Anthony Lin, writing in The Asian Lawyer last week, outlined the prospects for American law firms in Asia for the foreseeable future.  The bottom line of Lin’s article comes down to Lin’s prediction that the Asian marketplace will continue to grow, continue to attract US business,  and hence continue to attract American law firms that represent those companies.  The statistics certainly support Mr Lin’s conclusions.

US firms predicted to be in Asia to stay

“To many lawyers in Asia”,  Lin wrote “the best solution to extremely high levels of competition— [and low fees]— in the region’s major markets is simple: wait for the competition to leave. At some point, the thinking goes, a number of international firms will realize that the modest success they’ve managed to achieve in Asia doesn’t merit the continued commitment in terms of cost and resources.”

Lin argues that US law firms leaving Asia is likely not going to materialize — as the opportunity in Asia is too great to pass up.  As well, compression on fees is seen not as much a challenge as an opportunity.  And more than just the elite, international firms are winning new work in Asia.  Another reason the region is more attractive to more US firms without substantial international experience.

Competition from local firms fierce

Every week, there is more news of US law firms opening or expanding in Asia.  “However it is the growth in Chinese law firms” as Lawfuel reports “that dominates the Asia Legal Business Top 50 rankings as their firms expand rapidly into a market that is seeking additional legal services and expanding following the global financial crisis.”

US foreign direct investment — the world’s largest — is both expanding and diversifying

While approximately half of all US foreign direct investment has up until 2011 been directed at the advanced economies of Western Europe “(14% of investment was located in Asia less Australia, Japan, New Zealand, and South Korea)”, those patterns may be changing or more accurately, diversifying, according to a recent report by the Congressional Research Service.  Perhaps the most important figure the report identifies is: “The total  amount of U.S. direct investment abroad…during the 2000-2012 period — more than quadrupled, rising from $920 billion to $4.4 trillion.”  Importantly, the United States is the world’s leading source of global foreign direct investment.

A perfect storm – China and the US

US foreign direct investment will likely continue to expand apace – focused not just on Europe, but increasingly focused on Latin America, Asia, Africa and other developing regions.  US firms appear clearly, as Anthony Lin wrote, to be following US corporate investment overseas.  And the Wall Street Journal reported last week that “China became the world’s top destination for foreign investment in the year’s first half…underlin[ing] the shift in foreign investment flows that has occurred since the financial crisis hit developed economies in 2008, making faster-growing developing economies more appealing to businesses.

As outbound US investment increases and developing nations like China are increasingly attracting more of that — Asia will almost certainly continue to remain a focus for expanded US law firm expansion.  Hence, Lin’s prediction that US firms are in the region to stay – appears to be right on point.

Posted by John Grimley

John Grimley edits and publishes Asia Law Portal and is the author of A Comprehensive Guide to the Asia-Pacific Legal Markets. He provides writing, editing, research and strategy services to law firms and legal services sector companies.

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