the big four Japanese law firms have outposts now in Manila.”
Clients are looking at an array of deals in areas such as renewable energy, infrastructure and construction in the Philippines, according to senior partners at domestic law practices. A combination of government-led investment initiatives and regulatory relaxation moves in a politically stable environment have contributed to an increase in inbound deals by foreign companies.
Louie Ogsimer, a senior partner at Romulo and co-chair of the firm’s dispute resolution department, says: “One of the bigger investments that we are advising on is the expansion of a solar power plant by US solar firm Maxeon. When President Marcos visited the US last year, the biggest investment that he brought home was Maxeon. They are looking at around USD1 billion in additional capital expenditure to expand their solar manufacturing facility in the Philippines.”
The opening of the country’s renewable energy sector to full foreign ownership and the launch of a green energy auction programme in recent years have been driving work in the energy space, according to Regina Jacinto-Barrientos, founding partner and chief executive officer of PJS Law in Manila. “Just for this week, there are about 15 renewable energy projects that are going to be closed. It is coming from the project finance side,” she says.
In 2022, the Department of Energy (DOE) amended the Renewable Energy Act of 2008 to remove Filipino ownership requirements for the exploration and utilisation of solar, wind, hydro and ocean or tidal energy resources. In the same year, the DOE also launched the first round of the green energy auction, which saw 24 qualified bidders competing for a 2GW capacity requirement.
Infrastructure is another area that Jacinto-Barrientos has identified as a huge source of deal work, with her firm and Pinsent Masons MPillay having been chosen to assist the Asian Development Bank in advising the Philippine government on a USD3 billion redevelopment of Manila’s Ninoy Aquino International Airport. The government recently awarded the contract to a consortium led by Philippine conglomerate San Miguel Corp.
“Foreign investors are keen on looking at what changes that this administration can make. Currently we still have restrictions on ownership of land, and if that can be addressed in one form or another, that could open up a lot of opportunities,” says Jacinto-Barrientos.
South Korea
In South Korea, several regulatory tightening moves in the financial technology and cryptocurrency space have sent companies seeking legal advice from law firms.
In September last year, the country amended its Electronic Financial Transactions Act, which expanded the business scope of the issuance and management of electronic payment means subject to registration with the financial regulators.
Set to take effect in September this year, the amendment has resulted in many companies needing to make the required registration for their current business, according to Chloe Jung-Myung Lee, a partner at Lee & Ko in Seoul who specialises in digital finance and fintech. “That has a huge impact on the market,” she says.
Also introduced in the amendment is a buy now, pay later service, which was previously allowed exceptionally based on the country’s regulatory sandbox. Because of the amendment, says Lee, the deferred-payment service is now allowed only if the service provider gets approval from the financial regulator.
Thailand
In Thailand, a new raft of capital markets regulations aimed at protecting public interest, coupled with uncertainty partially caused by the country’s general election last year, have created a challenging environment for companies to raise an IPO, says Kudun Sukhumananda, founding partner of Kudun & Partners in Bangkok.
Following an accounting scandal involving listed wire maker Stark Corp being found with at least THB15.6 billion (USD434 million) of irregular transactions, the Thai Securities and Exchange Commission has recently announced new listing regulations including raising the ratio of free float and setting a higher threshold for profitability and shareholders’ equity.
But Sukhumananda and his firm are not deterred by the slowing trend in capital markets, which has seen Thailand recording the biggest fundraising decline in the region, with a 75% slump to USD773 million according to analyses by Nikkei and Dealogic.
“Capital markets are one of the areas of focus that we want to do more this year,” says Sukhumananda. “We have been expanding very fast in the capital markets space, actively recruiting talents to assist in this endeavour, and we have been mandated to represent companies in various industries looking to raise funds through Thai capital markets.”
On the inbound investment and M&A front, there has been continuous growth in Chinese and Japanese investment focusing on electric vehicle and supply chain businesses, according to Emi Rowse, a partner and head of Japan practice at Kudun & Partners. The stream of Japanese companies, including trading houses, looking into doing more M&A in Thailand has been generating work in areas ranging from competition and antitrust to corporate governance and compliance.
A recent post-covid rebound in Chinese investment into Thailand, being led by Chinese electric vehicle makers including BYD and Neta Auto, has also been adding to the pipeline of work flowing into the Thai legal market, says Mayuree Sapsutthiporn, a partner and head of China practice at Kudun & Partners in Bangkok.
Vietnam
Growing Chinese investment is also streaming into Vietnam. YKVN, one of Vietnam’s largest law firms, is among those seeking to capitalise on it.
The firm has seen growth in inbound investment by privately owned manufacturers based in mainland China or Hong Kong, with businesses in the US. This new wave is also accompanied by increasing activity of Chinese state-owned companies putting money into Vietnam’s renewables sector, according to Minh Dang, a senior partner at YKVN and head of the firm’s Singapore office.
Dang told Asia Business Law Journal that Chinese investments are becoming important enough that his firm is reaching out to its Chinese law firm friends to explore the possibility of a strategic alliance.
“Before this, it was more Chinese contractors bidding for EPC (engineering, procurement and construction) contracts, but in the last couple of years, and most recently, we have been seeing Chinese investors coming into the Vietnam scene,” says Dang.
Oliver Massmann, partner and general director of Duane Morris Vietnam, has been looking at a different trend. According to Massmann, under the free-trade agreement between Vietnam and the EU that took effect in 2020, more and more European companies, including German manufacturers, have been relocating parts of their China production business to Vietnam.
China concluded negotiations on the EU-China Comprehensive Agreement on Investment in 2020, which would give EU investors greater access to China’s market, but it has not yet been ratified.
Indonesia
Indonesia saw a slowdown in deal activity on many fronts in the second half of last year, as companies had tried to get transactions pushed through and finished before the country’s presidential election in February this year.
Capital markets have been one area affected by the wait-and-see approach taken by companies in the run-up to the general election.
David Dawborn, a senior international counsel at Hiswara Bunjamin & Tandjung in Jakarta and a partner at Herbert Smith Freehills, says: “The Amman Mineral IPO was the biggest one for Indonesia for a long time, and that got completed in early July last year. That was when we started to feel the impact of the election, as capital markets were where you really felt uncertainty. It has started to come through again now because the election produced a clear winner.”
Aside from the pickup in deal activity following the election, the insurance sector is one area where Dawborn has seen some opportunity. Earlier this year, Indonesia raised the minimum equity for insurance firms to hold to at least USD16.06 million by 2026, 67% higher than the previous minimum level, Reuters reported.
“The Financial Services Authority has had a policy over the last five years of trying to consolidate the various financial services sectors,” says Dawborn. “So they have increased the capital requirements for banks and now insurance companies, and we expect that there will be some consolidation, probably some mergers, and some sales and divestments of some of those insurance companies.”
Dawborn adds that his firm has also been investing heavily in fintech in the past year while working on an active stream of inbound M&A investment work by foreign strategic players.
