At a time when many global law firms are still grappling with their Asian market strategy, the Asia practice of the law firm CMS has tripled in size in just over 15 months.
The extraordinary growth was helped in part by the addition of an office in Singapore that was gained through the firm’s three-way merger with Nabarro and Olswang in the U.K. But it also came about because CMS’s Hong Kong office, opened just over a year ago, deliberately tapped into the strength and unique offerings of its German arm.
The instant office expansion combined with the German practice expertise have had an even larger impact on the firm’s regional practice in Asia than anyone anticipated.
“In a very short space of time, we’ve become 65 lawyers and 17 partners in Asia,” said Duncan Weston, the firm’s Frankfurt-based executive partner for global development. ”It’s a big step forward for us.”
When the news was first reported in the summer of 2016 that CMS Cameron McKenna and Olswang were discussing a merger, CMS, which had over 2,600 lawyers in 34 countries, had just two Asian offices—both in China.
But the firm had already decided it would launch a Hong Kong office through its German arm, CMS Hasche Sigle, beginning by focusing on two niche areas—international arbitration and asset finance work. The firm had a strong Europe-based international arbitration practice, and it saw an opportunity to use its arbitration expertise to fill a gap in the Asian market.
“We thought there might be a business case for us to be out here,” said Nicolas Wiegand, CMS’s Hong Kong managing partner.
Civil Law vs. Common Law
For years, the firm’s lawyers in Germany had noticed that a large number of Asia-related cases were being handled by U.S. or U.K. law firms instead of by European firms. They deemed this counterintuitive because the legal systems of most countries in Asia are, like continental Europe, founded in civil law, while the United States and U.K. are common-law jurisdictions.
“Ninety-five percent of the clients from this part of the world are from civil law jurisdictions, and yet the landscape here is purely U.S. or U.K. firms with no civil law roots,” Wiegand said. ”Hong Kong and Singapore are common law islands surrounded by a sea of civil law jurisdictions.”
Indeed, except for a handful of former British colonies that include India and Malaysia, most Asian countries are civil law jurisdictions. Moreover, their legal systems have strong ties to Germany. The German Civil Code, or Bürgerliches Gesetzbuch, is the basis on which many key Asian jurisdictions, including China, Taiwan, Japan and Korea, developed their own laws.
The systems are so similar, in fact, that Wiegand was appointed an arbitrator on an arbitration case governed by Korean law.
Hong Kong vs. Singapore
Partners at CMS had spent a lot of time debating whether to make Hong Kong or Singapore the firm’s third location in Asia after Shanghai and Beijing, and they eventually decided Hong Kong made more sense as China started mapping out its One Belt, One Road initiatives. That ambitious infrastructure project, which aims to cover most of Asia, the Middle East, Africa and Eastern and Central Europe, would potentially generate many opportunities for fundraising and dispute resolution. As a regional financial center, Hong Kong is set to benefit from bridging Chinese parties to those overseas.
“We wanted to start with Hong Kong and build up the practice from there,” Wiegand said.
The Hong Kong office opened in September 2016. The following month, CMS announced its plan to merge with Olswang and Nabarro, both of which had offices in Singapore. ”All of a sudden we got not one, but two Singapore offices,” Wiegand said.
CMS combined the two teams in Singapore, and the firm’s lawyers there are now handling construction, technology, media and telecommunications and litigation matters. This past September, after the merger went live, the 30-lawyer Singapore office also secured a local law capability by forming a formal law alliance with Singaporean firm Holborn Law.
So far, the German connection has paid off. “We came with our civil law background, combined with our big network in both continental Europe and the U.K.,” said Wiegand.
The firm continues to emphasize its civil law experience, which Wiegand said is proving to be appealing to clients who were used to litigation in their own jurisdictions.”We want to attract not only European clients but Asian clients around the region,” he said.
The arbitration team is currently working on two investment arbitrations—one on behalf of a nation and the other on behalf of an investor; it is also handling an International Chamber of Commerce-seated arbitration and other commercial cases in the region.
Apart from the appeal of its strength in civil law, CMS has also been able to capitalize on the fact that Germany is an attractive outbound investment destination. In 2016, Chinese companies invested a record $12.6 billion in Germany, making it the largest recipient of Chinese foreign direct investment in Europe.
Wiegand said Chinese clients’ have shown an immediate interest in Germany and the firm’s German connection. He often gets asked for the firm’s German contacts on cold calls, so the firm’s Asia practice has been able to refer work back to Europe.
The finance side of the practice has also landed several big-ticket mandates. According to Elliott, the team is advising European and American owners on financing, chartering and sales of offshore marine assets in Asia, and has been selected to be on the finance and leasing panel of one of China’s largest state-owned banks.
Elliott, who had worked for Chinese clients on asset and offshore financing in London, moved to Asia in part to respond to clients’ requests that he be closer, and in part to tap into an active borrowing market. “Eighty percent of the world’s shipyard financing activity is in Asia,” he said.
Both Elliott and Wiegand travel often to Singapore and the firm’s Beijing and Shanghai offices. “We have different products in these offices, and we support each other well,” Elliott said.
Globally, CMS is structured under a European Economic Interest Grouping of member firms that are not financially integrated; the firm’s Asian offices are extensions of different parts of the firm. While the offices in Hong Kong and Shanghai were launched by CMS’s German arm, the Beijing and Singapore offices are part of the U.K. firm, which is now named CMS Cameron McKenna Nabarro Olswang.
CMS is also using its broad coverage in Asia and its extensive European network to make itself attractive to Chinese law firms for a future alliance or merger. Weston, who is responsible for developing new markets for the firm, was in China earlier this fall to scout for potential targets to join the CMS brand.
CMS’s Shanghai office, which opened in 2001, handles foreign direct investments from Germany and Europe into China, while the Beijing office, opened in 1994, focuses on intellectual property and technology work.
“Longer term, to be a pre-eminent law firm in China as a foreign firm is not possible,” said Weston. “If we want to become [as strong] a firm in China as we are … in Europe, we have to …[form a tie-in] in China.”
Weston gave no timeline for establishing such an association or alliance in China, insisting that a potential partner would have to meet the firm’s quality standard in Europe.
“We have built up relationships with Chinese law firms over the years,” said Weston. ”And as those firms become more sophisticated, I hope we can find a CMS firm in China.”