In what is becoming something of a trend in recent years, another Asian legal market has opened its doors to an international legal fraternity increasingly keen on putting down roots in what are still colloquially referred to as emerging markets. Malaysia’s new structure, first unveiled under the Malaysia Legal Profession (Amendment) Act 2012 before coming into effect in June this year, is an unsurprisingly qualified liberalisation. Restrictions have been put in place to protect the elite local firms and to steady the flow of international firms into the market.
The Malaysian Bar has taken its cue from neighboring Singapore in some respects, allowing for both International Partnerships between incumbent local and incoming foreign firms (broadly mirroring the Joint Law Venture programme in Singapore which endured mixed results in its early days but continues to be the most popular method of accessing the local market from outside) and for international firms to open independently under the title of Qualified Foreign Law Firm (QFLF). However where the Malaysian Bar has held onto the reins a little more is in only permitting five QFLF licenses to be granted initially, and then only to firms that “have proven expertise in international Islamic finance and which would be able to support and contribute to the MIFC”. Whoever comes in is coming in on the Malaysian Bar’s terms. There will be no feeding frenzy.
Links to Singapore
The Malaysian market retains close ties to Singapore. Christopher & Lee Ong – itself the product of a three-way local merger in 2013 which could be seen to be a defensive reaction to the new legislation - is allied to Rajah & Tann while Wong & Partners is the Malaysian member firm of Baker & McKenzie. Both Allen & Gledhill and Shook Lin & Bok under other incarnations had presences in both Singapore and Malaysia but connections between the offices were severed following Singapore’s achievement of independence from Malaysia in 1965. Allen & Gledhill now has an association with Rahmat Lim & Partners. Beng Chai Tay is a partner with Singapore’s ATMD Bird & Bird and also the managing partner of Malaysia’s Tay & Partners. WongPartnership is allied with Foong & Partners while at the smaller end of the scale Oon & Bazul is associated with T S Oon & Partners, and KhattarWong has a cooperation agreement with KK Chong & Co.
UK firm Trowers & Hamlin opened a representative office in 2012 in anticipation of market liberalisation, a smart move given the firm’s strong reputation in Islamic finance elsewhere in the world, but an influx of international firms along one of the two paths outlined above is widely expected.
Lessons to be learned
Whereas the last major Asian legal market liberalisation, of South Korea in 2012, allowed, at last count, 19 overseas firms entrance to the market following the successful application for a license (Bird & Bird struck up an alliance with Hwang Mok Park), for all but five incoming firms to Malaysia it will require a close working alliance with a local outfit. History tells us that a great deal of care and due diligence should be put into assessment and selection of an alliance partner, on both sides. Previously received wisdom that the prestige of the firm, positions in directory league tables and recognised senior partners were the only factors that really mattered was steadily disproven.
In Singapore following the introduction of the Joint Law Venture system around the turn of the century, when local firms were permitted to tie-up with international firms, it was no surprise that the then market leaders – Shook Lin & Bok, WongPartnership, Allen & Gledhill and Drew & Napier (Rajah & Tann was arguably then still ascending to the summit) – were targeted by the UK’s Magic Circle. None of these arrangements continues to be in existence today. Allen & Overy did rather publicly flirt with Allen & Gledhill a couple of years ago but talks broke down with observers musing whether Allen & Overy would have had benefitted from a merger with a firm as large and diverse as Allen & Gledhill or whether the Singapore firm’s excellent corporate practice was the real attraction, with other practices expendable.
All of the Singapore firms had key partners with decision-making capability and big personalities. They held sway with big clients. They were not about to allow their firms to be dictated to by London or New York, nor turned into dumping grounds for low cost work. They wanted access to the brand, IT infrastructure, training facilities and international client base of their glamorous new partners. They wanted their slice of the pie, perhaps in some cases, too big a slice.
So what are both sides looking for in such an arrangement? An international firm can look for a strong local brand with an existing blue-chip local client base, prestigious (and most likely headstrong) partners and a strong and large bank of junior lawyers. If this is the preferred route then the aforementioned issues must be accepted and managed. If the international firm prefers a more supplicant partner, a mid-to-lower tier firm, then the ability to field high-quality local lawyers and access the bigger clients becomes more limited. If the international firm purely wants to get a foot in the door of the market and build from there in their own fashion then this is a viable option, especially as there is a finite selection of top names to approach.
Another option is to build a “local” firm from scratch, identify key partners who would launch a boutique firm which would ally itself to the international behemoth. This has the advantage of being able to secure the buy-in of all partners by effectively cherry-picking them but such a scheme requires big names with portable client bases and as discussed above, big names come with big personalities.
With the legal markets of Indonesia, Myanmar and, surely at some point, India likely to open their doors in the near future, international firms desiring an on-the-ground presence will have to confront these issues a few more times in the coming years. The terrain remains tricky to navigate.
Sam Kenworthy (Managing Consultant – Head of Private Practice)
Sam graduated from the University of Kent in 1998 with LLB Hons and was awarded a prize for outstanding contribution to Kent Law School. After completing the Legal Practice Course in 2000, he joined London law firm Lawrence Graham where he worked in the real estate department.
Three years later he moved into legal journalism with publisher Legalease, writing for The Legal 500 and Legal Business Magazine, where he held various editorships and became a correspondent for the Asia Pacific region. In 2007 Sam relocated to Hong Kong to join a bespoke legal recruitment consultancy operating at the senior end of the private practice market across Hong Kong, China and South East Asia.
In 2012 he joined Hughes-Castell to take a role as Head of Private Practice Hong Kong where he oversees comprehensive coverage of the market, personally focusing on mid- to senior-level hires both in Hong Kong and in Singapore.