Foreign firms set to turn up the heat on mergers with local firms in Hong Kong

Foreign law firms will apply increasing pressure on the Law Society of Hong Kong to allow mergers with local firms, a major report has concluded.The study on the manpower needs of the legal services sector in Hong Kong, commissioned by Hong Kong's Education and Manpower Bureau as part of a review of legal education and training, also countered accusations that there are too many foreign lawyers in Hong Kong.The reasons in favour of combined practices - and expansion or abolition of the ratio of foreign lawyers that a Hong Kong practice can employ - included: the needs of globalisation, greater cost-effectiveness, better opportunities for Hong Kong lawyers, and fears that clients would go elsewhere if they still have to consult two separate groups of lawyers.Complaints that the number of foreign-trained lawyers admitted to practise Hong Kong law have an 'adverse impact on the situation for local solicitors...

since they are perceived to have greater influence among clients than their local counterparts' are not supported by the statistics, the report found.From 1996 to 2000, the Law Society of Hong Kong admitted 549 overseas-trained lawyers as Hong Kong solicitors.

At the end of 1999, there were 480 foreign lawyers registered with the society, of whom 241 worked with Hong Kong law firms.

The number of foreign law firms at that date was 51 (up from 49 at the end of 1998) of which 33 were firms headquartered in the US.As a proportion of 4,720 practising solicitors, 241 foreign solicitors - or 5% - 'does not constitute to us a threat to other Hong Kong solicitors', it said.The report continued that given an anticipated growth in demand for legal services, a mix of professional and cultural backgrounds is 'beneficial for the legal profession in Hong Kong'.It highlighted IT and entertainment media law as two areas where there is an insufficient supply of Hong Kong specialists: 'It would be sensible for Hong Kong law firms to build up their own specialist teams and we understand some are doing so in both areas.

While that is happening there will be a need for alliances with overseas firms that have the experience and can supply it effectively.'Jim Baird, Clifford Chance's regional managing partner for Asia, said his firm has 165 lawyers in Hong Kong from a mix of jurisdictions - making it large by local firm standards - and so would not need a merger for size reasons, unlike other foreign firms with smaller presences.

'It could be attractive for some reasons,' he said, 'but we wouldn't be able to tick enough of the boxes [in favour of a merger].'Mr Baird added that top Hong Kong firms derive much profitability from practice which foreign firms would have little interest in, such as conveyancing, and would need reassurances about this were mergers to happen.

Local firms would also fear for their independence, he said.Neil Rose