Back in the 1980s, Paul, Weiss, Rifkind, Wharton & Garrison was one of just three go-to international law firms in the China market. With legendary China legal expert Jerome Cohen at the helm of its practice, New York–based Paul Weiss had a franchise advising multinationals investing in China rivaled only at the time by the now-defunct Coudert Brothers and Baker & McKenzie.
Three decades later, things are a bit different. The onetime China market leader has notably decided not to expand its practice in the region, even as many rival U.S. firms have doubled or tripled in size in recent years. Paul Weiss currently has one partner in the Beijing office it opened in 1981 and two in Hong Kong, where it is marking its 30th anniversary this year. With 22 lawyers in the two offices, the firm has barely grown from seven years ago, when it counted 18. Moreover, Paul Weiss has not elected a new partner in Beijing or Hong Kong for five years. In just the past month, the firm lost two promising young Hong Kong–based lawyers to firms willing to promote them to partner.
But chairman Brad Karp says Paul Weiss is sticking to its guns. "We believe that our success is measured by the quality of our partners, our clients, and the matters we work on, in the context of our worldwide vision, not by the number of boots on the ground," he says. "We are comfortable with our strategy, as are our clients, and we plan on continuing to pursue this strategy in the years to come."
That strategy is a "New York–centric" one, Karp explains, in which Paul Weiss maintains relatively modest overseas offices that can call upon lawyers and resources in New York, where over three-fourths of the firm’s 800 lawyers are based, as needed. In Asia, the firm also keeps a tight focus on two key areas: private equity and the technology, media, and telecommunications sector.
The firm’s approach is in marked contrast to that of many of its U.S. competitors. Paul Weiss’s upstairs neighbor in the Hong Kong Club Building, Davis Polk & Wardwell, has almost doubled the size of its office there in the past three years; it now has three full floors and parts of two others for its 42 lawyers, compared to Paul Weiss’s one floor. Davis Polk and several other New York firms, like Sullivan & Cromwell, Shearman & Sterling, Cleary Gottlieb Steen & Hamilton, and Simpson Thacher & Bartlett, have all made major pushes into Hong Kong capital market practices, as has Chicago’s Kirkland & Ellis.
But those firms are all now suffering through a prolonged capital markets slowdown in the region. Hong Kong partner John "Jack" Lange says Paul Weiss had a pretty good year by comparison.
The firm’s major 2012 Asia assignments included representing U.S. private equity group Silver Lake Partners and Singapore sovereign wealth fund Temasek Holdings as backers of Alibaba Group’s $7.6 billion buyback of stock from Yahoo! Inc. Paul Weiss also acted last year for a consortium investing $1.6 billion investment in China Cinda Asset Management Corp. and advised DreamWorks Animation SKG on the formation of a joint venture with two Chinese investment funds.
Lange says the types of deals Paul Weiss handles in the region are less cyclical than initial public offerings. "If you have a purely corporate practice and you try to go into capital markets, then you are faced with volatility that is actually inhumane," he says. "When the window is open, you need a big team to make money on [capital market deals], you need people to work 16 hours a day. And then, when the window closes, you have people just sitting around either doing nothing at the firm or doing nothing someplace else."
Jeanette Chan, Paul Weiss’s other Hong Kong partner, says the firm’s long experience in China has also given it a certain perspective. "We have seen how the market has changed," she says. "While other firms have come and gone, expanded and shrunk, we have been very consistent."
Back in the 1980s, the China practice that Cohen launched focused heavily on helping multinationals set up joint ventures in China. That started to change in the 1990s, recalls Lange, who moved to Hong Kong from New York in 1994.
"We used our direct investment expertise to really focus on the private equity market," he says. "Obviously that was just in [private equity’s] infancy during the early nineties. At the same time, Jeanette had been focused on building up our [technology, media, and telecommunications] practice. At that time, it had been particularly focused on telecommunications and expanded over time to include media and what we call entertainment infrastructure, which includes theme parks, casinos, those types of things."
Even back then, there was a capital markets boom everyone else seemed to be chasing. "To be honest we also dabbled in that," Chan says, "but we quickly realized that it was crazy."
She says the firm revisits the topic of capital markets every so often, but she says other New York firms are probably more motivated in that area. "The key is that we really are an extension of our New York corporate department and, even in our U.S. corporate department, capital markets work has not been a major focus," says Chan, "not like [it has been for] S&C and Davis Polk."
Indeed, Paul Weiss is probably best known in America for its powerhouse litigation practice, which Karp led before becoming chairman and which accounts for over 50 percent of the firm’s head count. Yet, unlike many other U.S. firms, including Davis Polk, Paul Weiss has not expanded its litigation practice into the region. Chan says the firm has discussed doing so but so far regards its overseas offices as extensions only of its corporate practice.
Paul Weiss’s aversion to expansion in Asia does have an impact on the career paths available to its lawyers in the region. Chan says the continuing high public profile of Cohen, who retired from Paul Weiss’s partnership in 2000 but remains of counsel, helps the firm attracts young lawyers interested in the region. Now primarily a professor at New York University School of Law, the 82-year-old Cohen still lectures and writes frequently on China issues, and he was instrumental in resolving the crisis last year over blind human rights activist Chen Guangcheng.
But the odds of becoming a partner in Asia with Paul Weiss are clearly low. Lange became a partner in 1994 and Chan in 1997. Beijing partner Greg Liu, who was promoted in 2008, is the firm’s most recent partner. In January, associates Gloria Liu and Frank Sun left Paul Weiss’s Hong Kong office to become partners at Goodwin Procter and Kirkland & Ellis, respectively.* Last year, Paul Weiss counsel Gary Li left to join Ropes & Gray as a Hong Kong partner. Associate David Lee became a counsel in the Hong Kong office of Akin Gump Strauss Hauer & Feld.
The firm’s China and Hong Kong partners deny that Paul Weiss is unwilling to invest in the region but acknowledge that it may be tougher to make partner there than at some other firms. Like many of the Wall Street firms, Paul Weiss has no nonequity partners. It also is a partial lockstep, so its investment in new partners is potentially higher than at firms like Kirkland & Ellis, which has both nonequity partners and more variable compensation.
Though she says there are inevitably frustrations, Chan says the firm also takes some pride in the fact that its Asia associates are in high demand by other firms.
"It’s because these are good-quality lawyers who have been trained by us, so we are very proud of the fact that we are able to train them, but only the tough and really good ones make partner," she says. "We always say we are small but mighty."
* Correction, 2/5/13: An earlier version of this story misidentified Gloria Liu as a former counsel at Paul Weiss rather than an associate. We regret the error.
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