Business of Law
Should law firms seeking a base in Asia set up shop in Singapore or Hong Kong?
Last fall, as the Occupy Central political protests began to snarl traffic in Hong Kong, some commentators began voicing the opinion that the unrest would only have one clear winner: Singapore.
The two cities have long competed with each other as expat-friendly hubs for business and finance in Asia. Along with proximity to the world's fastest-growing economies, both have excellent modern infrastructure, well-educated local populations and common-law legal systems inherited from their pasts as British colonies. For international law firms seeking a base in the region, it can be a tough choice.
"There were factors pointing in both directions for us," recalls Yash Rana, Asia managing partner for Boston's Goodwin Procter. The firm ultimately decided to open in Hong Kong in 2008.
China was the main reason. Singapore and Hong Kong both have majority Chinese populations, but the former is its own country while the latter is geographically and politically part of China, though it has a separate government and legal system. Large Chinese companies most frequently turn to Hong Kong to raise international capital, and its stock market led the world in initial public offerings from 2009 to 2011.
As a result, law firms with a very strong financial-markets bent tend to favor Hong Kong. New York City's Davis Polk & Wardwell, along with several of its fellow Wall Street firms, has a sizable office in Hong Kong but none in Singapore. Partner James Lin says Hong Kong's human infrastructure is unmatched when it comes to China deals.
"Most of the bankers, investors, lawyers and auditors are here," he says. "More of that demographic of 'deal professional' lives in Hong Kong than elsewhere."
He doesn't see the largely peaceful Occupy protests—launched in opposition to perceived mainland Chinese interference in Hong Kong politics—changing that anytime soon.
Rana says Goodwin Procter looked at Singapore because of its proximity to Southeast Asian markets like Indonesia or the Philippines. The firm was also interested in Singapore's potential as a hub for work originating in India. But it ultimately decided on Hong Kong because its clients in the region, mainly global private equity funds, were mostly looking at China.
"The demand we have for China," he says, "outweighs all other markets in Asia combined."
SEIZING OPPORTUNITY
For some firms, the choice is more opportunistic than strategic. Duane Morris' chairman and CEO, John Soroko, says the firm opened its first Asia office in Singapore in 2007 mainly because it had the chance to recruit a group of partners there.
"We weren't offered an option that included Hong Kong," he says. "We never really did a spreadsheet that compared the pros and cons of the different markets."
Though that initial group of partners mostly left the firm within a couple of years, the Philadelphia firm regrouped in Singapore by launching a joint venture with local firm Selvam in 2011. That venture has since become the driving force behind the firm's further expansion in the region. In 2013, Duane Morris became the first U.S. firm to open an office in Myanmar.
Soroko says the firm wouldn't rule out a Hong Kong opening, but notes that Duane Morris doesn't traditionally handle the sorts of big capital markets deals that draw other firms to that city. "That hasn't really been a focus for us," he says.
Rana, who relocated to Asia from Goodwin Procter's New York office, notes that personal preferences can also play a part in where firms go.
Hong Kong is generally regarded as the more lively and exciting city, while Singapore is cleaner, quieter and more family-friendly. Housing has historically been cheaper in Singapore, though prices have gone up significantly in recent years, and both cities rank among the world's most expensive in terms of property. A major issue for expatriates with children is that securing places in international schools is generally much harder in Hong Kong.
That was an issue for Rana and his wife, who have two school-age children. But they ultimately decided they preferred Hong Kong.
"And we couldn't be happier," he says, "on either a personal or professional level."
This article originally appeared in the March 2015 issue of the ABA Journal with this headline: “Best of the East: Hong Kong, Singapore vie for U.S. law firms' offices.”
