US law firms face hyper-competitive markets in Asia

The recent announcement that US-based law firm Fried Frank would close its Shanghai and Hong Kong offices and leave Asia highlights the intense and unique competitive pressures US law firms face here.  The combined markets composing the Asia-Pacific legal markets – from South Korea through China and South East Asia to Australia and the Pacific Islands – are characterized by both opportunity and danger for any foreign law firm seeking to operate in the region.

Most economies in the Asia-Pacific Region are, according to a recent report published by the International Monetary Fund (IMF), experiencing substantial economic growth — and will continue to for the foreseeable future.  And legal work associated with this economic growth covers a broad spectrum of legal specialisms.  At the same time, the competitive landscape among legal services providers in the region is expanding and diversifying. The number and form of legal services providers in the region includes global behemoth law firms, large international law firms, elite large domestic incumbent law firms, elite local boutiques, NewLaw law firms, Alternative Business Structure (ABS) legal services providers, legal process outsourcing companies (LPO’s), the Big4 accounting firms, and tens of thousands of small and medium-sized firms.

In addition to a growing list of the types and numbers of firms competing for legal work (China alone has 19,000 law firms) — local legal markets like China pose unique and daunting additional challenges to foreign law firms.  In China, for example, foreign law firms don’t just compete ferociously with local firms on cost — they must also struggle with skewed domestic regulatory and tax regimes which don’t apply to local law firms. US law firms, therefore, are up against headwinds so difficult that a practice focused on the provision of legal services within the region may not be the best approach to the region’s legal market.  But there is an alternative.

US law firms have two core options in the Asia-Pacific Region

The first option US law firms have in the region is to seek to compete for local work with local law firms.  This option, as I’ve described above, is fraught with danger and US law firm exits are frequent.  The second option is to seek to serve the needs of the growing number of Asian enterprises, whether large or state owned to smaller and privately owned, in their aim to expand into the US market.

A recent King & Wood Mallesons (KWM) report and coverage of that report in Britain’s Telegraph newspaper, underscores how outbound foreign direct investment from China exceeds, sometimes dramatically, the amount of inbound investment into the country.  At the same time, Asia’s family and corporate wealth is increasing and looking for more opportunity overseas, as Eric Chin (@EricJYChin) of Australia’s Beaton Capital (@BeatonCapitalhas outlined.  And what those investors most need, according to Fortune magazine, are sophisticated advisors in those markets to help guide them.

US-focused investment is an excellent path to success for US law firms in Asia

The advantages associated with US law firms setting up in Asia as a means primarily to help facilitate outbound Asia foreign direct investment focused on the United States are numerous.  They include the lack of a necessity to establish a local practice (even if via affiliation).  Instead, US law firms can establish a nimble representative presence whose primary aim is the identification, pursuit and capture of work from outbound investors focused on the US.

When this posture is taken, local law firms that were once competitors now become potential referral partners.  This representative presence strategy fundamentally alters a US law firms’ position in Asia from one of high-overhead local practice offices competing for local work to instead low-cost, high-return engines of growth tethered to Asia’s growing foreign direct investment focused on the United States.  In this scenario, US law firms can ride the wave of Asia’s growth as a means to re-build US domestic law firm practices recently battered by competitive pressures and a decrease in M&A and other corporate work since the financial crisis of 2008/2009.

Given recent US law firm departures from Asia and markets for local work becoming more, not less competitive – a local representative business development presence focused on Asia’s investors and their advisors is a superb path to US law firm success here.

Posted by John Grimley

John Grimley edits and publishes Asia Law Portal. An independent writer & editor, he's the author of: A Comprehensive Guide to the Asia-Pacific Legal Markets (Ark Group 2014).


  1. John,

    I think you touch on a lot of really good points in this post.

    My 2 cents if I can:

    1 – Japan

    As you would know more than most, Japan is a very different market for US lawyers than the rest of Asia. For that reason, when discussing Asia strategy with US lawyers, I nearly always carve out Japan from a discussion I label Asia (ex-Japan).

    I mention this because these days the geographic term “Asia”, wrongly in my opinion, has become synonyms with “China”. Whereas my experience has been that US lawyers wishing to be active in Japan need to have a very different strategy than would otherwise be the case if they were looking to be active in Indonesia, Thailand or even China.

    2- US securities lawyers

    Are a different breed.

    My experience has been that US securities lawyers active in Asia (ex-Japan) are a very different breed to the rest of the lawyers in the region. And largely that’s because, although they are physically located in Asia, the vast majority of their work is actually done within the time-zone and working world of the relevant area in the US.

    As such, it has been my experience that it is very possible to be a US securities lawyer acting for, say, JP Morgan in Hong Kong and not have any of the very real concerns raised in this post affecting their day-to-day lives.

    All the best
    Richard (RWS_01)



  2. Richard — both your points are well taken and I agree with you. “Asia” as a concept if far too general. So is “Asia-Pacific”. I use the terms almost interchangeably because in the context of legal services this region (the Asia-Pacific Region) – is what US and European lawyers, legal services sector professionals, legal journalists – including myself – use to define the market for discussion purposes. But that broad definition is not accurate as a means to comprehend the vast cultural, language and legal market differences as between virtually every constituent economy in the region. There is no question Japan is a particularly unique jurisdiction vis a vis the rest of the region. But I’d argue also that South Korea’s market is perhaps as unique. As to US securities lawyers. Yes i acknowledge that some legal practices do not fall within the general analysis I provided above. Some legal practices are totally detached in terms of the substance of their practice — from the local jurisdiction where they may be situated as they are involved in almost exclusively cross-border transcriptional work. That said – the fact remains that key jurisdictions like Tokyo, Hong Kong, Singapore and others in the region – offer US lawyers the best of both worlds were they to adopt a posture of establishing a representative presence where they’ll find that they can cost-effectively reap the benefits of regional growth while bolstering local US practices. I do not argue US firms should not operate here. Rather I propose some US firms should consider representative presences should the appetite or proclivity for competing for local work isn’t there. Best, John

    Liked by 1 person


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