Offshore firms in Asia have been experiencing fast and steady growth since their arrival and the projection is that there is still some way to go. In this article our consultant Adam Johnson gives an introduction to the offshore firms, their position in the market and what the future might bring.
What do offshore firms do in Hong Kong?
The offshore firms in the market here practise the laws of offshore jurisdictions instead of advising on local Hong Kong law. Such offshore jurisdictions typically include the Cayman Islands, the British Virgin Islands (“BVI”), Bermuda, Ireland, and more.
The volume of offshore work is driven by the number of Asian companies incorporated offshore. According to a recent analysis by Webb, 75 percent of Hong Kong listed companies are domiciled in Bermuda or the Cayman Islands. Many prominent listed firms in Hong Kong— including CK Hutchison Holdings Ltd., Li & Fung Ltd., Kunlun Energy Co. Ltd., and Tencent Holdings Ltd.– utilise offshore vehicles. Research last year revealed that mainland Chinese and Hong Kong companies accounted for more than 40 percent of the USD$1.5 trillion in assets mediated through the British Virgin Islands, highlighting the magnitude of Chinese overseas offshore investment. With demand among Chinese companies for offshore centres to facilitate their investments on the rise, the need for offshore legal advice in Hong Kong and Asia is set to continue and to grow.
Offshore law firms tend to focus on corporate and financial legal services. Their clients include financial institutions, capital market participants, global corporations, investment fund managers, and high net worth individuals located throughout Asia. As such, these firms typically have practices advising Asian clients on corporate, banking and finance, insolvency, restructuring, dispute resolution, private wealth and trust offerings. Often this means working closely with local onshore law firms who provide local advice, as well as with colleagues based in their international offices in the offshore jurisdiction itself.
The future of offshore law in Hong Kong
In terms of market trends, the offshore asset management and fund space in Asia continues to expand at an accelerated rate. Public and private M&A and general capital markets work have also been identified as having huge growth potential throughout Asia and, owing to mainland China for the most part, there has also been a steady increase in demand for offshore disputes advice in recent years. These disputes often centre around shareholder disputes arising out of publicly listed and privately owned offshore vehicles; contentious restructuring and insolvency work relating to offshore structures; and contentious private client work via offshore trust structures.
Due to this high volume of offshore work being generated in Asia, offshore law firms continue to expand in Hong Kong. As a result, the appetite to grow outpaces the majority of the onshore firms in the Hong Kong market. Long established offshore firms in this market, for example Maples & Calder (est. in Hong Kong in 1995) and Walkers (est. in Hong Kong in 2003), continue to look to grow. In addition, in recognition of the fact that there is such a large market share still to gain, others continue to set up in Hong Kong: Mourant Ozannes arrived in Hong Kong in 2012 and the newest arrival, Carey Olsen, opened an office as recently as November 2016. Harneys expanded operations towards the end of 2017 by opening an offshore office in Shanghai.
What do these firms look for and what can be expected?
While technical strength, a commercial outlook and solid training are required, there is a strong preference for lawyers already qualified in England & Wales, Australia, New Zealand, and other common law jurisdictions. Not only is this because of the similarity in legal systems but also, logistically, it saves on the costs that would otherwise be attached to putting someone through the process of qualifying in Cayman and the BVI. For these reasons, the majority of the lawyers in these firms come from international backgrounds. Although there is already a high and increasing demand for fluent Mandarin lawyers in the Hong Kong market, this is not yet such a pressing requirement for offshore firms here since no advice is given in respect to local laws.
Typically, the firms experience better hours than their onshore counterparts. In part, this owes to the high level of interaction with the international offices who, practising the same law and working on the same matters, can provide resource overnight due to the time differences between the offices— work sent across at 7pm to Cayman can be resumed when it is sent back at 9am the following day. Despite frequently enjoying better hours the salaries on offer are market leading and the prospects regarding internal promotion are quite high, typically at an accelerated rate to onshore firms in the current climate.
Positions within these firms typically suit people who enjoy both the technical side of the law and also those with a desire and aptitude for business development, where the clients include onshore firms alongside companies, financial institutions, liquidators, and high-net-worth individuals.