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Have QFLPs Worked for Singapore?
The Asian Lawyer
There are probably no government officials in the world who think as much about the global legal profession as those with Singapore's Ministry of Law. Their aim: to put in place policies that will make Singapore a global legal industry hub and create greater economic opportunities for Singaporeans.
Since 2008, the cornerstone of the ministry's efforts has been the Qualifying Foreign Law Practice program, which has so far granted licenses to six foreign law firms -- Allen & Overy, Clifford Chance, Latham & Watkins, White & Case, Norton Rose, and Herbert Smith -- to practice Singapore law. Outside of QFLPs and approved joint ventures with local firms, international firms are barred from practicing local law. Earlier this year, the government announced it would be accepting applications for new QFLPs.
Interest is expected to be high. Watson Farley & Williams, K&L Gates, and Jones Day have already said they will apply to become QFLPs. DLA Piper, Ashurst and Stephenson Harwood, which were turned down in the initial 2008 round of applicants, will also be re-applying. Mayer Brown JSM, which only launched its Singapore office late last year, says it's considering applying too.
But how much of a difference has the QFLP regime made? So far, the initial QFLP firms have still only hired a relatively small number of Singaporean lawyers, most of whom are dual-qualified and many of whom have mainly worked abroad. And, while it's true that the number and size of international firms in Singapore has increased, that is probably more attributable to economic growth in the region than actions by the government.
Indeed, several QFLP participants say that, while local law capability is "nice to have" and fits in with strategies of practicing locally wherever possible, they believe the deals would have come to them even if they didn't possess a local license.
"Is it critical to our practice here? I wouldn't say that," says Barrye Wall, Singapore managing partner at White & Case. Though he says many clients do expect the firm to offer "one-stop shop" service, including local law advice, Wall says the bulk of the firm's work in Singapore is regional in nature.
Latham Singapore managing partner Stephen McWilliam agrees. While a handful of clients have engaged them specifically because they have Singapore law capability, he says, the main reason Latham is thriving in Singapore is the boom in deals emanating from elsewhere in the region, including Indonesia, India and Vietnam.
The Law Ministry declined to respond to specific questions but stated that the objectives of the QFLP program were to support the growth of other economic sectors and increase the quality of legal services in Singapore generally, as well as boost the hiring of both foreign and local lawyers.
That QFLP firms see Singapore law as nice to have rather than critical is reflected in the relatively modest numbers of local lawyers they have hired. In a speech last year touting the success of the QFLP program, Law Minister K Shanmugam noted that the six firms have added a combined 200 lawyers to their Singapore headcounts since the end of 2008. But he also acknowledged that two-thirds of those have been foreign-qualified expatriates.
White & Case says Singapore-qualified lawyers account for 10 out of 44 lawyers; at Latham & Watkins, it's nine out of 36. Herbert Smith has an even lower proportion among QFLP firms: only four of the firm's 41 Singapore lawyers are locally qualified, and the only Singapore-qualified partner at the firm is also qualified in the U.K. and Hong Kong.
Moreover, with a few exceptions, such as Latham's recruitment of top mergers and acquisition partner Chei Liang Sin from Rajah & Tann in 2009, most international firms' hiring of Singaporean lawyers has focused on those who are also qualified in the U.S. or U.K. and may have spent most of their careers outside Singapore.
That means local firms haven't really felt much impact. Patrick Ang, deputy managing partner at Rajah & Tann, says the lawyers from his firm who've joined QFLP firms have mainly been junior associates. "The young ones will always be attracted to foreign opportunities," says Ang. "But when they get to a point where they have to consider a path to equity partnership, they will return to their Asian roots."
Ang says the difficulty Singapore-qualified associates still face in making partner at international firms marks a contrast with the legal market in Hong Kong, where many international firms, especially those from the U.S., have been eagerly expanding local practices of late. Though he thinks competition is set to increase with a new batch of QFLPs to come, Ang thinks foreign firms in Singapore are still going to continue focusing on the cross-border deals and foreign laws.
One stated goal of the QFLP was to attract new foreign firms to Singapore and that number has increased from 70 in 2008 to 110 today. In the past few months, these have included Mayer Brown JSM and Squire Sanders as well as leading Japanese firms Mori Hamada & Matsumoto and Nishimura & Asahi.
But also notable are many prominent firms that are still not in Singapore. Many of the elite Wall Street firms that have been most conspicuously building up in Hong Kong, including Sullivan & Cromwell, Cleary Gottlieb Steen & Hamilton, and Davis Polk & Wardwell, do not have offices in the island nation. Simpson Thacher & Bartlett closed in Singapore in 2002 and says it has no plans to return.
Some Wall Street firms that are in Singapore, including Skadden, Arps, Slate, Meagher & Flom; Shearman & Sterling; and Milbank, Tweed, Hadley & McCloy, have so far expressed little interest in local practice. "Firms with QFLP licenses want to win more market share from Singapore firms," says Milbank Singapore partner David Zemans. "And we don't want that."
The Singapore government has previously demonstrated flexibility in response to market realities. Indeed the QFLPs were introduced in response to the failure of many of the previous joint law ventures between international and local firms. Such JLVs had previously been the only way for foreign firms to have a local law capability and are enjoying renewed popularity among smaller market entrants, who may not wish to take on some of the regulatory burden placed on QFLPs. Applicants are required to give the government projections of Singapore revenue and headcount, subject to annual review. According to the ministry those who fail to meet their projections could have their QFLP status revoked.
Earlier this year, the Singapore government showed it was open to other ways for international firms to participate in the local legal market by approving legislative amendments that would permit foreign firms to own 33-percent stakes in local ones. The rule change was largely seen as facilitating a proposed combination between Allen & Overy and local leader Allen & Gledhill. Those discussions fell apart but several Singapore firms have said they are in talks with international partners about possible tie-ups.
That such large-scale talks are taking place indicates that, while the QFLP program may not have been a huge boost to the Singapore legal market, it has hardly been a hindrance.
"Firms will continue to head into Singapore with or without the license," says David Tang, Asia managing partner at K&L Gates.