Published in Chambers Magazine, Summer 2010
The last few years have seen many US firms expand their presence in China. Could they overturn UK firms’ traditional dominance in the world’s fastest-growing legal market?
As the world reeled from the collapse of Lehman Brothers in October 2008, scant attention was paid to the news that a seven partner-team had quit Allen & Overy’s Hong Kong office for Latham & Watkins. But Latham’s bold move was indicative of a wider trend.
For years, US firms have been content to practice US law in China from small offices. But recently, they have gone for growth: establishing local law practices, opening new offices on the mainland, and raiding UK rivals.
The top British firms, who dominated the biggest deals in China for more than 20 years, now face serious competition. “In five or ten years’ time, there’s a very high chance that the majority of the leading international firms in China will be of US origin,” predicts Michael Liu, leader of the team who moved from A&O to Latham.
The American invasion
City firms had a head start in China. Hong Kong’s status as a British colony meant UK lawyers could easily obtain Hong Kong practising certificates. And its close trade ties with the UK made Hong Kong an attractive proposition.
Between 1974 and 1990, most top City firms established an office in Hong Kong. And from there they expanded onto the mainland. By 2002, all the magic circle firms, apart from Slaughter and May, had added Beijing and Shanghai to their networks.
US firms, for the most part, lagged behind. Though Baker & McKenzie and Shearman & Sterling may have entered Hong Kong in the 1970s, Skadden, Arps didn’t arrive until 1989, and Latham & Watkins until 1994.
In recent years, all this has changed. US law firms have poured into China. Forty-four of the top 50 US law firms now have a presence in the country. Seventeen of these opened their first Chinese office in the last five years (see tables, page 18). In 2000, 10 of the top 50 US firms had two offices in China; none had three. Now 12 have two offices and 16 have three.
And US firm offices in China have been growing not just in number, but in size. Since 2005, Skadden has expanded its Chinese presence from 29 lawyers to 55; Simpson Thacher & Bartlett has increased from 16 lawyers to 42, and Latham and Watkins from 16 lawyers to 56.
Some of the newer arrivals, too, have been growing quickly.Weil Gotshal & Manges only opened its first Chinese office, in Shanghai, in 2004. Now it has offices in all three major cities with 30 lawyers between them. “We expect that figure to increase to 50 in the next two years,” says Akiko Mikumo, the firm’s Asia managing partner.
UK strengths targeted
In many cases, particularly in Hong Kong, US firms have achieved their growth by raiding UK firms. Latham & Watkins’ swoop on A&O was the latest in a stream of eye-catching raids by US firms on British rivals in China.
Skadden kicked off the trend in 2005, poaching partners from Linklaters and Simmons & Simmons. The following year, Freshfields China chief Michael Moser quit for O’Melveny & Myers; a year after, his replacement Doug Markel jumped ship for Simpson Thacher.
Then came the Latham move. “It’s totally changed the landscape for our China practice,” says Joe Bevash, a partner in Latham’s Hong Kong office. “It more than doubled our partnership overnight.” The move left A&O with just four corporate partners in their biggest Asian office.