Down under and out

The market for Australian legal services in London has been facing up to a period of structural change, with a gradual reduction in the overall volume of Australian work in the city.

This reduction has prompted Australian firms to scale back the size of their London branches and has also resulted in a change in the type of work they handle.

Historically, Australian firms worked on UK corporate investment into Australia and money-raising by Australian entities through the London market. And while individual firms found other areas of work to keep them busy, these tended to be short lived and were generally dependent on the personality of one of the lawyers in the firm or on contacts made previously.

The UK is still one of the largest investors in Australia, but the need for UK-based services has dropped. Many investors are already well established in Australia and much of the decision-making is now handled by existing Australian operations. As the market has grown and matured, it has, at the same time, become less dependent on UK law firms for legal services. This trend has not been reversed by the strong growth of the Australian economy.

In addition to a change in the nature of work, a subtle change to the client base is taking place and the top six City firms no longer dominate Australia-based work.

The reality is that routine corporate and commercial work is increasingly being picked up by the smaller City firms and regional practices. The work of the larger City firms tends to be mainly associated with major transactions.

These changes in the market have been happening over a period during which the number of Australian firms with branches in the UK has increased. There are now six in London – Allens Arthur Robinson, Blakes, Corrs, Freehills, Mallesons and Minter Ellison.

Curiously, now it has these six firms on its doorstep, the UK market tends to use the branches as a convenient stopping off point. It is now unusual for instructions to go directly to the firms in Australia and the market tends to use the Australian firm's UK branches.

Despite the underlying drop in the quantity of legal work for Australian firms, there are always a number of major projects which require their input. The largest in the past year was the RTZ/CRA 'merger' handled in Australia by Allen Allen & Hemsley and Arthur Robinson & Hedderwicks.

The intense competition, coupled with a difficult market which tends to know less about the parent firms than would have been in the case in 1980s, has tended to put heavy pressure on developing relationships in the long term.

In this environment, the usual three-year rotation of London partners by the majority of the firms is being re-evaluated.

The only real growth in the market is in the area of Asian legal services. Australian firms have provided the smaller City firms and regional firms with a non-threatening alternative in the Asian region.

In addition, several Australian firms have substantial operations in areas such as Indonesia and New Guinea which are not heavily populated by UK firms.