{"id":912,"date":"2017-01-18T10:00:09","date_gmt":"2017-01-18T10:00:09","guid":{"rendered":"https:\/\/www.edwarddrummond.com\/?p=912"},"modified":"2021-12-06T12:00:20","modified_gmt":"2021-12-06T12:00:20","slug":"increasing-competition-from-domestic-firms","status":"publish","type":"post","link":"https:\/\/www.edwarddrummond.com\/increasing-competition-from-domestic-firms\/","title":{"rendered":"Increasing competition from domestic firms."},"content":{"rendered":"

A major theme arising from our 2016 research has been the increasing prevalence and sophistication of domestic\/national law firms across the APAC region, and the potential challenge that this poses to international law firms operating in increasingly overlapping spaces.<\/p>\n

Many see that the so-called \u2018Red Circle\u2019 firms (i.e. Fangda, Haiwen, JunHe, KWM and Zhong Lun), in particular, have successfully institutionalised their businesses (see Catrin Griffiths\u2019 \u2018The Lawyer\u2019 Article \u2013 \u2018Chinese national firms need to learn a lesson in collaboration<\/em><\/a>\u2019), aligning their models to that of a more \u2018traditionally structured\u2019 firm and, in a similar way to some international firms, employ European\/US-qualified nationals alongside locally-qualified lawyers, thereby broadening their appeal to a wide range of both international and domestic clients.<\/p>\n

Moreover, many businesses are recognising a greater level of fee flexibility within these firms, in the face of what is generally considered to be a \u2018cost conscious\u2019 market, only adding to the strength of competition that international law firms face when targeting work from international clients operating in the region.<\/p>\n

Adding colour to the first point, roughly 15-20 years ago there was a notable gulf between international firms (who led the market with \u2018elder statesmen\u2019 expats) and national firms (who lacked the capability, resources, or international appreciation to compete at a similar level). We then saw a seismic shift over the following years to the point where, now, domestic firms employ UK\/US qualified lawyers, who are PRC natives, and who (by virtue of having trained abroad) can offer an approach which is sensitive to the requirements\/needs of international clients, but which also brings an in-depth cultural and procedural understanding of the APAC region, and native fluency.<\/p>\n

These lawyers are reaching the level of seniority where they can actively compete with the \u2018elder statesmen\u2019\/the partners of international firms, thus the aforementioned gulf is decreasing at an ever faster pace. Indeed, it is recognised that we are at somewhat of a \u2018tipping point\u2019 \u2013 whilst it is clear that the \u2018elder statesmen\u2019 (those 20-25 years qualified partners) will continue to represent \u2018go to\u2019 lawyers for some businesses, it is apparent that the increasing quality and international approach offered by national firms means that, at the very least, many companies are now considering these firms as direct comparators to international firms in their decision making processes.<\/p>\n

The following case study serves to demonstrate the above:<\/p>\n

China IP Litigation Case Study<\/h1>\n

By way of an example, a number of international businesses indicated that the increasing strength and depth of the IP litigation practices being developed within local Chinese firms, has lead them to question the need to use an international law firm in a \u2018coordinating\u2019 capacity (which some call a high-level \u2018middle man<\/em>\u2019)*<\/strong><\/span>, versus instructing Chinese firms directly. Demonstrably, one US client source commented to the effect that<\/p>\n

\u201cmany of the national firms\u2019 lawyers are advocating in the US, Europe and China, they have JDs and PhDs and US\/European backgrounds\u2026 and so they understand international clients\u2019 needs<\/em>\u2026that makes the Chinese offices of international law firms less competitive, as we could just go straight to the Chinese firms rather than double billing<\/em>\u201d.<\/p><\/blockquote>\n

Perhaps as a result of this, it is suggested that many international firms are exploring consolidating with Chinese firms so that they can directly handle the proceedings before the courts.<\/p>\n

This view is further compounded when we consider the thought that, as multi-national companies continue to increase the sophistication of their in-house teams by hiring good lawyers with strong US\/UK backgrounds, they will be able to do more and more of the management of local counsel and coordination of international work in-house. Again, this might reduce the need for external counsel, particularly the need to use those international firms acting in a \u2018coordinating\u2019 capacity.<\/p>\n

The above being said, many suggest that there is still a place for \u2018middle men\u2019. It would appear that some multinational companies show a preference towards using international law firms who can provide a \u2018unified IP management system\u2019 across a range of jurisdictions. Such matters will likely involve cross border and above country communication, and many recognise that this is where international law firms bring more value. Moreover, recognising that the China IP litigation market is seen as \u2018less advanced\u2019 than other jurisdictions (i.e. the US), some businesses feel that international law firms can bring a level of \u2018know how\u2019 that you might not get from local firms. Additionally, we should keep in mind that few see this model as \u2018expensive\u2019 to use, certainly in comparison to the cost of litigating in the US. Indeed, to paraphrase the comments of one contact<\/p>\n

\u201cI am paying five to ten million bucks for a US litigation, but in China I am paying $150,000 for beginning to end litigation with a domestic firm, and maybe I add another $200,000 for the middle man supervising firm\u2026 it\u2019s so cheap<\/em>. I am going to pay my damages expert more than I am going to pay that firm to help manage the activity in China.<\/em>\u201d<\/p><\/blockquote>\n

Overall, whilst there is still a desire to engage international law firms in a \u2018coordinating\u2019 model amongst multinational companies, and select other international businesses, the requirement to do so is decreasing as the sophistication of both domestic\/national law firms and in-house teams improves.<\/p>\n

However, it is not all doom and gloom. Our research has identified a variety of areas\/geographies where business activity (and therefore requirement for external counsel) is high, but where businesses feel largely \u2018underrepresented\u2019. By comparison, many view the Japanese Equity Capital Markets (ECM) space as stable and growing, with much less competition, and an area where it is easier to \u2018make a splash<\/em>\u2019 with hires. South East Asia was also regularly volunteered as a busy ECM market, but one which remains fairly underrepresented (in that the competition between firms is much less \u2018intense<\/em>\u2019); examples include the more regional and localised markets (e.g. Thailand, Indonesia, Malaysia, and India), where only a handful of firms operate.
\nShould you wish to discuss these areas of opportunity further, please feel free to call either myself (Gavin Penn) or Gareth Ward on 020 3206 1199.<\/strong>
\n*<\/strong><\/span> A model whereby a locally based lawyer(s) from an international law firm acts as the business\u2019 first point of contact. Subsequently that firm\/lawyer will engage local lawyers (who have rights of audience) to act on their\/their clients\u2019 behalf.<\/em><\/p>\n

**<\/span><\/strong> It should be noted that our assumption of mainland China being the main area of growth for DCM work in Greater China is firmly based upon feedback from our sources. That said, it cannot be taken as fact.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A major theme arising from our 2016 research has been the increasing prevalence and sophistication of domestic\/national law firms across the APAC region, and the potential challenge that this poses […]<\/p>\n","protected":false},"author":1,"featured_media":829,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"quote","meta":{"_acf_changed":false,"footnotes":""},"categories":[4,14,15],"tags":[],"acf":[],"yoast_head":"\nIncreasing Competition from Domestic Firms - Edward Drummond & Co.<\/title>\n<meta name=\"description\" content=\"Our research has revealed some major shifts in the legal world as domestic law firms are increasingly overlapping with international ones. 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