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Singapore has one of the most developed legal markets in Southeast Asia and has long been designated an "Asian tiger," a financial hub with the resources to compete with Seoul and Hong Kong. Its financial laws are based on those of the UK....

Singapore has one of the most developed legal markets in Southeast Asia and has long been designated an "Asian tiger," a financial hub with the resources to compete with Seoul and Hong Kong. Its financial laws are based on those of the UK.

It is widely understood that the government would like Singapore law to become the law that governs contracts for multinational corporations in cross-border transactions, similar to the role of UK or US law. To facilitate its expansion, the government has moved towards a liberalisation of the law market so that international firms can also advise clients on Singapore law.

In a long-awaited move, the government has elected to expand its Qualified Foreign Law Practice (QFLP) license programme to all international firms. QFLP-licensed firms are able to hire Singapore lawyers to practice local law. However, a Singapore lawyer at an international firm, even with a QFLP license, still cannot go to court. Instead, firms are eager to take advantage of Singapore's leading international arbitration centre and its strong financial markets, which serve as a hub for all of Southeast Asia.

The QFLP changes are likely to be most beneficial for banking and capital markets clients, who will now be able to find a one-stop shop at most international firms. Allen & Overy, Clifford Chance, Herbert Smith, Latham & Watkins, Norton Rose and White & Case already boast in-house Singapore practices and more are expected to follow. Linklaters, which broke up with its long-time Singapore joint venture partner Allen & Gledhill this year, has also announced its intention to apply. Other firms that will submit applications include Ashurst, DLA Piper, Jones Day, K&L Gates, Stephenson Harwood and Watson Farley & Williams. Mayer Brown JSM, which only launched in Singapore last year, is also considering applying.

International firms are moving into Singapore at a rapid rate. Practitioners frequently complain about fee pressure, though clients will benefit from lower fees at international and local firms alike as they compete for premium work. Magic circle firm Freshfields has also announced its intention to move back into the city after a contentious pull-out during the 2007 financial crisis. Dutch firm De Brauw Blackstone Westbroek and Indian firm Wadia Ghandy have also opened offices in the last year.

These openings and the issuance of QFLP licenses mean that firms in Singapore are set for another round of lateral hires. International firms with new QFLP licenses will undoubtedly look to the top-tier local firms for well-connected Singapore-qualified lawyers. Firms moving into Singapore will be looking for practitioners with longstanding experience in the region, especially those who have nurtured relationships with Indonesian regulators.

Though they profess to be enthusiastic about competing with international firms, Singapore firms are undoubtedly jittery about the incursion into their traditional work. Easily the most high-profile event in the Singapore law market this year was when Allen & Gledhill broke off its long-time relationship with Linklaters, before nearly completing a controversial merger with fellow magic circle firm Allen & Overy. Allen & Gledhill's actions reverberated throughout the market as other leading Singapore firms frantically explored tie-ups with international partners to be able to compete. However in late March, the Allen & Gledhill and Allen & Overy merger fell through.

But the market has not yet calmed. Some firms are looking into best friends relationships or joint law ventures, while others, like Rajah & Tann and Allen & Gledhill, are now building a regional presence to add value to their Singapore practice. Drew & Napier, leveraging off its exceptional litigation practice, has stated that it will stay independent. When looking into mergers, Singapore firms say that it is difficult to align their partner reimbursement structures to that of international firms.

One interesting angle is the view of in-house counsel who on the whole are lukewarm about the prospect of international firms moving into the domestic space. "I have a personal preference for specialised law firms," says an in-house counsel of an Australian bank. "I'm not keen on working with international law firms with a QFLP. Those law firms practice US, English and Singapore law and don't necessarily focus on the Singapore aspects or have experience with Singapore regulators. I like working with the big Singapore firms because they're client-focused and have a breadth and depth of experience."

Another counsel says, "The top-tier firms will survive liberalisation. However, I am concerned about the mid-tier firms, who may think that a merger will be the only way to handle high-quality cross-border work."

CONTEXT AND TRENDSBanking work slowed this year amid a Euro crisis reaching new heights and banks preparing for the implementation of Basel III. Though European banks largely pulled out of Asia to focus on problems closer to home, regional banks have become increasingly active....

CONTEXT AND TRENDS

Banking work slowed this year amid a Euro crisis reaching new heights and banks preparing for the implementation of Basel III. Though European banks largely pulled out of Asia to focus on problems closer to home, regional banks have become increasingly active.

"Though French banks in particular are less active than they were two to three years ago, the gap has been filled by Asian banks from Japan, Singapore, Malaysia and Hong Kong," says a partner from a magic circle firm.

"I'd say that the development of multilateral finance institutions such as the International Finance Corporation (IFC) and the Asian Development Bank has taken up part of the role that European banks would have played, mostly in markets like Indonesia, Bangladesh and Mongolia," says one banking specialist.

Another practitioner states that "Basel III hasn't had a huge impact in Southeast Asia, but European banks have pulled back. We're not sure how much of the reason is Basel III or if it's just their own circumstances [rather] than changes of direction".

Most lawyers will readily admit that their banking practices rely on the continuing growth of Indonesia and India. However both countries' onerous regulatory regimes and recent slowdown in growth mean that clients have begun looking elsewhere. Though the Philippines and Vietnam are not easy places to do business, their rapid growth and enormous potential has made them markets to watch for the next year.

Though the Southeast Asian banking sector seems relatively untouched by global crises, a practitioner emphasises its growth potential. "The market is busy, but it would be much busier if not for regulatory and capital reforms, such as Basel III. The rules haven't been applied yet, but banks foresee that they won't be doing so much business in certain product lines," he says. "The market is busy and companies still need cash. However, the market would be busier and deeper without all the upcoming regulations."

As for the next year, practitioners are waiting for a resolution to the Euro crisis and the implementation of Basel III. "I don't think the European banks will recover for a while," notes a partner and most expect Asian banks to supply the necessary capital for financings and loans.

CONTEXT AND TRENDS"Facebook killed it," said a partner about the global equity capital markets after the social media network's IPO. Needless to say, the slowdown in the equity capital markets finally reached Asia this year....

CONTEXT AND TRENDS

"Facebook killed it," said a partner about the global equity capital markets after the social media network's IPO. Needless to say, the slowdown in the equity capital markets finally reached Asia this year.

Partners noted a drop-off in the fourth quarter of 2011 and as the Euro crisis unfolded the markets never seemed to recover. Though the Facebook IPO went through, its failure to perform well meant that blockbuster listings in the Asia-Pacific, such as the F1 IPO on the Singapore Exchange and the Graff IPO on the Hong Kong Exchange were quickly pulled.

Most practitioners are not optimistic about the next year's prospects for the Singapore Exchange: "If there's terrible positioning in Europe or America, there is a three to six month delayed response in Southeast Asia while everyone wants to see what happens. The market is quite volatile, and when someone starts running in one direction, everyone starts running."

However, practitioners are optimistic about smaller regional exchanges, namely the Thai Exchange and the Kuala Lumpur Exchange, which should see increased activity as rapidly growing Southeast Asian corporates look to raise capital. "Keep an eye out for IPOs in the natural resources sector," said an analyst of a regional bank.

But the debt capital markets are increasingly busy as companies turn to medium-term notes and perpetual bonds for financing. "We've seen a lot of investment-grade issuances this year," says a partner at an American law firm. "High-yield bonds are more difficult, but there are deals going through across the market. However, volumes are down with the overhang of Greece."

Taking advantage of low interest rates, perpetual bonds are among the most popular debt instruments. After Genting issued a retail perpetual bond, the Singapore Monetary Authority urged retail investors to consider the risks of perpetual bonds, namely that such products do not have maturity dates.

The Islamic capital markets are rapidly expanding throughout the region, and most are listed in neighbouring Malaysia. The total global sukuk (Islamic bond) issuance is estimated at $44 billion this year, and Malaysia will account for 60%, or $26 billion of the total issuance. With these statistics, it is unsurprising that Malaysia is widely considered the global centre for sukuk issuance, largely because of tax incentives and the predominant interpretation of shariah, which is seen as less stringent than some areas in the Middle East, such as Dubai.

As for the next year, analysts expect the debt capital markets to maintain growth in Southeast Asia. Instruments are becoming more sophisticated in emerging markets such as the Philippines, Thailand and Vietnam and practitioners are already reporting a pipeline of sukuk and debt deals for the next year. In the equity capital markets, lawyers throughout the region promise that there are dozens of IPOs with ready prospectuses, but issuers are waiting for the markets to stabilise for the best valuations.

MAJOR LATERAL HIRES

Philip Lee
From: Allen & Overy (counsel)
To: Herbert Smith

Hooman Sabeti-Rahmati
From: Allen & Overy
To: In-house (International Islamic Liquidity
Management Corporation)

RISING STARS

Linklaters
Phillip Hall

O'Melveny & Myers
Andrew Hutton

CONTEXT AND TRENDS Though the global markets experienced a downturn amid a Euro crisis, the markets in Singapore remained remarkably strong in all sectors. Practitioners note that international banks have largely pulled out of Southeast Asia as they tend to the implementation of Basel III's capital requirements and the Euro crisis....

CONTEXT AND TRENDS

Though the global markets experienced a downturn amid a Euro crisis, the markets in Singapore remained remarkably strong in all sectors. Practitioners note that international banks have largely pulled out of Southeast Asia as they tend to the implementation of Basel III's capital requirements and the Euro crisis. However, domestic banks have largely absorbed their place in the market. DBS, Oversea-Chinese Banking Corporation and Maybank have especially been integral in maintaining deal flow in the region.

As regulatory concerns become more prevalent, firms are beginning to focus heavily on their financial regulatory practices. Though Singapore has had competition law since 2004, corporates have only recently seen an uptick in enforcement. Firms are also beginning to build competition practices, anticipating increasing scrutiny from the Competition Commission.

Because acquisition financing was available from local banks, M&A deal flow remained strong. Popular areas in Singapore included the healthcare and early education sectors. While medium-sized M&A deals were very popular, most lawyers noted that they did not expect an increase in large cap deals anytime soon.

Practitioners also noted that they were seeing Singapore corporates looking overseas to build their presence, with cross-border activity in the first half of 2012 reaching $14.8 billion, up 17.6% from the same time period in 2011.

In the capital markets, the debt-based work far outstripped equity. The tumultuous global markets meant that highlight deals such as the Manchester United IPO and Formula 1 IPO that were supposed to list in Singapore were either moved to the US or delayed outright. However, listings on the Singapore Exchange's sponsor-supervised platform Catalist remained active. Taking advantage of low interest rates, perpetual bonds were especially popular, as were medium-term notes. Though very few securitisation transactions took place this year, as one in-house counsel says, "Structured finance is going ahead.The private markets and bond markets are actually quite active."

Though the Singapore economy was generally buoyant, there were a few sectors that kept restructuring and insolvency practitioners busy this year. Jakarta and Singapore-listed PT Berlian Laju Tankers is undergoing a large restructuring, while Dubai Drydocks and Dutch shipping company Torm were also notable restructuring cases this year. Work from this sector is likely to continue, as one partner says: "Unfortunately, we're not expecting the shipping sector to improve next year."

Another area that was especially important for restructuring and insolvency lawyers was S-chips, or Chinese companies listed on the Singapore Exchange. Unfortunately, when they became insolvent, it is usually impossible to get assets out of China to repay creditors. Practitioners claim that finding white knight investors for these companies or engaging company directors in complex litigation is frustrating, however it is proving quite lucrative for the Singapore lawyers involved. Like shipping restructurings, practitioners are expecting problems with S-chips to continue.

MAJOR LATERAL HIRES

Nicholas Chong
From: Shook Lin & Bok
To: Rodyk & Davidson

Marcus Chow
From: Drew & Napier
To: ATMD Bird & Bird

Ashok Kumar
From: Stamford Law
To: TSMP Law Corporation

Manoj Sandrasegara
From: Drew & Napier
To: WongPartnership

RISING STARS

Allen & Gledhill
Lim Wei Ting

Drew & Napier
Blossom Hing

Rajah & Tann
Danny Ong

WongPartnership
Andrew Ang

CONTEXT AND TRENDSIn the last year practitioners have largely seen marquee M&A deals dry up, though medium-sized deals in areas such as natural resources and healthcare have maintained a steady deal flow. "It's been a difficult period for M&A," a lawyer says....

CONTEXT AND TRENDS

In the last year practitioners have largely seen marquee M&A deals dry up, though medium-sized deals in areas such as natural resources and healthcare have maintained a steady deal flow. "It's been a difficult period for M&A," a lawyer says. "The European crisis and general downturn in economic activity in China and India have had an impact on market activity."

Basel III seems to be the culprit for the slowdown in both M&A and banking transactions in the region. The same practitioner added, "The trouble with banks and the implementation of Basel III's capital requirements has dried up a lot of funding available for M&A activity in the region."

However, there are still popular areas, such as healthcare, early childhood education and insurance. "The banking sector is obviously still a huge M&A area. Temasek's sale of its stake in Indonesia's Bank Danamon to DBS clearly represents further consolidation in the banking sector, but I wonder if valuation is becoming an issue," says a partner.

Practitioners note that Indonesian corporates are being scrutinised by internationally recognised private equity firms and are becoming more expensive as a result. "Private equity firms, both domestic and foreign, have raised billions of dollars to invest in Indonesia. It is bringing bidding prices way up in the private equity space, so the best way to invest is either in the equity capital markets or in very specific sectors," says a practitioner.

Up-and-coming markets include Thailand as a partner at an international law firm says, "Thailand has a very strong economy. Though it's always shadowed by political instability, people are comfortable with it because the country has demonstrated that its economy can function despite massive protests."

Practitioners frequently mention Myanmar as a potential target. They agree that private equity firms and frontier-market investors are hunting for good deals, but note that the legal structure there is antiquated and that good local counsel can be difficult to find. "There's a lot of noise about Myanmar, but it's a long way off," says a partner at a magic circle firm. "We're tracking it, but reforms to its foreign investment law are necessary before it attracts large investments. Anyone who goes in now is a risk-taker."

RISING STARS

Clifford Chance
Valerie Kong
Melissa Ng

Linklaters
Sophie Mathur

Milbank Tweed Hadley & McCloy
Jacqueline Chan

Hogan Lovells Lee & Lee
Matthew Nortcliff

White & Case
Mae Chong

CONTEXT AND TRENDSThough other practice areas have been affected by global market uncertainty, project finance in Southeast Asia, which is typically serviced by international firms' Singapore offices, remains buoyant. "Southeast Asia's growing demand for power infrastructure and natural resources plays throughout the region, project finance specialists found themselves very busy this year," says a partner....

CONTEXT AND TRENDS

Though other practice areas have been affected by global market uncertainty, project finance in Southeast Asia, which is typically serviced by international firms' Singapore offices, remains buoyant. "Southeast Asia's growing demand for power infrastructure and natural resources plays throughout the region, project finance specialists found themselves very busy this year," says a partner.

Project finance deals in Singapore itself are scarce. After the completion of the landmark Jurong Aromatics project financing and the Sportshub public-private-partnership (PPP), practitioners are not expecting much domestic work. "Sportshub was a hangover from five years ago - that's not an exaggeration," says a partner at a magic circle firm. "It had gone on for a long time. The difficult thing with PPP is that it works best if you create a market for it with a flow of deals. Instead, Singapore maybe has one a year."

Following a trend from the last few years, investors and lawyers look towards Indonesia for the bulk of their work as the country upgrades its infrastructure. "Indonesia will undoubtedly be the busiest country for us this year. We're looking at mining, LNG (liquefied natural gas), power, infrastructure and transportation - the whole lot is active," says a practitioner.

However another lawyer warns about increasing regulatory measures regarding foreign ownership of Indonesian assets. He says, "In the last 12 months, what's really stuck out is the potential for the Indonesian government to change the law in a contradictory fashion."

Other areas of interest include Malaysia, which is better-known as a shariah-compliant financing hub. Though Malaysia does not allow international law firms to open offices in the country, foreign lawyers lead project finance deals on a fly-in basis. "Malaysia seems to be opening up to international sponsors and finance," a partner observes.

But the Philippines and Vietnam, previously considered promising, have been panned by practitioners for their slow regulatory regimes. This year the first power deal in Vietnam in nearly a decade, Muong Dong II, finally closed. "We're slightly cautious when it comes to Vietnam and IPPs (independent power projects. If you look at the number of projects on the slate and the number that have been realised, there is a significant mismatch," a oil and gas specialist says. "I think there is a huge demand for new generating capacity, but I don't' think they have the framework in place to incentivise investment."

The Philippine government champions PPPs, but few have actually appeared in the pipeline. However, one partner expresses excitement for the future: "In the long run, we think that the Philippines is a more promising market than even Indonesia."

Practitioners are most interested in talking about Myanmar, which is in the process of opening its markets. However, they are less certain that it will be a successful market for project finance until its legal system is updated. "Myanmar is incredibly underlawyered and doesn't have the necessary framework for complex transactions," one practitioner commented. "Project finance is a long way off and people will make equity investments until they are comfortable with limited recourse finance."

MAJOR LATERAL HIRES

Bruce Schulberg
From: Clifford Chance (Beijing)
To: Hogan Lovells Lee & Lee

RISING STARS

Allen & Overy
Charlie Glover

CONTEXT AND TRENDSRestructuring and insolvency has become an increasingly important practice in Southeast Asia as companies affected by the 2008 financial crisis and the ongoing Euro crisis require assistance. A partner says, "I think Asia has weathered the storm reasonably well, but situation-specific restructuring is popular....

CONTEXT AND TRENDS

Restructuring and insolvency has become an increasingly important practice in Southeast Asia as companies affected by the 2008 financial crisis and the ongoing Euro crisis require assistance. A partner says, "I think Asia has weathered the storm reasonably well, but situation-specific restructuring is popular. Of course, badly-run companies are having difficulties."

The shipping sector is having problems worldwide and some of the largest companies are undergoing complex multijurisdictional restructurings. "It's a well-publicised fact that the shipping industry is on its knees in all sectors and has been for some time now," says a practitioner. "Unfortunately for anyone involved in the industry, the forecast for the next 18 months is pretty bleak. Traditional shipping companies are running out of money very quickly."

Dutch shipping company Torm and Dubai Drydocks have been high-profile cases with Singapore components, but by far the shipping company restructuring that has had the most impact domestically has been that of Singapore and Jakarta-listed PT Berlian Laju Tankers.

These multijurisdictional restructurings are especially difficult because there are no provisions for cross-border insolvency across ASEAN (Association of Southeast Asian Nations). Singapore's Insolvency Act requires the ring fencing of all assets in Singapore for Singapore-based secured creditors, so a workout is impossible across jurisdictions.

However, Singapore's government has commissioned a study of its insolvency laws by some of its leading lights. It is rumoured that the report, which will be released in late 2012, will include recommendations for how to handle cross-border insolvency, especially regarding the unpopular ring-fencing provision.

A practitioner says, "All the large global shipping companies have used Chapter 11, which is not recognised in most Southeast Asian jurisdictions. Singapore is ahead of the curve, but Indonesia does not recognise other jurisdictions at all. Chapter 11 is effective only because I can't think of a creditor or financial institution that would want to contend a Chapter 11 order. All in all, these complexities make cross-border restructuring very difficult."

But lawyers remain sceptical of legal codes ever allowing full cross-border insolvency rules. "Only countries with a common law legal history are open to cross-border insolvency, so anywhere with a code based on the English system would be fine. It will never happen in Indonesia, where the legal system is based on the Dutch legal code and is unlikely to happen in the Philippines," says a leading insolvency practitioner. "The insolvency law committee is looking at it in Singapore, but the establishment here is torn. I think Malaysia is more likely than Singapore to switch to a UNICTRAL model."

MAJOR LATERAL HIRES

Troy Doyle
From: Norton Rose (Australia)
To: DLA Piper

RISING STARS

O'Melveny & Myers
Ashley Bell
Damien Coles