Global law firms continue to flock to Singapore to set up shop and do business, but will this remain the case further down the track? Andrew Jennings investigates.

In August 1966, on the southern tip of the Malay Peninsula, one of the fathers of Singaporean independence, Sinnathamby Rajaratnam, penned the city state’s National Pledge.

The iconic oath, published a year after Singapore gained independence, was written against the backdrop of the racial riots and opium dens that blighted its streets. It revealed the dream of building a Singapore to be proud of, one that embodied the ideals of a united Singapore.

Rajaratnam got his wish.

Today, Singapore is one of the most sophisticated and multicultural places on the planet, widely regarded as the focal point for commerce in Southeast Asia, littered only by glistening skyscrapers, spotless sidewalks and flawless roads.

Last year, Singapore’s GDP per capita was about $57,000. In 1965, it was about $493. On GDP per capita, it has comfortably surpassed Australia in wealth.

The 2012 Wealth Report predicts Singapore will be the world’s wealthiest country by the middle of the century — reaching a GDP per capita of $131,641.

As the Australian Government prepares to release its upcoming white paper on the Asian Century — outlining the need to forge deeper and broader relationships with our Asian neighbours — what will it mean for Singapore as a leading legal services hub in the region?

The legal services sector has registered rapid growth following liberalisation measures in recent years, with the Singapore government working hard to make its legal industry more accessible to foreign interests.

A wide-ranging review of its legal services is making it easier for global law firms to open new offices there and for foreign lawyers to practise.

A change in policy earlier this year saw the introduction of a new Foreign Practitioner Certificate, which means foreign lawyers can practise in certain commercial areas such as banking, M&A and intellectual property.

John Dick, managing partner at Freehills’ office in Singapore, says the firm’s recent merger with Herbert Smith is unlocking doors in the Southeast Asia legal market.

“The merger offers tremendous opportunities for our clients in Asia,” he says, revealing it will result in a 59-lawyer law firm in Singapore, pending regulatory approval on 1 October.

“It will enable the new firm to fully utilise the current Herbert Smith LLP Qualified Foreign Law Firm Licence to practise Singapore law,” he adds.

Dick believes the merger means Herbert Smith Freehills in Singapore is able to “provide greater breadth and depth of resources, more regional and global coverage and an enhanced ability to practice local law in more jurisdictions”.

Geoffrey Green, head of Ashurst’s Asia practice, who is chairing the Asian part of its ongoing merger with Blake Dawson, says Singapore has been a “boom area” and one of the firm’s “most successful offices over the past three years”.

“It [the merger with Blake Dawson] has given us a tremendous boost in Asia,” says Green. “Blake Dawson was one of Australia’s most Asia-minded firms. It lost its domesticity and went into Asia with more enthusiasm than others … and we’ve benefited enormously.

“Now, when we’re doing deals in Singapore or Jakarta, the firm has bigger teams to offer clients”.

International legal hub

Singapore is currently seeing plenty of project oil and gas work, but firms are also busy in banking and finance, corporate and capital markets.

The bulk of Ashurst’s work at its Singapore office is international – approximately 75 per cent. “It shows Singapore is very much a hub for all Southeast Asian work, as opposed to a centre in its own right, but it is becoming more important in that respect,” says Green.

 For Freehills, Singaporean companies make up about 10 per cent of clients, although companies based in Singapore (but headquartered overseas) are probably 50 per cent of the client base.  The rest are multinationals and regional players investing across the region.

Geraint Hughes, managing partner at Clifford Chance’s Singapore office, says the firm’s practice there has grown significantly in recent years, in part due to the benefits of being able to offer English, Singaporean and New York law advice from one top-tier platform.

Clifford Chance’s energy and infrastructure group is made up of more than 100 lawyers across nine offices in the region, working across a wide variety of transactions that range from Pakistan to Papua New Guinea and from Mongolia to Mozambique, and include a number of M&A, joint venture, capital-raising, trading, regulatory and dispute-related matters.

“Typically, our team on a matter will comprise team members from different offices providing the best skill-set to match our clients’ needs,” says Hughes.

“From Singapore, for example, we are working with our Australian colleagues on deals in countries such as Mongolia, Hong Kong and Indonesia.”

Staying connected

Firms in Singapore liaise frequently with their counterparts back in Australia.

Although relatively small (17 lawyers) prior to the merger, Freehills’ Singapore office has drawn on the expertise and additional resources from Australia for larger projects. 

Hughes says that Clifford Chance has “absolutely maintained connections” with operations in Australia.

“We’re working as one team on transactions all the time, both within and outside Australia for Australian and international clients,” he says. “For example, we’re currently active on the outbound side: on capital raisings in Asia for Australian-based companies and outbound investment for Australian companies; and on the inbound side, on direct investment, capital raising, regulatory and dispute resolution work for international clients in Australia.”

Talking the talk

Singapore’s reputation as a neutral venue for dispute resolution continues to grow and it’s now firmly entrenched as an arbitration seat of excellence.

Existing local and foreign firms have increased arbitration work in recent years.
“Arbitration is a growing part of the practice and will be strengthened substantially following the merger with Herbert Smith, regarded as having the best pan-Asia arbitration/disputes practice,” says Dick.

Hughes adds that Singapore is “undoubtedly a world class dispute resolution hub” and Clifford Chance has a dynamic and growing dispute resolution practice there that is active on a number of arbitration matters both locally and internationally.

Previously, foreign firms opening in Singapore had to contend with high levels of government intrusion. However, according to Hughes, recent liberalisation of the legal sector has made life easier.

“Singapore has a very dynamic legal sector and we support the government’s moves to liberalise further the legal profession and to reinforce Singapore’s position as a global legal hub,” he says.

Hughes adds that Clifford Chance employs “very strict global client acceptance procedures” and the office is mindful of a range of factors when determining whether to work with a client.

“For lawyers, Singapore has some of the most stringent ‘know your client’ obligations, which clients understand and are happy to meet,” says Dick, while Green adds that “the government is very supportive, getting work permits for people to come and work there is quicker and simpler then in many other places in Asia”.

Clouds gathering

Despite the positive soundings from the law fraternity on the ground in Singapore, storm clouds that could eventually impact the legal services sector may be gathering on the horizon.

Last week, the Financial Times (FT) reported an “unexpected weakness in Southeast Asia’s fourth-largest economy” and, ominously, Singapore is in danger of heading into recession.

The warning comes after Singapore’s non-oil exports fell by 11 per cent in August compared with a year earlier. Michael Wan, analyst at Credit Suisse, told the FT: “We suspect GDP will contract for a second quarter, pushing Singapore into technical recession.”

Singapore could also take a hit as one of the region’s key air hubs following the recent partnership between Qantas and Emirates, which will see the former flying to Europe via Dubai instead of Singapore.

In terms of Singapore’s demographic depth, it has the lowest fertility rate in the world, with a birth rate far below the replacement rate, which could see its 5.2 million population plummet dramatically in the next 25 years.

News last week that Clifford Chance has asked capital markets associates at its Singapore office to take voluntary sabbaticals has hinted all might not be rosy in the legal services market.

The move followed a meeting between Singapore management and staff.

Crawford Brickley, Clifford Chance’s Asia-Pacific capital markets practice leader, told Lawyers Weekly: “In common with any business we always keep our resourcing under review to ensure that our capability is in line with client needs. We remain very busy in other practice areas and do not expect any further changes.”

If the Singapore juggernaut is about to slow, and the Singaporean national identity of its founding fathers begins to fade, it will be interesting to see what the future holds for the stylish city state and the global law firms working there.