Office buildings in Hong Kong. Credit: r.nagy/Shutterstock.com

Two U.S. firms recently made opposing moves in Hong Kong: Orrick, Herrington & Sutcliffe decided to close its office there after 15 years, whereas Steptoe & Johnson LLP launched a new office in the city.

Hong Kong is the most popular office location in Asia for global law firms. The city's legal market is fully liberalized and firms have a menu of options to practice local law, U.S. law or U.K. law; corporate or finance; litigation or arbitration—you name it. That has made Hong Kong an incredibly competitive market. Even without additional challenges that include recent protests and the coronavirus, Hong Kong's legal market requires carefully implemented strategies—and some luck—to succeed.

At almost the same time, Orrick and Steptoe ended up having polar opposite views about the market in Hong Kong.  Orrick CEO Mitch Zuklie doesn't hide his pessimism. He doesn't think the firm can achieve in Hong Kong the success it has elsewhere in Asia. Meanwhile, Steptoe is betting on Hong Kong's role as a regional center for clients' legal needs, not only in China but in Asia more broadly.

Although Orrick and Steptoe have different focuses, in Hong Kong they have something in common—neither is engaged in listings work, the most popular and competitive game in town. But finding the right people makes all the difference. Every firm stresses the importance of the right team when talking about recruitment; rarely does anyone talk about hiring partners as experiments. In reality, though, the right people comprise a small group, and it takes time, luck and investment to get them.

I was surprised to learn that Steptoe decided to open in Hong Kong, but it all made sense when I saw the firm hired Wendy Wysong for its new office. Wysong previously led a U.S. law government enforcement practice in Asia for Clifford Chance, and she doesn't just do Foreign Corrupt Practices Act work. Instead, she specializes in U.S. trade control matters and handled Chinese telecommunications company ZTE Corp.'s high-profile U.S. sanctions case.

Wysong's move to Steptoe came at a time when Chinese technology companies such as Huawei are facing multifront trade controls and economic sanctions in the U.S. Though it will be a while before we know whether Steptoe's Hong Kong office pans out, the addition of Wysong's team appears to be fitting and timely.

Orrick's difficulties in Hong Kong are not recent. By 2016, after being in the city for just over a decade, the firm thought its Hong Kong practice, which centered on advising Chinese companies on listings and other corporate finance deals, was too price-sensitive and overlapped too little with the rest of the firm's clients. The disagreement resulted in the majority of the office, led by partner Edwin Luk, splitting off from the firm in 2017. After that, Zuklie wanted to pivot the Hong Kong office to focus on work in the technology, energy and infrastructure and finance sectors, which he identified as keys for the whole firm.

Until then, it all made sense. But Orrick didn't quite get the right team for that strategy. Just before the transactions team left, Orrick recruited Sidley Austin litigation partner Charles Allen. But when the local law transactions group pulled out, the litigation side lost a source of cases. Orrick did also make lateral hires in Hong Kong after the exodus—M&A partner Mark Lehmkuhler and funds partner Scott Peterman, both of whom focus on private equity work. If that was the office's connection to the technology sector, the firm didn't quite get to energy, infrastructure and finance in Hong Kong.

Perhaps Orrick made the right call to exit Hong Kong. After all, the days when firms could get away with putting Hong Kong on their letterhead without thinking through their plans in the city are long gone.

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