Analysis of Singapore market data: Sing it loud
30 July 2012 | By Yun Kriegler
17 June 2013
4 March 2014
28 February 2014
24 February 2014
28 February 2014
The Singapore government is opening the door to international firms and developing the lion city as a centre of arbitration
Singapore’s legal fraternity is experiencing an eventful year, not least owing to the dramatic saga of the city state’s flagship legal brand Allen & Gledhill. The Singapore firm, which will celebrate its centenary later this year, recently separated from its decade-long joint venture partner Linklaters and entered into merger talks with magic circle suitor Allen & Overy, which despite failing to reach a conclusion marks a turning point in Singapore’s legal landscape.
Singapore’s legal community has now become increasingly international. In 2007, there were 630 foreign lawyers, but at the end of 2011 this had almost doubled to more than 1,200. This rise in numbers means that almost one of every four lawyers in Singapore is now a foreign practitioner.
Almost 110 foreign firms have a presence on the ground and the number continues to grow. Over the past year, UK firms Addleshaw Goddard, Lawrence Graham, Olswang, Reynolds Porter Chamberlain, Withers and US firms Squire Sanders and Mayer Brown have set up shop in Singapore.
In addition to the traditional US and UK crowds, the expatriate community has become more diverse. As Japanese investment surges in Singapore and its neighbouring countries, two of the big four Japanese firms – Nishmura & Asahi and Mori Hamada & Matsumoto – have recently launched their Singapore offices.
“Singapore’s legal market has been internationalised more than ever before,” says Jimmy Yim, managing director of Drew & Napier’s dispute resolution department. “It’s an exciting time for Singapore’s younger legal talent as they now have much more career options and have a greater chance to work with a greater range of institutions.”
The competition, either for work or for lawyers, is also on the rise. However, the general sentiment among local firms remains optimistic.
“The market is getting more crowded, but the pie is also growing bigger. We are well positioned to be part of the growth,” says Rachel Eng, managing partner of WongPartnership.
“With more legal expertise available in Singapore to handle complex international commercial and corporate transactions and disputes, Singapore enjoys added reputation as an international centre for financial and legal services hub,” adds Yin. “This draws work to itself.”
The beginning of 2012 saw Singapore’s government pass new legislation giving local firms greater flexibility to collaborate with foreign law firms by allowing foreign firms to take a profit and equity share of up to 33 per cent in a Singapore firm.
Earlier this month, Singapore’s Ministry of Law opened the second round of applications for the Qualifying Foreign Law Practice (QFLP) licence. The government will award more QFLP licences to foreign law firms by 2013.
Singapore firms view the move to allow profit-sharing and concurrent partnerships with foreign firms as an additional avenue for expansion.
“We’re seeing a phase where the major firms are assessing for themselves whether their best opportunity for the future is to remain independent or to tie up with a leading foreign firm,” says Sarjit Singh Gill, senior partner of Shook Lin & Bok. “Any jurisdiction over time will arrive at a sustainable mix of independent and international firms and Singapore will find that balance.”
For the city’s larger international players, the attention is mostly focused on the second round of QFLP applications. In 2008, the Republic awarded QFLP licences to six firms – A&O, Clifford Chance, Herbert Smith, Latham & Watkins, Norton Rose and White & Case. It is expected that at least another six new licences will be granted this time.
“The announcement of the new round of QFLP licences is an important development. The interesting aspect is the emphasis on growing the ‘offshore’ component, using Singapore as a hub for work across the region,” says Bill McCormack, a partner at Shearman & Sterling in Singapore. “We’re actively looking at this development and think it is of great interest to us.”
It is estimated that two thirds of the cross-border M&A transactions handled by the firm’s Singapore office involve other jurisdictions in Asia, with Indonesia being one of the most active countries.
The invitation for applications has been open since 1 July and will close on 31 August. Similar to Shearman, many international firms in Singapore are also contemplating applying for a licence. DLA Piper, for example, has confirmed that it will be applying for a licence because “being able to provide Singapore law advice is part of the firm’s strategy”.
The QFLP licences were previously regarded as a prestigious status, but the market expects that the granting of more will drive down the legal fee rates and increase competition among the top-tier international firms.
“At a certain level for a certain type of work, there will be some impact on fee rates because more lawyers will be chasing the same work. Generally all international firms will feel increased pressures on fees,” says Stephen McWilliams, the Singapore managing partner of Latham. “But as the transactions in Singapore, such as IPOs, project finance and M&A, become increasingly more global, there’ll be more involvement of international firms. The market is able to absorb the new entrances.”
Another consequence of more licences being granted will be an increased demand for experienced, top-quality Singapore-qualified lawyers.
“The legal recruitment market has been relatively quiet over the last 12 months compared with the previous year,” says Jamie Newbold, Singapore-based partner of legal recruitment consultancy Taylor Root. “Singapore is not delinked from the global market. But if more firms are granted QFLPs, there’ll be an increasing demand for Singapore-qualified lawyers with extensive international experience. I believe a number of firms have applied for it.”
According to Taylor Root, one of its clients has confirmed that it will be looking to hire Singapore-qualified partners once it obtains a licence.
Top-tier Singaporean firms have traditionally been a major source of talent for international firms. but legal recruiters have noted the gap is closing between international firms and local firms in terms of working environment, quality of work and compensation. “Local firms have closed the gap to a certain degree and it has made it a little harder to move Singaporean lawyers in local firms to international firms,” Newbold observes.
Local firms are rightfully feeling confident despite the growing competition.
“Singaporean firms have come a long way and have never been stronger. We are ready to face a more open marketplace and the regulators know it. The gradual opening up process over the past decade has prepared us,” says Eng of WongPartnership.
While the government is taking a more gradual approach to opening up its legal sector, it has pressed ahead with plans to build Singapore as an international arbitration centre for Asia.
According to Singapore International Arbitration Centre (SIAC) statistics, the active caseload handled by the institution as of 31 December 2011 was 405. The total number of new cases handled by SIAC in 2011 reached 188, almost double the 99 cases in 2008. More impressively, the number of new cases handled by SIAC in the first six months of 2012 has already exceeded the total number in 2011.
The robust increase has been translated into growth in law firms. For example, the value of claims in arbitration that Drew & Napier, a local firm with a strong focus on contentious work, has handled over the past 12 months has risen 20 per cent year-on-year to $6.7bn.
“It’s fair to say that Singapore has become a true hub for international arbitration. The number of cases has grown strongly and the range of jurisdictions where cases originated from has also broadened significantly. Companies doing business in India, China and the ASEAN economies increasingly refer their disputes to be solved through arbitration in Singapore. It has become an obvious attractive choice,” says Yim, who has recently handled a number of SIAC cases in which both parties are based outside of Singapore.
With all the changes happening in the market, lawyers and firms in the lion city have good reasons to be excited about the future.
GDP (2011): $259.8bn
Annual inflation (2011): 5.2%
Population (2011): 5.18 million
Life expectancy at birth (2011): 82
Unemployment rate (Q1 2012): 2.1%
Source: Department of Statistics Singapore
Quick facts: Singapore’s legal market
Number of foreign law firms: 110
Number of foreign lawyers: 1,200
Number of local law firms: 800
Number of local lawyers: 3,700
Total number of new cases handled by Singapore International Arbitration Centre (2011): 188
Source: Singapore Ministry of Law, Singapore International Arbitration Centre