Singapore, where the number of foreign lawyers has doubled in the last four years after opening its legal market to foreign firms, will award a second round of licenses by next year, Law Minister K. Shanmugam said.
Firms can apply in the second half of 2012, with the process to be completed by early next year, he said in an interview yesterday. The first round of liberalization has done “better than we could have expected,” he said.
International law firms have expanded in Asia, the world’s fastest growing region, boosting competition as more lawyers fight to advise companies amid slowing deal activity. Mergers and acquisitions involving Singapore-based companies fell by 53 percent to $41.5 billion in 2011 from 2007 levels, according to data compiled by Bloomberg.
“Overall I think the trend is very positive. The rate of growth has been very encouraging,” Shanmugam said. Singapore’s legal industry has grown by about 10 percent each year for the past five years, he said.
New York-based White & Case LLP, Los Angeles-based Latham and Watkins LLP, and Clifford Chance LLP, Herbert Smith LLP, Allen & Overy LLP and Norton Rose LLP -- all headquartered in London -- got licenses in 2008. Twenty firms had applied on the day that year that Lehman Brothers Holdings Inc. filed for bankruptcy.
“We’re not quite looking at the edge of the precipice now,” Shanmugam, who is also Singapore’s Foreign Minister, said. “We think 2012 is the right time for the second round.”
Impact on Fees
Most of the foreign firms are doing better than their projections, Shanmugam said. Foreign lawyers in Singapore have almost doubled to 1,200 at the end of 2011 from 633 in 2007.
“There are probably too many lawyers in the market and there may well be an impact on fees,” said Jeff Smith, head of South East Asia at Norton Rose. “However, at the top end of the corporate and financial services market, the competition has remained stable for many years.”
While the new licenses may increase competition for local firms, they will give an incentive to international firms to use Singapore law for their regional work, according to Krishna Ramachandra, the managing director of Duane Morris & Selvam LLP.
“This is a positive move for Singapore lawyers,” he said. The joint venture of Philadelphia and Singapore firms plans to add to its 30 lawyers in the city state, he said.
Companies including Formula One and Manchester United have been said to be considering initial share sales in Singapore this year, adding to the $21.6 billion raised from first-time offerings since the beginning of 2007 in the city, according to data compiled by Bloomberg.
“How much legal work there is, how much cross-border work there is, really depends on the regional economy,” Shanmugam said.
Mergers and acquisitions in developed Asia have fallen 17 percent to $458.8 billion in 2011 from 2007 while deals in emerging Asia rose 3 percent to $381.5 billion in the same period, according to data compiled by Bloomberg.
Emerging Asian economies may expand 6.8 percent in 2012, after growing 7.3 percent last year, the International Monetary Fund said on April 17. Singapore’s economy rose an annualized 9.9 percent in the three months through March 31 from the previous quarter, when it dropped 2.5 percent.
“If the regional economy is doing well, then the question is are we shooting ourselves in the foot by having a regulatory framework that doesn’t allow us to become a legal hub?” Shanmugam said. “We have removed most of those impediments.”
Singapore began opening its legal industry in 2000, when it allowed foreign firms to set up joint ventures with local ones. Several tie-ups, including those involving New York-based Shearman & Sterling LLP and London’s Freshfields Bruckhaus Deringer LLP have ended.
In February when Singapore amended legislation allowing foreign law firms to take a stake in local practices, the local bar and lawmakers expressed concern that domestic firms would take a back seat as international firms dominate.
Shanmugam said while the government has “suggested” that some local law firms could consolidate, market forces should determine the corporate structure of Singapore firms.
“The Singapore firms will find it more difficult to grow, handle more high-end work, and compete on the international level,” said Lee Eng Beng, managing partner of Rajah & Tann LLP. “Singapore firms will have to ready themselves for the new landscape.”
Clifford Chance, which has more than 70 lawyers in Singapore now, said the licenses for foreign law firms have increased the city’s attractiveness as a venue for transacting regional and global business.
“A further benefit is that it has allowed Singaporeans who have been working outside their country to return home with their expertise,” said Geraint Hughes, Clifford Chance’s Singapore managing partner.
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