— James Holzhauer announced he will step down as chairman of Mayer Brown in January 2010
— Shearman & Sterling is set to cut 60 support staff jobs in its US and Canadian offices following redundancies in the UK
— Sonnenschein Nath & Rosenthal has closed its Charlotte office due to the declining demand for legal services. The firm will relocate some of the 11 Charlotte-based lawyers to busier parts of the network, while others will be laid off
— K&L Gates has confirmed it will initiate a round of layoffs across its US and UK practices with reductions affecting 4.9% of the firm’s associate lawyers and 4.3% of its staff
— Clifford Chance, which recently downsized its US capabilities, has sub-let space in its New York office to US firm Kilpatrick Stockton
— The election race has begun at McDermott Will & Emery, as New York-based partner Peter Sacripanti, Washington DC partner Bobby Burchfield and Chicago-based head of litigation Jeff Stone vie for the position of chairman
— Craig Medwick was re-elected as regional managing partner of the Americas at Clifford Chance. His second term will run until 30 April 2013
March 22, 2010
Bakers closes on revenue top spot
Baker & McKenzie is close to becoming the largest US law firm by revenue, surpassing Skadden Arps, which has long held the title.
It is only US$10m away from first place after posting a 20% rise in revenue last year, with a turnover boost from US$1.83bn in 2007 to US$2.19bn in 2008; Skadden only managed a 1% rise in revenue last year, with a total global turnover of US$2.2bn.
Latham&Watkins is currently in third place, although it recorded a 4% revenue drop.
It is only US$10m away from first place after posting a 20% rise in revenue last year, with a turnover boost from US$1.83bn in 2007 to US$2.19bn in 2008; Skadden only managed a 1% rise in revenue last year, with a total global turnover of US$2.2bn.
Latham&Watkins is currently in third place, although it recorded a 4% revenue drop.
Firms unite to fight for ‘P3’
UK firms Allen & Overy and Freshfields Bruckhaus Deringer have joined forces with leading US firms and banks to push for the expansion of public private partnerships (PPP) in the US.
Kearsarge Global Advisers recently reported that a group comprised of seven firms (including Chadbourne & Parke, Debevoise & Plimpton, Fulbright & Jaworski, Mayer Brown and McKenna Long & Aldridge) and 11 companies made the case for PPP, or ‘P3’ as it is known in the US.
The group claims PPPs could create 1.5 million US jobs by using US $180 bn in available private capital to build infrastructure projects.
Kearsarge Global Advisers recently reported that a group comprised of seven firms (including Chadbourne & Parke, Debevoise & Plimpton, Fulbright & Jaworski, Mayer Brown and McKenna Long & Aldridge) and 11 companies made the case for PPP, or ‘P3’ as it is known in the US.
The group claims PPPs could create 1.5 million US jobs by using US $180 bn in available private capital to build infrastructure projects.
Redundancies today, salary cuts tomorrow
After law firms around the world have made their first round of global financial crisis induced lay-offs, some US firms are now implementing salary cuts.
Dewey & LeBoeuf has cut the pay of up to 66 US partners by as much as 80%. The move has reportedly left some Dewey partners taking home around just US$10,000 per month.
Meanwhile, DLA Piper’s US partners have faced an 11.5% pay cut amid gloomy predictions about the firm’s performance this year. And US- and UK-based firm Katten Muchin Rosenman has cut salaries by 20% for associates who did not meet more than 90% of their 2,000-hour billing quota during 2008. However, they can return to their former remuneration levels by reaching their 2009 billing targets.
Dewey & LeBoeuf has cut the pay of up to 66 US partners by as much as 80%. The move has reportedly left some Dewey partners taking home around just US$10,000 per month.
Meanwhile, DLA Piper’s US partners have faced an 11.5% pay cut amid gloomy predictions about the firm’s performance this year. And US- and UK-based firm Katten Muchin Rosenman has cut salaries by 20% for associates who did not meet more than 90% of their 2,000-hour billing quota during 2008. However, they can return to their former remuneration levels by reaching their 2009 billing targets.
More staff face the axe
White & Case has announced plans to slash approximately 200 associates and 200 administrative and business support staff from its global network.
The redundancy plans are among the largest so far announced by a US firm and will also include a review of the firm’s partnership.
Other US firms have also recently announced plans to cut staff, including O’Melveny & Myers, which is set to layoff 90 associates and 110 support staff, Sidley Austin, which has confirmed more than 200 lawyers and staff will lose their jobs, and Fried Frank, which said it will reduce US workforce by 99 people – 41 associates and 58 administrative staff.
The redundancy plans are among the largest so far announced by a US firm and will also include a review of the firm’s partnership.
Other US firms have also recently announced plans to cut staff, including O’Melveny & Myers, which is set to layoff 90 associates and 110 support staff, Sidley Austin, which has confirmed more than 200 lawyers and staff will lose their jobs, and Fried Frank, which said it will reduce US workforce by 99 people – 41 associates and 58 administrative staff.
March 18, 2010
False bullying claims rise as downturn bites
Asurprising trend has emerged amid the uncertainty of the current job market – an increase in the number of bullying claims. Interestingly, however, many of these are false claims made by employees trying to protect themselves from redundancies through contrived or exaggerated workplace allegations.
Joydeep Hor, managing partner of Australian law firm Harmers Workplace Lawyers, has seen an increase in false bullying claims in recent months. “When employees feel that their employment is threatened, many feel cornered and helpless. Bullying and harassment cases are typically high profile and very negative for employers, and employees can see the bargaining power a claim like this might give them,” he said.
Claims of bullying and harassment have steadily increased over the past 10 years as employees are now better educated about these issues and have clearer avenues to report cases. The Workplace Pulse Quarterly Survey of 2,140 employees, conducted by online learning and information management provider WorkPro, found that almost 30% of employees have been bullied at work, 24% have been discriminated against, and 44% have witnessed bullying in the workplace.
Hor said that while employers should be wary of false claims, they must ensure the appropriate steps are taken to deal with every bullying claim in order to avoid litigation.
“What many employers fail to realise is that they don’t have to be directly involved in an incident to be liable. They can be prosecuted for an incident that happens between other staff members, as well as for not providing employees with adequate OHS and EEO information and training,” he said.
Joydeep Hor, managing partner of Australian law firm Harmers Workplace Lawyers, has seen an increase in false bullying claims in recent months. “When employees feel that their employment is threatened, many feel cornered and helpless. Bullying and harassment cases are typically high profile and very negative for employers, and employees can see the bargaining power a claim like this might give them,” he said.
Claims of bullying and harassment have steadily increased over the past 10 years as employees are now better educated about these issues and have clearer avenues to report cases. The Workplace Pulse Quarterly Survey of 2,140 employees, conducted by online learning and information management provider WorkPro, found that almost 30% of employees have been bullied at work, 24% have been discriminated against, and 44% have witnessed bullying in the workplace.
Hor said that while employers should be wary of false claims, they must ensure the appropriate steps are taken to deal with every bullying claim in order to avoid litigation.
“What many employers fail to realise is that they don’t have to be directly involved in an incident to be liable. They can be prosecuted for an incident that happens between other staff members, as well as for not providing employees with adequate OHS and EEO information and training,” he said.
March 17, 2010
Qatar clarifies firm requirements
The Qatar Financial Centre Authority has released a consultation paper containing what it describes as a “clarification” of the conditions firms are required to fulfil in order to remain operating in the Qatar Financial Centre.
The conditions outlined in the consultation paper are not particularly onerous and many are not new. Firms need to ensure that lawyers are "in good standing of the requisite professional/licensing body in the foreign jurisdiction where the lawyers are admitted to practice law", and will also need to demonstrate expertise in at least one aspect of Qatar law. The paper also reiterates that a licence to operate in the centre does not confer the right to perform local law tasks such as representing a client in a Qatari court. And a new requirement is proposed whereby firms must disclose to clients the jurisdictions in which individual lawyer are admitted to practice.
The conditions outlined in the consultation paper are not particularly onerous and many are not new. Firms need to ensure that lawyers are "in good standing of the requisite professional/licensing body in the foreign jurisdiction where the lawyers are admitted to practice law", and will also need to demonstrate expertise in at least one aspect of Qatar law. The paper also reiterates that a licence to operate in the centre does not confer the right to perform local law tasks such as representing a client in a Qatari court. And a new requirement is proposed whereby firms must disclose to clients the jurisdictions in which individual lawyer are admitted to practice.
Double office opening for GLN
Gide Loyrette Nouel has made a two-fold commitment to the UAE with the opening of not one but two new offices, in Abu Dhabi and Dubai. The firm is particularly looking to attract work in the M&A, corporate law, banking & finance, and infrastructure spaces.
With the Gulf market contracting, Gide will need to produce a trump card to distinguish itself from other firms in the region and the firm believes that its French origins might just provide that leverage, with its lawyers to have both French civil law and common law qualifications.
“The judicial systems in the UAE and other countries in the region are largely inspired by French civil law, meaning that we are ideally positioned to advise national and international clients on their activities across the Middle East and North Africa,” said Sami Fakhoury, partner in charge of the firm in Dubai.
With the Gulf market contracting, Gide will need to produce a trump card to distinguish itself from other firms in the region and the firm believes that its French origins might just provide that leverage, with its lawyers to have both French civil law and common law qualifications.
“The judicial systems in the UAE and other countries in the region are largely inspired by French civil law, meaning that we are ideally positioned to advise national and international clients on their activities across the Middle East and North Africa,” said Sami Fakhoury, partner in charge of the firm in Dubai.
Jones Day enters Dubai
US firm Jones Day has kicked off its presence in the Gulf region by opening an office in Dubai.
The office, which will focus on energy, finance, arbitration and M&A work will be led by soon-tobe-relocated London-based project finance partner Arman Galledari.
He will supported by Sheila Shadmand, who will also relocate from the US, and four other lawyers – one counsel, two foreign associates and one locallyqualified associate.
The firm’s managing partner, Steve Brogan, said that the lure of one of the region’s most rapidly developing economies was just too difficult for the firm to resist. “The Gulf region continues to become ever more important in the global economy,” he added.
The office, which will focus on energy, finance, arbitration and M&A work will be led by soon-tobe-relocated London-based project finance partner Arman Galledari.
He will supported by Sheila Shadmand, who will also relocate from the US, and four other lawyers – one counsel, two foreign associates and one locallyqualified associate.
The firm’s managing partner, Steve Brogan, said that the lure of one of the region’s most rapidly developing economies was just too difficult for the firm to resist. “The Gulf region continues to become ever more important in the global economy,” he added.
March 16, 2010
Second round of layoffs at Orrick
Any lawyers who thought they were safely out of the woods might need to think again. Orrick has completed its second redundancy consultation and has decided to lay off another 300 staff.
In one of the largest rounds of layoffs to date, the firm said that 12% of its non-partner lawyers would be cut. Twenty-five lawyers will be given the chop in Asia – the same amount as in Europe – while 50 will leave in the US. The firm also announced that 200 staffers would be let go.
Last November, 40 associates and of counsel in Orrick’s structured finance and real estate practices were booted to the curb. It also decided that 35 staffers were surplus to requirements. Those 75 staff were offered fivemonth severance packages, but the people laid off this time around only receive a three-month package. By contrast, Latham & Watkins offered its associates a six-month severance package capped at US$100,000.
Firms need to be aware of the impact that multiple rounds of layoffs have on staff morale. Law firm consultant Wendy Tice- Wallner said that firms considering layoffs may need to make them all in one fell swoop so as to not erode staff morale.
“Most firms would prefer to do one round of layoffs. The ideal situation is to not be doing this very often and to know where you want to be six months or a year from now. You don’t want people waiting for the other shoe to drop,” she said. “It’s not just a slow practice area or underperformers. These cuts are really targeted at keeping the bottom line from becoming intolerable to the owners of the business. When you are talking about this large a volume of people, you are inevitably cutting into people who could be keepers. You can’t help but cut some potentially quality lawyers.”
Meanwhile, the firm has also shelved plans to launch in the Gulf region. The firm announced last year that it would open two offices in the region in 2009, but these plans are now on hold in light of global economic conditions.
“We are not short-term speculators, and our analyses and commitments to markets are based on long-term practice and client drivers,” said Christopher Stephens, Orrick’s Asia managing partner. “But current economic realities are causing us to reorient several of our traditional operations, and our primary focus now is aimed at achieving better practice efficiency and value for clients.”
Stephens added that despite the downturn the firm will still be active in examining potential markets around the world. “The Middle East is an important commercial region and [is] becoming an increasingly important financial centre – global circumstances notwithstanding,” he said.
In one of the largest rounds of layoffs to date, the firm said that 12% of its non-partner lawyers would be cut. Twenty-five lawyers will be given the chop in Asia – the same amount as in Europe – while 50 will leave in the US. The firm also announced that 200 staffers would be let go.Last November, 40 associates and of counsel in Orrick’s structured finance and real estate practices were booted to the curb. It also decided that 35 staffers were surplus to requirements. Those 75 staff were offered fivemonth severance packages, but the people laid off this time around only receive a three-month package. By contrast, Latham & Watkins offered its associates a six-month severance package capped at US$100,000.
Firms need to be aware of the impact that multiple rounds of layoffs have on staff morale. Law firm consultant Wendy Tice- Wallner said that firms considering layoffs may need to make them all in one fell swoop so as to not erode staff morale.
“Our analyses and commitments to markets are based on long-term practice and client drivers”Christopher Stephens, Orrick
“Most firms would prefer to do one round of layoffs. The ideal situation is to not be doing this very often and to know where you want to be six months or a year from now. You don’t want people waiting for the other shoe to drop,” she said. “It’s not just a slow practice area or underperformers. These cuts are really targeted at keeping the bottom line from becoming intolerable to the owners of the business. When you are talking about this large a volume of people, you are inevitably cutting into people who could be keepers. You can’t help but cut some potentially quality lawyers.”
Meanwhile, the firm has also shelved plans to launch in the Gulf region. The firm announced last year that it would open two offices in the region in 2009, but these plans are now on hold in light of global economic conditions.
“We are not short-term speculators, and our analyses and commitments to markets are based on long-term practice and client drivers,” said Christopher Stephens, Orrick’s Asia managing partner. “But current economic realities are causing us to reorient several of our traditional operations, and our primary focus now is aimed at achieving better practice efficiency and value for clients.”
Stephens added that despite the downturn the firm will still be active in examining potential markets around the world. “The Middle East is an important commercial region and [is] becoming an increasingly important financial centre – global circumstances notwithstanding,” he said.
March 15, 2010
Lovells to pay up after all
Despite no mention of compensation in its first letter to future joiners, reports have revealed that Lovells will now offer a cash payment to trainee solicitors who have decided to defer.
The firm recently wrote to its autumn 2009 and spring and autumn 2010 intakes offering a Ј5,000 cash payment to those who delay their start dates by 12 months and Ј2,500 for any who decide to defer for six months.
Lovells follows in the footsteps of other UK firms, such as DLA Piper, Penningtons (which is paying a flat rate of Ј5,000 to trainees who delay their start dates for a year), Herbert Smith and Norton Rose (the most generous so far, offering up to Ј10,000).
The firm recently wrote to its autumn 2009 and spring and autumn 2010 intakes offering a Ј5,000 cash payment to those who delay their start dates by 12 months and Ј2,500 for any who decide to defer for six months.
Lovells follows in the footsteps of other UK firms, such as DLA Piper, Penningtons (which is paying a flat rate of Ј5,000 to trainees who delay their start dates for a year), Herbert Smith and Norton Rose (the most generous so far, offering up to Ј10,000).
US firms cut London counterparts
Many US firms have recently taken to cutting staff from their London networks as they seek to ride out the slump.
Dewey & LeBoeuf last month launched a redundancy consultation in London in a bid to reduce its associate headcount by approximately 15.
The cut will amount to 9% of London-based associates and see 13% of support staff laid off in the capital.
Latham & Watkins also announced plans to lay off a total of 440 employees across its global network, with the firm’s London office set to lose 15 employees.
The firm will offer severance packages including six months’ salary and six months of continued medical benefits to staff who are cut.
Shearman & Sterling has followed suit and begun redundancy consultations in its London office, where 18 secretarial and support staff are likely to lose their jobs.
The firm also revealed that is has reduced its bonus pool and initiated a salary freeze due to the shaky economic climate.
Last, but not least, White & Case is on track to slash between 80 and 95 legal and support staff jobs in London as part of a firm-wide round of redundancies that will see approximately 400 employees laid off.
Dewey & LeBoeuf last month launched a redundancy consultation in London in a bid to reduce its associate headcount by approximately 15.
The cut will amount to 9% of London-based associates and see 13% of support staff laid off in the capital.
Latham & Watkins also announced plans to lay off a total of 440 employees across its global network, with the firm’s London office set to lose 15 employees.
The firm will offer severance packages including six months’ salary and six months of continued medical benefits to staff who are cut.
Shearman & Sterling has followed suit and begun redundancy consultations in its London office, where 18 secretarial and support staff are likely to lose their jobs.
The firm also revealed that is has reduced its bonus pool and initiated a salary freeze due to the shaky economic climate.
Last, but not least, White & Case is on track to slash between 80 and 95 legal and support staff jobs in London as part of a firm-wide round of redundancies that will see approximately 400 employees laid off.
Staff cuts continue at UK firms
The economic turmoil continues to take its toll on firms and their staff as another round of redundancy consultations begin.
Following reports that Clifford Chance aims to reduce lawyer headcount by 80 and scale back its partnership numbers, the Magic Circle firm recently announced it would be laying off up to 115 business services staff in London after a review.
Allen & Overy also recently revealed that five partners of the 12 that make up its London leveraged finance team will be departing, due to the scarcity of buyout activity. The firm is also said to be poised to lay off a further 31 of its 192 associates from its general banking practice.
Bristol-headquartered firm Burges Salmon has begun a redundancy consultation that will see 18 lawyers laid off across a number of different practices, while trainees are being requested to defer their start dates by a year.
The firm is also considering initiating a freeze on lawyer salaries, a decision that is due to be confirmed in September.
Following reports that Clifford Chance aims to reduce lawyer headcount by 80 and scale back its partnership numbers, the Magic Circle firm recently announced it would be laying off up to 115 business services staff in London after a review.
Allen & Overy also recently revealed that five partners of the 12 that make up its London leveraged finance team will be departing, due to the scarcity of buyout activity. The firm is also said to be poised to lay off a further 31 of its 192 associates from its general banking practice.
Bristol-headquartered firm Burges Salmon has begun a redundancy consultation that will see 18 lawyers laid off across a number of different practices, while trainees are being requested to defer their start dates by a year.
The firm is also considering initiating a freeze on lawyer salaries, a decision that is due to be confirmed in September.
March 14, 2010
UK firm rocked by student’s indirect discrimination claim
UK-based firm Osborne Clarke has been embroiled in a discrimination case brought by an Indian law student for its refusal to accept his trainee application.
The firm dismissed the student’s training contract application in 2007 on the grounds that he was a non-EEA (European Economic Area) resident and needed a work permit.
A ruling issued in March by the UK Employment Appeal Tribunal found that the firm “could not justify their policy of not accepting applications for training contracts from non-EEA nationals”. A spokesman from Osborne Clarke said the firm was disappointed with the tribunal’s ruling of indirect discrimination.
The firm is now believed to be undertaking measures to comply with the ruling. “We have already re-assessed our position on this issue to ensure that our policy complies with the original tribunal’s ruling,” the spokesman said.
The firm dismissed the student’s training contract application in 2007 on the grounds that he was a non-EEA (European Economic Area) resident and needed a work permit.
A ruling issued in March by the UK Employment Appeal Tribunal found that the firm “could not justify their policy of not accepting applications for training contracts from non-EEA nationals”. A spokesman from Osborne Clarke said the firm was disappointed with the tribunal’s ruling of indirect discrimination.
The firm is now believed to be undertaking measures to comply with the ruling. “We have already re-assessed our position on this issue to ensure that our policy complies with the original tribunal’s ruling,” the spokesman said.
Dentons re-enters the arena due to increase in work
Denton Wilde Sapte has quietly reopened its Singapore office, giving the stream of instructions coming from the region as the motivating factor.
In 2004, the firm closed all its Asian offices – Singapore, Tokyo, Beijing and Hong Kong – after deciding that they did not fit into the firm’s broader strategy.
The office, which will focus solely on trade finance, will be headed up by London partner Jonathan Solomon, who will have two associates. As part of the reopening, the firm has struck an exclusive alliance with local outfit Global Law Alliance.
“What has changed is that we have started seeing a good stream of instructions from Singapore, so for our trade finance group it made sense to open up here,” Solomon said.
In 2004, the firm closed all its Asian offices – Singapore, Tokyo, Beijing and Hong Kong – after deciding that they did not fit into the firm’s broader strategy.
The office, which will focus solely on trade finance, will be headed up by London partner Jonathan Solomon, who will have two associates. As part of the reopening, the firm has struck an exclusive alliance with local outfit Global Law Alliance.
“What has changed is that we have started seeing a good stream of instructions from Singapore, so for our trade finance group it made sense to open up here,” Solomon said.
March 13, 2010
Measures by SGX-ST to Facilitate Secondary Fundraising by Listed Companies
The Singapore Exchange Limited (“SGX”) has introduced a few measures to assist listed companies to raise funds in the current economic environment where credit is tight. The measures, which variously took effect from 13 January 2009 and 20 February 2009, include the following:
- Rights Issue Exposure Period is shorter
The SGX will accept confidential submissions for all rights issue applications before the company makes an announcement. Confidential submissions were previously allowed only for underwritten issues. The notice of books closure date is also reduced from ten to five market days. Companies are also required to use a checklist to facilitate compliance with the listing reguirements. This should reduce the time that SGX takes to approve an application. - 100% Renounceable Pro-Rata Share Issuance
The listing rules had allowed listed companies to obtain shareholders’ approval for the issuance of new shares on a pro-rata basis amounting to not more than 50% of the issued share capital. SGX has increased the limit to allow listed companies to issue up to 100% of their issued share capital via a pro-rata renounceable rights issue. Shareholders have equal opportunities to participate or dispose of their entitlements if they do not wish to subscribe for their rights. The issuer remains responsible to make periodic announcements on the use of proceeds and report on such use in its annual report. - Discount Limit for Share Placements
In the current dismal market, the 10% maximum discount for a placement of shares has not been attractive to investors. This has hampered the efforts of listed companies to raise funds in this way. To improve the viability of placement exercises, SGX now allows issuers to undertake placements of new shares priced with a 20% maximum discount of the weighted average price for trades done on the date the placement agreement is signed subject to:- shareholders’ approval being obtained to issue new shares on a non pro-rata basis at a discount exceeding 10% but not more than 20%;
- any resolution for such non pro-rata issuance of shares is not conditional to the resolution in (1).
- Scrip Dividend Schemes
Subject to the Companies Act and other legal requirements, the payment of dividends through a scrip dividend scheme may now be carried out without the need for shareholders’ approval, if the listed company gives its shareholders the option to receive their dividends in cash. Measures (b) to (d) will be in effect until 31 December 2010. - Placements to Substantial Shareholders
Former Dewey lawyers get ready to lead SJ Berwin’s charge into region
SJ Berwin is believed to be on the cusp of securing permission to open its first Asian office in Hong Kong – and former Dewey & LeBoeuf partner Daniel Liew is expected to be its man on the ground.
Liew was charged with the same task at Dewey – he opened their HK office in 2007 – but this time he will be supported by former Dewey counsel Peter Tse and the current head of SJ Berwin’s German-based real estate practice, Hans Thomas Kessler.
The firm’s senior partner, Jonathan Blake, said that such a move was always on the cards but it was simply a matter of getting the timing right and finding the right resources.
“We have felt for some time that it is a market to be in and we waited for the right opportunity. There are a number of business areas that we want to develop in Hong Kong and it was about getting the plan together, and having the right people,” he said. “We feel that Hong Kong is an important base for the whole of China and the East Asian region, and we see that as a huge growing market where our core areas will be very important.”
Liew was charged with the same task at Dewey – he opened their HK office in 2007 – but this time he will be supported by former Dewey counsel Peter Tse and the current head of SJ Berwin’s German-based real estate practice, Hans Thomas Kessler.
The firm’s senior partner, Jonathan Blake, said that such a move was always on the cards but it was simply a matter of getting the timing right and finding the right resources.
“We have felt for some time that it is a market to be in and we waited for the right opportunity. There are a number of business areas that we want to develop in Hong Kong and it was about getting the plan together, and having the right people,” he said. “We feel that Hong Kong is an important base for the whole of China and the East Asian region, and we see that as a huge growing market where our core areas will be very important.”
March 12, 2010
Asia not immune as White & Case lays off additional 200 lawyers
In the latest round of additional redundancy announcements by major international firms, White & Case will again reduce its workforce, cutting 400 staff, including 200 lawyers and a number of partners across its global offices.
The recent cuts follow last November’s 3% workforce reduction, which cut 70 lawyers and 100 staff, largely from the UK and US offices. The firm’s statement at the time said the cuts were precautionary steps taken “in advance of what is likely to be a significantly weakened global economy in 2009”.
However, the firm has now undertaken an additional round of cuts, which will see an unconfirmed number of partners, 200 associates and 200 administrative staff axed to meet “current and anticipated business needs”. The start date of the majority of the firm’s new associate intake will be deferred until 2010 and ‘operating expenses’ will also be reduced.
A spokesperson for the firm told ALB that its Asia practices cannot be ‘ruled out’ from the review, but did not give any indication as to the number of Asia redundancies which might occur. “From this review, it was clear that the deterioration of the global economy will continue to affect our clients and their demand for our services for the foreseeable future,” the spokesperson said. “The Asia economy is not immune to this and we will continue to monitor our resource levels in our Asia practice so that they are properly aligned to our business in the long term and to enable us to maintain our position as a leading law firm, both globally and in Asia.”
The recent cuts follow last November’s 3% workforce reduction, which cut 70 lawyers and 100 staff, largely from the UK and US offices. The firm’s statement at the time said the cuts were precautionary steps taken “in advance of what is likely to be a significantly weakened global economy in 2009”.
However, the firm has now undertaken an additional round of cuts, which will see an unconfirmed number of partners, 200 associates and 200 administrative staff axed to meet “current and anticipated business needs”. The start date of the majority of the firm’s new associate intake will be deferred until 2010 and ‘operating expenses’ will also be reduced.
A spokesperson for the firm told ALB that its Asia practices cannot be ‘ruled out’ from the review, but did not give any indication as to the number of Asia redundancies which might occur. “From this review, it was clear that the deterioration of the global economy will continue to affect our clients and their demand for our services for the foreseeable future,” the spokesperson said. “The Asia economy is not immune to this and we will continue to monitor our resource levels in our Asia practice so that they are properly aligned to our business in the long term and to enable us to maintain our position as a leading law firm, both globally and in Asia.”
March 11, 2010
Hong Kong singled out as DLA Piper axes 54
DLA Piper is restructuring its Asia offices in a move which will see 20 of its Asia-based lawyers made redundant by the end of March.
The firm announced that 54 staff members – 20 fee earners and 34 support staff – across its Asia businesses will be cut. Most of the losses are believed to affect the Hong Kong office, in the aftermath of several partner departures. Managing partner Alastair Da Costa described the cuts as “strategically and commercially responsible”.
A leaked memo allegedly provided an outline of the firm’s culling strategy detailing criteria including strength in maintaining client relationships, initiative shown in external practices and the amount of leave take will be used when selcecting staff for layoffs.
Staff unhappy with miserly payouts
Support staff at DLA Piper are reportedly less than impressed at the severance packages on offer.
Those who take voluntary redundancies will be paid out for their contractual notice period, one month’s salary and only the statutory minimum compensation. This pales in comparison with the packages being offered by international rivals Clifford Chance, Linklaters and Allen & Overy.
The firm announced that 54 staff members – 20 fee earners and 34 support staff – across its Asia businesses will be cut. Most of the losses are believed to affect the Hong Kong office, in the aftermath of several partner departures. Managing partner Alastair Da Costa described the cuts as “strategically and commercially responsible”.
A leaked memo allegedly provided an outline of the firm’s culling strategy detailing criteria including strength in maintaining client relationships, initiative shown in external practices and the amount of leave take will be used when selcecting staff for layoffs.
Staff unhappy with miserly payouts
Support staff at DLA Piper are reportedly less than impressed at the severance packages on offer.
Those who take voluntary redundancies will be paid out for their contractual notice period, one month’s salary and only the statutory minimum compensation. This pales in comparison with the packages being offered by international rivals Clifford Chance, Linklaters and Allen & Overy.
March 10, 2010
White & Case cuts off local ally
White & Case has broken off its alliance with local Singapore firm Venture Law, after obtaining a licence to practice local law.
Despite initially stating the alliance would remain after the Qualifying Foreign Law Practice (QFLP) licence was granted last December, the firm has shifted its stance but said that its overall strategy in Singapore would remain unchanged. White & Case, unlike some of its fellow QFLP licensees, had formally registered its now six-year-old alliance, rather than undertaking it as a joint law venture (JLV).
White & Case’s Singapore managing partner, Doug Peel, told ALB earlier this year that the alliance was strong and had made the transition to becoming a QFLP firm easier. “Our alliance with Venture Law has been extremely useful and has enabled us to combine our resources with Venture Law’s vast domestic knowledge,” he said. “It has been a happy and fulfilling relationship and the granting of this licence will create opportunities for the two of us to unify.”
Despite initially stating the alliance would remain after the Qualifying Foreign Law Practice (QFLP) licence was granted last December, the firm has shifted its stance but said that its overall strategy in Singapore would remain unchanged. White & Case, unlike some of its fellow QFLP licensees, had formally registered its now six-year-old alliance, rather than undertaking it as a joint law venture (JLV).
White & Case’s Singapore managing partner, Doug Peel, told ALB earlier this year that the alliance was strong and had made the transition to becoming a QFLP firm easier. “Our alliance with Venture Law has been extremely useful and has enabled us to combine our resources with Venture Law’s vast domestic knowledge,” he said. “It has been a happy and fulfilling relationship and the granting of this licence will create opportunities for the two of us to unify.”
March 9, 2010
Singapore Ready to Roar in Islamic Finance
In terms of focused implementation, rapid developments in Singapore indicate that Singapore’s Islamic finance industry is fast on the heels of that of Malaysia, which has been nurturing its own Islamic finance industry since much earlier, circa the 1980s.
Malaysia-based corporate law firm Azmi & Associates’ roadshow in Singapore early this year is emblematic of the growing interest of foreign law firms to gravitate towards Singapore, attracted by the potential of Islamic finance in the island nation.
According to Ahmad Lutfi Abdull Mutalip, the Partner who leads Azmi & Associates’ Global Financial Services and Islamic Banking Practice Group, Singapore’s latest moves to develop its Islamic finance sector is not surprising, given that it has – especially so circa 2005 and 2006 – tailored its fiscal and monetary policies to facilitate Islamic finance.
“We have been following the progress of Islamic finance in Singapore with keen interest, hence our roadshow,” Ahmad Lutfi says, “and our recently opened branch in Johor Bahru is one of the elements in the Azmi & Associates strategy for expanding our range of Islamic financial solutions for the businesses and institutions in Singapore.” Johor Bahru is the thriving capital city of the southern Malaysian state of Johor, which borders Singapore.
Singapore has, like Malaysia, removed double-stamping duty on Islamic banking instruments. Singapore has also licensed its first Islamic bank, the Islamic Bank of Asia. More recently, there were Singapore’s first Shariah-compliant Exchange-traded Fund and its first local-currency sovereign sukuk, issued by the Monetary Authority of Singapore (MAS) on a reverse-enquiry basis: the maturity, price and size of the sukuk is determined by investors demand instead of by the issuer. “This is reflective of the consistent emphasis by MAS on organic growth of the Singaporean Islamic finance industry, as it prefers to encourage the private sector to take the leading role,” Ahmad Lutfi says.
While Singapore may derive much advantage from Malaysia’s longer experience with Islamic finance, Malaysia may similarly learn from Singapore’s advances in regulating an open Islamic finance industry. Such cross-pollination between law firms that are based in Singapore and Malaysia and that offer Islamic financial services may show that the way forward for the sustainable growth of Islamic finance in the Southeast Asia region is through cross-border co-operation.
Malaysia-based corporate law firm Azmi & Associates’ roadshow in Singapore early this year is emblematic of the growing interest of foreign law firms to gravitate towards Singapore, attracted by the potential of Islamic finance in the island nation.
According to Ahmad Lutfi Abdull Mutalip, the Partner who leads Azmi & Associates’ Global Financial Services and Islamic Banking Practice Group, Singapore’s latest moves to develop its Islamic finance sector is not surprising, given that it has – especially so circa 2005 and 2006 – tailored its fiscal and monetary policies to facilitate Islamic finance.
“We have been following the progress of Islamic finance in Singapore with keen interest, hence our roadshow,” Ahmad Lutfi says, “and our recently opened branch in Johor Bahru is one of the elements in the Azmi & Associates strategy for expanding our range of Islamic financial solutions for the businesses and institutions in Singapore.” Johor Bahru is the thriving capital city of the southern Malaysian state of Johor, which borders Singapore.
Singapore has, like Malaysia, removed double-stamping duty on Islamic banking instruments. Singapore has also licensed its first Islamic bank, the Islamic Bank of Asia. More recently, there were Singapore’s first Shariah-compliant Exchange-traded Fund and its first local-currency sovereign sukuk, issued by the Monetary Authority of Singapore (MAS) on a reverse-enquiry basis: the maturity, price and size of the sukuk is determined by investors demand instead of by the issuer. “This is reflective of the consistent emphasis by MAS on organic growth of the Singaporean Islamic finance industry, as it prefers to encourage the private sector to take the leading role,” Ahmad Lutfi says.
While Singapore may derive much advantage from Malaysia’s longer experience with Islamic finance, Malaysia may similarly learn from Singapore’s advances in regulating an open Islamic finance industry. Such cross-pollination between law firms that are based in Singapore and Malaysia and that offer Islamic financial services may show that the way forward for the sustainable growth of Islamic finance in the Southeast Asia region is through cross-border co-operation.
March 8, 2010
In-house team importance grows
Continued efforts to implement a ‘general counsel system’ in state-owned enterprises in China sends a positive message to law firms and encourages greater communication with decision-makers.
Six years after the Chinese Government initiated a campaign to implement a “general counsel system” in state-owned enterprises (SOEs), the majority of the large SOEs have now established an in-house legal function and appointed general counsel.
Many of these in-house departments have thrived and proven their value to senior management in a remarkably short space of time. Legal managers and general counsel in these departments have also earned good reputations in the legal community. The in-house legal teams of CNOOC, Bao Steel and Sinopec, for example, have excelled in providing strategic and innovative legal solutions to enable their companies to achieve business and strategic objectives not only in the domestic market, but also in key markets around the globe.
As part of the campaign, and in an effort to find the most competent candidates for general counsel positions, the State Assets Supervision and Administration Commission of the State Council (SASAC) started an annual public recruitment program to help appoint general counsel for enterprises under its supervision since 2006. So far, 16 central-level SOEs have appointed general counsel through three public recruitment programs.
Last May, a plan to promote general counsel roles in subsidiary companies announced by SASAC marked the beginning of the campaign’s second phase. The plan says all important subsidiaries of the central-level SOEs should have appointed general counsel and set up an in-house legal function by 2010.
China Chengtong Group, a large logistics conglomerate which is a central SOE, is one of the first to respond to the new agenda set by the SASAC. Under the leadership of the group’s general counsel, Tang Mingyi, who was appointed through SASAC’s 2007 public recruitment program, the group recently named Wang Yonghai as the general counsel of its important subsidiary, China Asset Management Corporation.
As the SOEs are becoming increasingly commercially oriented, international and market-driven, the development of a solid in-house legal function is a good strategy. However, this raises an important question: does the growth of the inhouse role translate into reduced business opportunities for external firms?
According to Dacheng’s senior partner, Tuo Zhongming, the promotion of in-house legal teams in SOEs will improve the legal service industry. “We see the rise of in-house teams led by a general counsel as a positive and necessary development. As large sophisticated organisations, they do need professional legal management,” he says.
Tuo has extensive experience working with SOEs, particularly on restructuring projects. He has been the main outside advisor for China Asset Management Corporation since 2000. After the appointment of the general counsel, he continues to provide legal support and advice regarding the company’s business operations and strategic planning.
“General counsel and in-house counsel don’t handle all legal matters directly; they are responsible for leading and managing the process,” Tuo says. “The volume of legal work outsourced to us won’t be lower than before the general counsel was named, but we have to offer more specialised legal services in certain practice areas and improve the quality of our services.”
In the past, due to the absence of an in-house legal team, communication between external counsel and board members and senior management has been problematic and prone to misunderstandings. Having an in-house legal team will help external counsel work more efficiently.
“In-house teams can help law firms to better understand companies’ business needs, and at the same time they can ensure that external advisers are able to provide the best value and legal solutions for businesses,” says Liu Yuming, a partner of Zhong Lun.
Six years after the Chinese Government initiated a campaign to implement a “general counsel system” in state-owned enterprises (SOEs), the majority of the large SOEs have now established an in-house legal function and appointed general counsel.
Many of these in-house departments have thrived and proven their value to senior management in a remarkably short space of time. Legal managers and general counsel in these departments have also earned good reputations in the legal community. The in-house legal teams of CNOOC, Bao Steel and Sinopec, for example, have excelled in providing strategic and innovative legal solutions to enable their companies to achieve business and strategic objectives not only in the domestic market, but also in key markets around the globe.
As part of the campaign, and in an effort to find the most competent candidates for general counsel positions, the State Assets Supervision and Administration Commission of the State Council (SASAC) started an annual public recruitment program to help appoint general counsel for enterprises under its supervision since 2006. So far, 16 central-level SOEs have appointed general counsel through three public recruitment programs.
Last May, a plan to promote general counsel roles in subsidiary companies announced by SASAC marked the beginning of the campaign’s second phase. The plan says all important subsidiaries of the central-level SOEs should have appointed general counsel and set up an in-house legal function by 2010.
China Chengtong Group, a large logistics conglomerate which is a central SOE, is one of the first to respond to the new agenda set by the SASAC. Under the leadership of the group’s general counsel, Tang Mingyi, who was appointed through SASAC’s 2007 public recruitment program, the group recently named Wang Yonghai as the general counsel of its important subsidiary, China Asset Management Corporation.
As the SOEs are becoming increasingly commercially oriented, international and market-driven, the development of a solid in-house legal function is a good strategy. However, this raises an important question: does the growth of the inhouse role translate into reduced business opportunities for external firms?
According to Dacheng’s senior partner, Tuo Zhongming, the promotion of in-house legal teams in SOEs will improve the legal service industry. “We see the rise of in-house teams led by a general counsel as a positive and necessary development. As large sophisticated organisations, they do need professional legal management,” he says.Tuo has extensive experience working with SOEs, particularly on restructuring projects. He has been the main outside advisor for China Asset Management Corporation since 2000. After the appointment of the general counsel, he continues to provide legal support and advice regarding the company’s business operations and strategic planning.
“General counsel and in-house counsel don’t handle all legal matters directly; they are responsible for leading and managing the process,” Tuo says. “The volume of legal work outsourced to us won’t be lower than before the general counsel was named, but we have to offer more specialised legal services in certain practice areas and improve the quality of our services.”
In the past, due to the absence of an in-house legal team, communication between external counsel and board members and senior management has been problematic and prone to misunderstandings. Having an in-house legal team will help external counsel work more efficiently.
“In-house teams can help law firms to better understand companies’ business needs, and at the same time they can ensure that external advisers are able to provide the best value and legal solutions for businesses,” says Liu Yuming, a partner of Zhong Lun.
Proposed reforms to executive remuneration
The fallout from the global financial crisis has resulted in increased interest in executive remuneration across the Asia-Pacific region and beyond.
Developments in the United States have contributed to this interest. The US Senate has been asked to consider a proposal to recover a large proportion of retention bonuses paid to executives of AIG, and other institutions that have received taxpayer assistance, via the introduction of a 70% tax on these payments.
There is a perceived lack of nexus between executive remuneration and performance, and concerns about independence and transparency in setting and paying the remuneration.
There are many reported instances in recent times of companies announcing voluntary reductions in executive salaries, and in some instances, of executives returning bonuses paid to them during the 2008 period. However some governments have proposed reforms to limit the amount companies can offer their executives, causing concern within the business community as to whether companies will be able to offer adequate incentives to attract and retain the best people in an international market for talent.
One example of government intervention is the recent announcement in Australia of proposed reforms to the corporations legislation, aimed at curbing termination payments to executives. These reforms include a proposal to cap termination payments at 1 year’s base salary unless shareholder approval is obtained. The proposed reforms also widen the scope of regulation of termination payments by:
In the People’s Republic of China it has been reported that a draft regulation on executive remuneration is soon to be submitted to the State Council for approval. The draft regulation proposes a pay ceiling of 2.8 million Yuan a year for senior executives of all state-owned enterprises, commencing with the financial sector. Under the proposal, executives may also receive performance-linked pay of no more than three times the basic salary.
Employers should be mindful of developments and how these will affect their ability to attract and retain talent at the executive level.
Developments in the United States have contributed to this interest. The US Senate has been asked to consider a proposal to recover a large proportion of retention bonuses paid to executives of AIG, and other institutions that have received taxpayer assistance, via the introduction of a 70% tax on these payments.
There is a perceived lack of nexus between executive remuneration and performance, and concerns about independence and transparency in setting and paying the remuneration.
There are many reported instances in recent times of companies announcing voluntary reductions in executive salaries, and in some instances, of executives returning bonuses paid to them during the 2008 period. However some governments have proposed reforms to limit the amount companies can offer their executives, causing concern within the business community as to whether companies will be able to offer adequate incentives to attract and retain the best people in an international market for talent.
One example of government intervention is the recent announcement in Australia of proposed reforms to the corporations legislation, aimed at curbing termination payments to executives. These reforms include a proposal to cap termination payments at 1 year’s base salary unless shareholder approval is obtained. The proposed reforms also widen the scope of regulation of termination payments by:
- covering not just current and former directors, but all executives named in the company’s remuneration report;
- broadening the definition of ‘termination payment’ to include all types of payments and rewards given at termination.
In the People’s Republic of China it has been reported that a draft regulation on executive remuneration is soon to be submitted to the State Council for approval. The draft regulation proposes a pay ceiling of 2.8 million Yuan a year for senior executives of all state-owned enterprises, commencing with the financial sector. Under the proposal, executives may also receive performance-linked pay of no more than three times the basic salary.
Employers should be mindful of developments and how these will affect their ability to attract and retain talent at the executive level.
ALB — George Cooper,
Practice Leader Workplace Law & Advisory – Asia Freehills
March 6, 2010
Asia drives Australian growth
Australian legal services are increasingly targeting Asia as work on the region’s continuing development and the continent’s insulation from the worst of the economic downturn prove irresistable.
Asia has officially become the fastest growing market for Australia’s exported legal services, with lawyers saying Asia’s developmental needs will drive the growth further and see more law firms move into the region.
According to research issued this month by Australia’s International Legal Services Advisory Council (ILSAC), from 2006-2007 Australia’s exported legal services to Asia grew by 56.4%, compared to the 25.5% growth from the previous period (2005-2006). For the first time, China overtook the UK as the second largest market for Australian exported legal work, accounting for 16% of the total revenue generated. The United States remained Australia’s largest legal services market.
Although the research captures the market before the advent of the global financial crisis, Jim Dunstan, a Hong Kong-based partner heading Allens Arthur Robinson’s Asia operations, says the growth coming from Asia was likely to be sustained. He said the possibilities for legal work in Asia were almost “limitless”, and that the region will remain somewhat insulated from the effects of the financial crisis.
“The underlying demand for infrastructure and the increasing wealth throughout Asia will drive growth over the next 25 years,” Dunstan says. “The demand for those areas is almost endless and it will continue to grow as things sort out following the current crisis. In addition, the sophistication and rapid growth of middle-class wealth in Asia will provide more opportunities for the financial services industry to do more routine banking, [as opposed to] developed economies where they’ve come to the end of what they could do, [since] everyone has a bank or super account.”
John Corcoran, president of the Law Council of Australia – which cocommissioned the ILSAC report, has a similar outlook.
“I think the growth in exported legal services to Asia is likely to move forward even further despite the economic crisis, because the Asia economies, with some exceptions, seem to be maintaining their growth and activity, and perhaps are more likely to rebound from the crisis, particularly in China and Hong Kong,” he says. “Both of those economies will grow in the foreseeable future and, looking specifically at the sectors, Australia has been involved mostly in M&A and corporate transactions, and they are very consistent with the areas that China is likely to need legal services in.”
Corcoran says that Australian firms will continue to push further into the Asian market either by setting up offices, establishing joint ventures or through the “fly in, fly out” method.
“It’ll be interesting to see [more firms moving towards Asia] as Australian firms in Asia practice in different ways – some are involved in ‘fly in, fly out’ transactions; others have a number of offices in Asia. I think it’ll be combinations of both and possibly joint ventures with local firms,” he says.
As law firms look towards Asia in response to the downturn, it is likely that competition will become more heated in the short term. But Corcoran says that Australia’s links to the region will set its firms apart from competitors.
“Many law firms from the UK and the US have a significant presence in Asia, and I guess they are competitors with Australian firms in the area,” he says. “But there’s still a lot of upside for Australian firms in Asia as we understand the region well and we practice in the areas that are likely to meet the need in.”
The firm expects to meet more demand in practices such as litigation and insurance, as work filters down from the US towards the Asia-Pacific region.
Asia has officially become the fastest growing market for Australia’s exported legal services, with lawyers saying Asia’s developmental needs will drive the growth further and see more law firms move into the region.
According to research issued this month by Australia’s International Legal Services Advisory Council (ILSAC), from 2006-2007 Australia’s exported legal services to Asia grew by 56.4%, compared to the 25.5% growth from the previous period (2005-2006). For the first time, China overtook the UK as the second largest market for Australian exported legal work, accounting for 16% of the total revenue generated. The United States remained Australia’s largest legal services market.
Although the research captures the market before the advent of the global financial crisis, Jim Dunstan, a Hong Kong-based partner heading Allens Arthur Robinson’s Asia operations, says the growth coming from Asia was likely to be sustained. He said the possibilities for legal work in Asia were almost “limitless”, and that the region will remain somewhat insulated from the effects of the financial crisis.
“The underlying demand for infrastructure and the increasing wealth throughout Asia will drive growth over the next 25 years,” Dunstan says. “The demand for those areas is almost endless and it will continue to grow as things sort out following the current crisis. In addition, the sophistication and rapid growth of middle-class wealth in Asia will provide more opportunities for the financial services industry to do more routine banking, [as opposed to] developed economies where they’ve come to the end of what they could do, [since] everyone has a bank or super account.”
John Corcoran, president of the Law Council of Australia – which cocommissioned the ILSAC report, has a similar outlook.
“I think the growth in exported legal services to Asia is likely to move forward even further despite the economic crisis, because the Asia economies, with some exceptions, seem to be maintaining their growth and activity, and perhaps are more likely to rebound from the crisis, particularly in China and Hong Kong,” he says. “Both of those economies will grow in the foreseeable future and, looking specifically at the sectors, Australia has been involved mostly in M&A and corporate transactions, and they are very consistent with the areas that China is likely to need legal services in.”
Corcoran says that Australian firms will continue to push further into the Asian market either by setting up offices, establishing joint ventures or through the “fly in, fly out” method.
“It’ll be interesting to see [more firms moving towards Asia] as Australian firms in Asia practice in different ways – some are involved in ‘fly in, fly out’ transactions; others have a number of offices in Asia. I think it’ll be combinations of both and possibly joint ventures with local firms,” he says.
As law firms look towards Asia in response to the downturn, it is likely that competition will become more heated in the short term. But Corcoran says that Australia’s links to the region will set its firms apart from competitors.
“Many law firms from the UK and the US have a significant presence in Asia, and I guess they are competitors with Australian firms in the area,” he says. “But there’s still a lot of upside for Australian firms in Asia as we understand the region well and we practice in the areas that are likely to meet the need in.”
The firm expects to meet more demand in practices such as litigation and insurance, as work filters down from the US towards the Asia-Pacific region.
An unnatural attraction?
The guiding hand of the regulator is again at work in the Lion Nation. But is there enough investor appetite or business around in the would-be financial hub of Southeast Asia to make it worthwhile? ALB investigates...
Funds management is big business in Asia. Cerulli & Associates notes that the total assets under management (AUM) in Singapore as at the end of 2007 hit a five-year high coming in at just over US$800bn, a figure which represents a 30% increase on the corresponding period in 2006. Of this total figure, net inflows accounted for 62% of the growth while the rising stock market accounted for the rest. Hong Kong had US$1.2trn in AUM in 2007, a 49% increase on 2006, Cerulli says.
This increase is largely due to the special administrative region’s unprecedented access to China’s wealth of affluent investors. Somewhat predictably, however, the forecasts for the remainder of this year and into 2010 are glum, with AUM expected to plummet in both countries as wary investors choose to hold on to their cash rather than throw it to the mercy of wounded markets. Enter the guiding hand of the regulator which, in Singapore, has launched a new line of tax incentives designed to both encourage funds to return and new fund houses to set up in the Lion nation. But will it work?
Positive signs
Lawyers ALB spoke to were understandably excited by the Singapore Government’s announcement that it would add an enhanced tier to existing fund management incentives, saying that the move was both overdue and a step in the right direction. “The enhanced tier status and the proposed amendments in the recent budget announcement is definitely a step – or two – in the right direction,” says Ho Han Ming, a counsel with Clifford Chance in Singapore.
“The amendments announced in the Budget clarify and refine the existing tax scheme announced in August 2007, which had unintentionally imposed additional operational difficulties on managers and administrators when ensuring compliance with its requirements,” he says.
Under the current tax incentives, specified income derived by qualifying funds from designated investments is generally exempt from Singapore income tax. Qualifying funds can only be in the form of companies, trusts or individual accounts. Where a qualifying fund is in the form of a company or a trust, the qualifying fund must not be 100% beneficially owned by resident investors. Resident nonindividual investors of a qualifying fund are subject to a 30–50% investment limit, depending on the number of investors in the fund. If that limit is breached, the resident non-individual investors would have to pay a financial penalty.
“It is clear that compliance with the new scheme will no longer be contingent on the fund domicile nor residency of the investors into the fund – the latter of which proved to the sticking point in the old days – the ‘80/20’ rule and more recently ‘30/50’ days of the ‘qualifying fund’ scheme,” Ho says.
Singapore’s ‘new’ tax incentive scheme
The Singapore Government, in line with its initiatives included in the 2009 budget, has announced a new tax incentive for certain investment funds managed from Singapore that has no restrictions on the residency status of fund vehicles or investors.
Further steps needed
However, despite the fact that the amendments are considered to be long overdue, there have been some suggestions that the bar may have been set a little too high and smaller sized funds are set to miss out.
“The current rules discriminate against Singapore-resident funds and Singapore-resident corporate investors. The enhanced tier would appear to remove the restrictions on the residency status of both the fund and the investors,” says Yang Eu Jin, a partner with KhattarWong in Singapore.
“If the proposed minimum fund size at the inception of the fund must be at least S$50m for the enhanced tier to be applicable, then it would appear that smaller funds would not be able to avail themselves of the benefits.”
The problem, Yang says, is that it is not uncommon to see the starting size of such funds at around the S$20m mark or less.
Another problem, albeit one largely beyond the control of the regulators, is – given the current economic climate – just whether these measures will fulfil their stated objectives and lure new, and old funds back into the country. For although Singapore has been relatively successful in attracting fund managers to set up operations in the country, it remains to be seen whether there will be a flurry of activity in this regard given the current economic situation. But while decreased activity on this front is expected in the short to medium term, lawyers ALB spoke to expect that the proposed amendments will help set up the fund management industry in Singapore for sound long-term growth enabling it to, inter alia, be in a better position to compete with Hong Kong.
“The incentives of the Singapore Government over the last few years have generally been quite successful in attracting fund managers to set up operations here,” Yang says. “I think the tide of fund managers setting up operations in Asia is an irreversible one and that jurisdictions have a favorable environment, which comprises many factors, of which tax incentives are a major but not the only consideration, given that corporate vehicles can set up easily in a number of jurisdictions. The single most important factor may perhaps be the jurisdiction which is the most convenient platform from which fund managers can access the increasing wealthy Asians who are often the target audience for such funds.”
Playing catch up
Nevertheless, all agree that Singapore still has a lot of ground to make up if it is to pip Hong Kong in the race to become Asia’s pre-eminent funds centre.
“It appears that Hong Kong’s being part of China is a double-edged sword. Some foreigners they perceive it as a window to the mainland, but to others Singapore is preferred as it is perceived to be a more neutral and independent jurisdiction. There is no denying, however, that Hong Kong is still a more mature market when it comes to the fund management industry,” says Yang – and this is something evidenced perfectly by Cerulli’s statistics.
It’s this race between funds centres in Asia that is set to keep lawyers extremely busy in the short to midterm as clients seek out both new and distressed opportunities.
“There is certainly a market for legal services in the area although the volume does not appear yet to be sufficient to sustain the type of highly specialised practices that you might find in the large UK firms,” says Yang, noting that the bulk of his firm’s instructions come from fund managers who are starting up their own unregulated funds.
Similarly, Ho’s clients are also actively on the look out for new opportunities. “We continue to see interest from managers who are keen to establish alternative investment funds, with a recent focus on distressed opportunities. Interestingly, we also see interest from Asian equities-focused managers, as well as private equity managers who see opportunities in the short to medium term space.”
Funds management is big business in Asia. Cerulli & Associates notes that the total assets under management (AUM) in Singapore as at the end of 2007 hit a five-year high coming in at just over US$800bn, a figure which represents a 30% increase on the corresponding period in 2006. Of this total figure, net inflows accounted for 62% of the growth while the rising stock market accounted for the rest. Hong Kong had US$1.2trn in AUM in 2007, a 49% increase on 2006, Cerulli says.
This increase is largely due to the special administrative region’s unprecedented access to China’s wealth of affluent investors. Somewhat predictably, however, the forecasts for the remainder of this year and into 2010 are glum, with AUM expected to plummet in both countries as wary investors choose to hold on to their cash rather than throw it to the mercy of wounded markets. Enter the guiding hand of the regulator which, in Singapore, has launched a new line of tax incentives designed to both encourage funds to return and new fund houses to set up in the Lion nation. But will it work?
Positive signs
Lawyers ALB spoke to were understandably excited by the Singapore Government’s announcement that it would add an enhanced tier to existing fund management incentives, saying that the move was both overdue and a step in the right direction. “The enhanced tier status and the proposed amendments in the recent budget announcement is definitely a step – or two – in the right direction,” says Ho Han Ming, a counsel with Clifford Chance in Singapore.
“The amendments announced in the Budget clarify and refine the existing tax scheme announced in August 2007, which had unintentionally imposed additional operational difficulties on managers and administrators when ensuring compliance with its requirements,” he says.
Under the current tax incentives, specified income derived by qualifying funds from designated investments is generally exempt from Singapore income tax. Qualifying funds can only be in the form of companies, trusts or individual accounts. Where a qualifying fund is in the form of a company or a trust, the qualifying fund must not be 100% beneficially owned by resident investors. Resident nonindividual investors of a qualifying fund are subject to a 30–50% investment limit, depending on the number of investors in the fund. If that limit is breached, the resident non-individual investors would have to pay a financial penalty.
“It is clear that compliance with the new scheme will no longer be contingent on the fund domicile nor residency of the investors into the fund – the latter of which proved to the sticking point in the old days – the ‘80/20’ rule and more recently ‘30/50’ days of the ‘qualifying fund’ scheme,” Ho says.
Singapore’s ‘new’ tax incentive scheme
The Singapore Government, in line with its initiatives included in the 2009 budget, has announced a new tax incentive for certain investment funds managed from Singapore that has no restrictions on the residency status of fund vehicles or investors.
- The government will add a new enhanced tier to the existing fund management incentives for funds with a minimum size of S$50m at the point of application
- The 30–50% investment limit on resident non-individual investors will be lifted for funds so that resident companies are able to enjoy the full benefits of tax exemption for qualifying income derived by funds without any worries about being subject to financial penalties
- Enhanced tier will be open to fund vehicles in the form of companies, trusts and limited partnerships
- Enhanced tier will be effective from 1 April 2009 to 31 March 2014
- Funds that are in the scheme on or before 31 March 2014 will continue to enjoy the tax exemption if they continue to meet the scheme’s conditions
Further steps needed
However, despite the fact that the amendments are considered to be long overdue, there have been some suggestions that the bar may have been set a little too high and smaller sized funds are set to miss out.
“The current rules discriminate against Singapore-resident funds and Singapore-resident corporate investors. The enhanced tier would appear to remove the restrictions on the residency status of both the fund and the investors,” says Yang Eu Jin, a partner with KhattarWong in Singapore.
“If the proposed minimum fund size at the inception of the fund must be at least S$50m for the enhanced tier to be applicable, then it would appear that smaller funds would not be able to avail themselves of the benefits.”
The problem, Yang says, is that it is not uncommon to see the starting size of such funds at around the S$20m mark or less.
Another problem, albeit one largely beyond the control of the regulators, is – given the current economic climate – just whether these measures will fulfil their stated objectives and lure new, and old funds back into the country. For although Singapore has been relatively successful in attracting fund managers to set up operations in the country, it remains to be seen whether there will be a flurry of activity in this regard given the current economic situation. But while decreased activity on this front is expected in the short to medium term, lawyers ALB spoke to expect that the proposed amendments will help set up the fund management industry in Singapore for sound long-term growth enabling it to, inter alia, be in a better position to compete with Hong Kong.
“The incentives of the Singapore Government over the last few years have generally been quite successful in attracting fund managers to set up operations here,” Yang says. “I think the tide of fund managers setting up operations in Asia is an irreversible one and that jurisdictions have a favorable environment, which comprises many factors, of which tax incentives are a major but not the only consideration, given that corporate vehicles can set up easily in a number of jurisdictions. The single most important factor may perhaps be the jurisdiction which is the most convenient platform from which fund managers can access the increasing wealthy Asians who are often the target audience for such funds.”
“The incentives of the Singapore Government over the last few years have generally been quite successful in attracting fund managers”Yang Eu Jin, KhattarWong
Playing catch up
Nevertheless, all agree that Singapore still has a lot of ground to make up if it is to pip Hong Kong in the race to become Asia’s pre-eminent funds centre.
“It appears that Hong Kong’s being part of China is a double-edged sword. Some foreigners they perceive it as a window to the mainland, but to others Singapore is preferred as it is perceived to be a more neutral and independent jurisdiction. There is no denying, however, that Hong Kong is still a more mature market when it comes to the fund management industry,” says Yang – and this is something evidenced perfectly by Cerulli’s statistics.
It’s this race between funds centres in Asia that is set to keep lawyers extremely busy in the short to midterm as clients seek out both new and distressed opportunities.
“There is certainly a market for legal services in the area although the volume does not appear yet to be sufficient to sustain the type of highly specialised practices that you might find in the large UK firms,” says Yang, noting that the bulk of his firm’s instructions come from fund managers who are starting up their own unregulated funds.
Similarly, Ho’s clients are also actively on the look out for new opportunities. “We continue to see interest from managers who are keen to establish alternative investment funds, with a recent focus on distressed opportunities. Interestingly, we also see interest from Asian equities-focused managers, as well as private equity managers who see opportunities in the short to medium term space.”
March 5, 2010
Gulf strategies vary in uncertain times
The Islamic finance practices of firms in East Asia have been eyeing the Gulf as a growth strategy for some time. The question is, will recent global financial events put their ambitions on hold?
As Asian authorities have intensified their pursuit of a larger slice of the Islamic finance (IF) market, the region’s law firms have followed suit – some of them even establishing offices in the Gulf region. But how successful will this be in attracting more IF work?
It seems the main factors persuading firms to leap towards the Middle East are the proximity to the large client base and the region’s importance for new industry developments.
“The Middle East will recover from the economic downturn faster than other parts of the world, and this alone will provide enough incentive for forward-thinking law firms to be here,” said Farid Hussain, Dubai office head at Zaid Ibrahim & Co. “Here, the business communities’ exposure to and knowledge of Islamic finance is growing, so this will also create demand for work.”
Last year, Zaid Ibrahim & Co became the first law firm in Asia to be approved to operate in the region’s leading finance hub, the Dubai International Financial Centre. Hussain says that the growth of the Islamic finance market was a significant motivation for the firm to make the move. “We’ve found our niche in the Middle East market by focusing on Islamic finance, infrastructure projects, regulatory reform and, to a certain extent, ICT. [This, coupled with our positive outlook in Middle East,] means we’re confident that there will be considerable growth in demand for these type of work.”
Another firm keen on expanding to the Middle East, but taking a steadier approach, is Azmi & Associates. “We will do so only after consolidating and enhancing our position here in Malaysia and in the Southeast Asian region, something we intend to pursue in the next two years,” says managing partner Azmi Mohd Ali.
As the IF market is dominated by Middle East investors, being close to the biggest clients would seem to be crucial.
“[Expansion] meets the need to be close to Gulf clients – who require far more personal contact. It is their high liquidity that drives the Islamic finance market. Certainly, proximity to the Gulf is also needed to understand the developments in Islamic finance better,” explains Muthanna Abdullah, managing partner of Lee Hishammuddin Allen & Gledhill.
Client concentration in the Gulf means that while IF work in Asia is growing, ambitious firms still need to establish a regional presence.
“Middle East investors tend to come to Asia for business such as property investments and other business opportunities,” says Loong Caesar, managing partner of Malaysia-based firm, Raslan Loong. “Where we do have Islamic finance-related dealings with them, it’s more a case of our banks trying to sell their Islamic products to Middle East investors. So our guys are over there rather than the other way around.”
The global financial crisis has had a somewhat positive effect on the IF sector, as investors eye its simpler principles and lower exposure to risk. “There has been a move towards IF as… subscribers to IF products were not as exposed [to the crisis]. This realisation has led to more interest in IF products,” Abdullah says.
Other observers were less convinced. Loong remained uncertain about the outlook for increased work in the current global climate. “I think you’ll find more interest in Islamic finance now, but conventional bankers are still suspicious of what it’s all about,” Loong says. “When the economy picks up, people may be disillusioned with new financial products. They may go back to more conservative banking types, but it is not necessarily going to be Islamic finance.”
And the steady growth of the IF market recently does not mean it has remained unaffected by the downturn. “A lot of people are saying that Islamic finance is not affected at all, but that’s not true,” Hussain says. “All the [Gulf] banks are still under one system at the moment, and the main issue now is liquidity.”
“At the moment the market in the Middle East is very quiet,” says Azlin Ahmad, head of WongPartnership’s Islamic banking & finance practice. “As a fact, there are several Islamic banks that are flushed with funds but are very cautious to extend loans and financing. IF is a pretty new area, so the fact that a lot of the banks have not quite collapsed yet does not necessarily mean that it is the better option - it just means that the banks at the moment are less exposed to [the global crisis]. [While that is the upside,] the downside is that a lot of the banks have been exposed to the property sector – and it’ll be quite interesting to see how they hold up.”
This in turn raises some doubts as to the viability of new office openings in the Gulf. Asian firms may have to resort to other means to break into the market. “We reckon that in the next two or three years, not many Asian law firms will be opening up a presence there, except maybe for toptier Singaporean or Malaysian firms,” Ali says. “Liquidity has been affected by the global financial crisis and firms will prefer to enter the Gulf by way of strategic moves. It is easier to obtain services through friendly law firms that are already in the Gulf region. It is also more cost-effective.”
As Asian authorities have intensified their pursuit of a larger slice of the Islamic finance (IF) market, the region’s law firms have followed suit – some of them even establishing offices in the Gulf region. But how successful will this be in attracting more IF work?
It seems the main factors persuading firms to leap towards the Middle East are the proximity to the large client base and the region’s importance for new industry developments.
“The Middle East will recover from the economic downturn faster than other parts of the world, and this alone will provide enough incentive for forward-thinking law firms to be here,” said Farid Hussain, Dubai office head at Zaid Ibrahim & Co. “Here, the business communities’ exposure to and knowledge of Islamic finance is growing, so this will also create demand for work.”
Last year, Zaid Ibrahim & Co became the first law firm in Asia to be approved to operate in the region’s leading finance hub, the Dubai International Financial Centre. Hussain says that the growth of the Islamic finance market was a significant motivation for the firm to make the move. “We’ve found our niche in the Middle East market by focusing on Islamic finance, infrastructure projects, regulatory reform and, to a certain extent, ICT. [This, coupled with our positive outlook in Middle East,] means we’re confident that there will be considerable growth in demand for these type of work.”
“We’ve found our niche in the Middle East market by focusing on Islamic finance, infrastructure projects, regulatory reform and, to a certain extent, ICT”Farid Hussein, Zaid Ibrahim & Co
Another firm keen on expanding to the Middle East, but taking a steadier approach, is Azmi & Associates. “We will do so only after consolidating and enhancing our position here in Malaysia and in the Southeast Asian region, something we intend to pursue in the next two years,” says managing partner Azmi Mohd Ali.
As the IF market is dominated by Middle East investors, being close to the biggest clients would seem to be crucial.
“[Expansion] meets the need to be close to Gulf clients – who require far more personal contact. It is their high liquidity that drives the Islamic finance market. Certainly, proximity to the Gulf is also needed to understand the developments in Islamic finance better,” explains Muthanna Abdullah, managing partner of Lee Hishammuddin Allen & Gledhill.
Client concentration in the Gulf means that while IF work in Asia is growing, ambitious firms still need to establish a regional presence.
“Middle East investors tend to come to Asia for business such as property investments and other business opportunities,” says Loong Caesar, managing partner of Malaysia-based firm, Raslan Loong. “Where we do have Islamic finance-related dealings with them, it’s more a case of our banks trying to sell their Islamic products to Middle East investors. So our guys are over there rather than the other way around.”
The global financial crisis has had a somewhat positive effect on the IF sector, as investors eye its simpler principles and lower exposure to risk. “There has been a move towards IF as… subscribers to IF products were not as exposed [to the crisis]. This realisation has led to more interest in IF products,” Abdullah says.
Other observers were less convinced. Loong remained uncertain about the outlook for increased work in the current global climate. “I think you’ll find more interest in Islamic finance now, but conventional bankers are still suspicious of what it’s all about,” Loong says. “When the economy picks up, people may be disillusioned with new financial products. They may go back to more conservative banking types, but it is not necessarily going to be Islamic finance.”
And the steady growth of the IF market recently does not mean it has remained unaffected by the downturn. “A lot of people are saying that Islamic finance is not affected at all, but that’s not true,” Hussain says. “All the [Gulf] banks are still under one system at the moment, and the main issue now is liquidity.”
“At the moment the market in the Middle East is very quiet,” says Azlin Ahmad, head of WongPartnership’s Islamic banking & finance practice. “As a fact, there are several Islamic banks that are flushed with funds but are very cautious to extend loans and financing. IF is a pretty new area, so the fact that a lot of the banks have not quite collapsed yet does not necessarily mean that it is the better option - it just means that the banks at the moment are less exposed to [the global crisis]. [While that is the upside,] the downside is that a lot of the banks have been exposed to the property sector – and it’ll be quite interesting to see how they hold up.”
“[Expansion] meets the need to be close to Gulf clients – who require far more personal contact”Muthanna Abdullah, Lee Hishammudin Allen & Gledhill
This in turn raises some doubts as to the viability of new office openings in the Gulf. Asian firms may have to resort to other means to break into the market. “We reckon that in the next two or three years, not many Asian law firms will be opening up a presence there, except maybe for toptier Singaporean or Malaysian firms,” Ali says. “Liquidity has been affected by the global financial crisis and firms will prefer to enter the Gulf by way of strategic moves. It is easier to obtain services through friendly law firms that are already in the Gulf region. It is also more cost-effective.”
March 4, 2010
Mastering the basics
The clearest message to emerge from the ALB In-house Survey 2009 was that private practice lawyers still had plenty of scope to fine-tune their offerings. In the eyes of the region’s corporate counsel, many external lawyers need to do some work on a number of key issues of which billing methods, responsiveness, timeliness and the quality of the advice delivered were the most frequently raised.
However, this is not to say that things haven’t improved. In-house lawyers roundly noted that their relationships with external lawyers were now more flexible; they were willing to offer fee reductions, explore alternative billings arrangements and even hold back on work, but for many they still come up short when it comes to the basics: timeliness, quality and the more mundane things, such as drafting and clarity.
When ALB asked David Flavell, the Asia-Pacific GC for Danone Asia, what inhouse lawyers had to do to make it through the down time, he noted that the task in hand was a demanding one: they must remain close to their companies’ pulse and understand it and the market within which it operates intimately. Tasks which, of course, are mandatory in the job description of every in-house lawyer, but have a tendency to be waylaid by the day-to-day pressures of managing the entire legal function of a company, sometimes on a shoe-string budget and with minimal resources.
And this advice is indispensable to the region’s private practice lawyers who wish to continue to attract and retain instruction from in-house lawyers. If the events of the past six to 12 months have demonstrated anything it is that as collective gazes become fixed on the bottom line or balance sheet, some law firms are inevitably drawn away from the fundamentals. In the flight to cost cutting there is a very real danger that quality can be compromised.
If the events of the past six to 12 months have demonstrated anything it is that as collective gazes become fixed on the bottom line or balance sheet, some law firms are inevitably drawn away from the fundamentals.
However, this is not to say that things haven’t improved. In-house lawyers roundly noted that their relationships with external lawyers were now more flexible; they were willing to offer fee reductions, explore alternative billings arrangements and even hold back on work, but for many they still come up short when it comes to the basics: timeliness, quality and the more mundane things, such as drafting and clarity.
When ALB asked David Flavell, the Asia-Pacific GC for Danone Asia, what inhouse lawyers had to do to make it through the down time, he noted that the task in hand was a demanding one: they must remain close to their companies’ pulse and understand it and the market within which it operates intimately. Tasks which, of course, are mandatory in the job description of every in-house lawyer, but have a tendency to be waylaid by the day-to-day pressures of managing the entire legal function of a company, sometimes on a shoe-string budget and with minimal resources.
And this advice is indispensable to the region’s private practice lawyers who wish to continue to attract and retain instruction from in-house lawyers. If the events of the past six to 12 months have demonstrated anything it is that as collective gazes become fixed on the bottom line or balance sheet, some law firms are inevitably drawn away from the fundamentals. In the flight to cost cutting there is a very real danger that quality can be compromised.
If the events of the past six to 12 months have demonstrated anything it is that as collective gazes become fixed on the bottom line or balance sheet, some law firms are inevitably drawn away from the fundamentals.
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