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For a custom-made suit at less than what it would cost in New York or London, Hong Kong has long been the place to go. Much to their dismay, some lawyers say that distinction appears to apply in the market for legal services as well. “In Hong Kong, there is a tremendous emphasis on low-cost work,” said Robert D. Joffe, the presiding partner of New York-based Cravath, Swaine & Moore. Cravath does not do low-cost work, said Joffe, and that is why the firm announced Monday it plans to close its Hong Kong office over the next two months. In so doing, Cravath follows New York’s Dewey Ballantine, which announced plans in January to end its Hong Kong presence by the end of this month. Since the beginning of the year, New York-based Simpson Thacher & Bartlett and San Francisco-based Orrick, Herrington & Sutcliffe have both announced plans to close offices in Singapore. But the closing of Hong Kong offices by two major New York law firms is particularly significant because the former British colony has long been the primary base of operations in Asia for law firms, banks and multinational corporations. For Cravath, Hong Kong was just one of three offices, the others being New York and London. Hong Kong was also Dewey’s only Asian office. The decision to close the 9-year-old Hong Kong office was not based on the current slow economic climate, said Joffe. “If we thought this was just a business cycle issue, we’d be more inclined to stick it out,” he said. “The work in Asia just doesn’t command the kind of premiums we can get for our work elsewhere.” Cravath will recall its two partners and five American associates to New York. One locally hired associate has been offered a chance to move to Cravath’s London office, and the other four locally hired lawyers will be let go. Dewey Chairman Everett Jassy said his firm also had faced low returns from its seven-lawyer Hong Kong office, which opened in 1995 to go after project finance work in mainland China. That goal failed to pan out, he said, and more recently the office had been refocused on capital markets work. Jassy also pointed out the enormous cost of maintaining American lawyers in Hong Kong, where living costs are frequently higher than in New York. “You need more revenue coming in to cover those costs,” he said. Both Dewey and Cravath geared their offices toward cross-border transactions structured under U.S. law, and Cravath has long declined to follow the global strategies embraced by larger firms such as New York’s Shearman & Sterling and the firms of London’s Magic Circle. Those firms have sought to create full-service offices in Asia and elsewhere staffed with locally qualified lawyers. Such efforts have run into occasional difficulties as a number of Asian markets, though not Hong Kong, place restrictions on how U.S. and U.K. firms can practice local law. Singapore joint ventures involving Orrick, Shearman and White & Case have all crumbled, though only Orrick has left Singapore altogether. The San Francisco-based firm cited economic difficulties in explaining the closure. PREMIUM PRICING Whitney Pidot, Shearman’s Singapore-based managing partner for Asia, said he understands why many firms are re-thinking investments in overseas offices in the current global downturn, and added New York firms’ concerns about premiums are not unjustified. “There is no premium pricing anywhere in Asia now,” said Pidot, who also oversees the firm’s Hong Kong, Beijing and Tokyo offices. “You try to get full rate.” But that can be tricky too, according to a number of American lawyers familiar with the Hong Kong market. One lawyer who asked to remain unnamed said price competition among law firms in Asia has been exacerbated by a tendency among British firms in particular to accept work at far below their normal rates in order to acquire market share. Pidot agreed, noting that British firms had lower costs than their U.S. counterparts and other advantages that came from Britain’s history in Asia, including the fact that British lawyers have a far easier time qualifying to practice local law in Hong Kong. “It is very clear that it was England that colonized Asia and not the United States,” he said. However, Pidot said complex restructuring work was starting to bring in higher rates, and he noted that lower rates did not indicate a lack of large transactions. He said Shearman’s 22-lawyer Hong Kong office had worked on the Bank of China’s $2.7 billion initial public offering, among other major deals. Pidot said he predicted pricing for legal services to rebound even stronger in Asia than in New York when the economy turns around because there are far fewer firms there capable of handling large, complex mergers and acquisition or capital markets work. Jassy said Dewey continued to seek a berth in Asia. Immediately after the firm decided to close in Hong Kong, he said, Dewey partners convened a task force to examine whether the firm should circumvent Hong Kong and open offices in Shanghai or elsewhere in China. “We may return to Asia sooner rather than later,” he said.

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