(Illustration by Bruce MacPherson)

To many lawyers in Asia, the best solution to extremely high levels of competition—and the consequent low fees—in the region’s major markets is simple: wait for the competition to leave. At some point, the thinking goes, a number of international firms will realize that the modest success they’ve managed to achieve in Asia doesn’t merit the continued commitment in terms of cost and resources. These “weaker” firms will then depart, leaving a bigger pie for everyone else.

The Great Shakeout was predicted not long after the collapse of Lehman Brothers Holdings Inc. If stable practices back home had been, in many instances, subsidizing money-losing investments in Asia, then a crisis affecting their home markets would lead at least some firms to retreat, right?

Yet only one international firm actually left Asia during that time, closing its offices in Beijing and Shanghai in the summer of 2009. That would be Helsinki’s Hannes Snellman, not exactly a bellwether for the global profession.

Instead, several more firms launched in the region, including Goodwin Procter, Proskauer Rose and Ashurst. Others expanded their offices enormously. Rather than viewing Asia as an investment they could no longer afford, most firms appear to have decided they couldn’t afford not to be there.

Could a shakeout still happen? International firms, particularly American ones, did close offices in considerable numbers following the 1997 Asian financial crisis and the economic downturn surrounding the outbreak of Severe Acute Respiratory Syndrome in 2002 and 2003. Managing partners of U.K. firms are always eager to suggest that, when the going gets tough, U.S. firms will again “cut and run.”

It is true that large British firms in general are more self-consciously “international” than their U.S. counterparts, meaning there’s a broad consensus among the partners about the need to invest overseas. With some major exceptions like Baker & McKenzie and White & Case, American firms have tended to be more opportunistic when it comes to expanding abroad.

But such differences mean less today, because there is little disagreement that there is massive opportunity in Asia.

The change in the Western public’s perception of Asia, especially China, between SARS and the global financial crisis, can’t be underestimated. Everyone knew China was growing, but the speed with which it was ascending only became extremely clear after the West seemed to be declining.

Now even firms that have relatively little international experience have been scrambling to figure out their Asia strategies. It’s widely recognized that the region is the future, and how can any firm say they’re giving up on the future?

Then there’s the fact that although law firms continue to have trouble making money in Asia, most of their clients do not. China is now the largest or second-largest market for multinationals like General Motors Company, Apple Inc., Starbucks Corporation and many others. Much of that growth has been recent; GM saw its sales in China jump 69 percent in 2009. Many Western law firms clearly fear being left behind as longtime clients draw ever-larger shares of their revenue from Asia.

And it also cannot be denied that many firms still see the region’s more wide-open competition as opportunity rather than obstacle. In truth, the firms that complain the most about the intense competition in Asia tend be those accustomed to being market leaders at home, such as the British Magic Circle or the top Wall Street firms. But the region has actually given many lower-ranked firms a shot at being market leaders themselves.

It wasn’t New York M&A heavyweights Skadden, Arps, Slate, Meagher & Flom or Wachtell, Lipton, Rosen & Katz that last year handled Shuanghui International Holdings’ purchase of Smithfield Foods Inc., the largest-ever Chinese acquisition of an American company. Instead the Chinese company turned to Paul Hastings for its landmark deal. Likewise, it wasn’t Linklaters or Clifford Chance but Philadelphia’s Duane Morris, acting through its regional joint venture, that advised Heineken N.V. on its $4.6 billion takeover of Singapore’s Asia Pacific Breweries. Minneapolis’ Dorsey & Whitney, of all firms, has managed to build a leading Indian capital markets practice. Morrison & Foerster has the top Japan practice among international firms.

Still, with China slowing and a capital markets downturn in Hong Kong now entering its third year, there probably have been more ambitions thwarted than realized in Asia recently. If the U.S. economy returns to robust growth this year, it’s certainly possible that American firms’ attention will start to turn away from Asia again toward higher fees back home.

Don’t count on it, though. It’s just as likely that firms plow a good chunk of any U.S. growth into even greater Asia expansion. It’s what most of their clients will do.

Email: alin@alm.com.