Abdul Jabbar, an executive committee partner at one of Singapore's oldest law firms, Rajah & Tann, has started to see a change in the types of clients contacting his firm.

Rich families have started to ask about moving their money out of Hong Kong to Singapore, mainly motivated by the troubles and uncertainty gripping the special administrative region.

"Where we have seen a growth as a direct result of the troubles [in Hong Kong] is definitely on the private wealth side", said Jabbar. "We have seen a lot more ultra high net worth Chinese and Hong Kong families setting up family offices here. Some people are hedging [by keeping a presence in Hong Kong] and others are saying I'm going to move everything."

It's not just money that is moving. Jabbar has also seen "a lot more Chinese and Hong Kong residents applying for permanent residence in Singapore".

Singapore and Hong Kong have long been Asia's two key legal hubs, but for the most part have focused on different types of work. While they may compete directly for disputes work, Hong Kong is seen as the gateway to China and a venue for large listings. While Singapore as the jumping off point for business in Southeast and South Asia.

But the protests that have rocked Hong Kong, as well as rising diplomatic tensions between China and the UK and Australia and changes to basic laws within Hong Kong are threatening that equilibrium, making Singapore a more attractive place to live and do business. This alongside a push by the Singaporean government to make the city-state into a centre for intellectual property, insolvency and funds work, all mean that in the coming years, Singapore looks well placed to gain a bigger slice of the Asian legal market.

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The Shift

Edwin Tong, Singapore's minister for culture, community and youth and second minister for law, agrees that in the short term Hong Kong's troubles could be Singapore's gain.

"I think in the short term you will probably see some benefit to Singapore as a jurisdiction" from unrest in Hong Kong, he said. But he warned that in the longer term, a sickly Hong Kong may not be good for Singapore or business in the region as a whole.

"Should we in Singapore be counting on a weakened Hong Kong? I think the answer is no. I think in the longer term that is not going to be beneficial for both of our countries. It's served us well for many years for Singapore and Hong Kong to be in competition."

Riot police march along a road during a protest Riot police during a protest in Hong Kong, China, in May 2020. Photographer: Roy Liu/Bloomberg

Ong Sim Ho, managing director of corporate & finance department at Singapore-based Drew & Napier, said that he had noticed a shift from Hong Kong among his clients and "the migration of wealth to Singapore".

He said: "We are used to having fairly regular riots and protests [in Hong Kong] but I think about three or four months ago we could see a structural shift. I think people are finally waking up to the prospect that this is not just going to be a regular irritation but the very fabric of the economy is now fundamentally affected."

"I think people are finally waking up to the prospect that [disruption in Hong Kong] is not just going to be a regular irritation but the very fabric of the economy is now fundamentally affected."

Singapore has long been a magnet for private wealth management so it makes sense that rich families would be some of the first to consider relocating, especially as they tend to be small organisations with the flexibility to make decisions quickly. But the movement of private wealth may just be the start. Singapore also wants to muscle in on funds, insolvency and intellectual property work.

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Market Reforms

A Singapore arbitration facility.    Photo: Bloomberg Mercury

The city-state has form when it comes to these sorts of changes. Few thought that Singapore would become a global powerhouse for international arbitration in the late 1990s, but a series of reforms and market liberalisation means that Singapore International Arbitration Centre handled a total of $8.09 billion in disputes last year.

The ministry of law's Tong explained that the country's lack of natural resources and small size meant the government was keen to make the city-state as business friendly as possible. He said that a strong legal services market and rule of law were key to luring companies to the city-state.

"Legal services is relatively small [as a contributor to GDP] but we look at it as a big contributor to other areas. Had we not had such a strong legal system here, you would find that a large number of other business would not choose Singapore", he said. "We in the government take the view that government has to set the tone and take the lead. So in all of these initiatives whether it is in IP or disputes or infrastructure work, it's got to be the government setting the foundation."

"Legal services is relatively small [as a contributor to GDP] but we look at it as a big contributor to other areas."

Alastair Henderson, managing partner of south east Asia at Herbert Smith Freehills who has worked in the region since the early 1990s, said that when the Singaporean government makes a pledge to boost a particular business line, it pursues that agenda with an "incredible single minded devotion".

"They decide where they want to grow and they are very focused about putting in place all of the building blocks and support that will achieve that", he said. "So you see all of these initiatives coming through in any one of a number of small incremental steps, but cumulatively it's very powerful."

Recent reforms include the establishment of a new low tax funds structure in January, known as the Variable Capital Company, as well as subsidies to help hedge funds, private equity firms and asset managers set up these new structures.

There have also been significant changes to the insolvency laws in the past five years that make it easier for international companies to restructure their debt in Singapore. These changes were recommended by a number of government-funded committees whose sole objective was to boost cross border restructuring work in Singapore.

"The impact of COVID is expected to lead to an increase in disputes and restructuring work and I think Singapore will be well placed for that."

Kaya Proudian, a partner in the Singapore office of White & Case, thinks this focus on restructuring could be particularly useful in the coming years as more companies struggle financially due to a volatile economy and the global pandemic.

"It's interesting timing. The Singapore regime is considered by many as innovative so it may well attract large corporate restructurings in the region", she said. "The impact of COVID is expected to lead to an increase in disputes and restructuring work and I think Singapore will be well placed for that."

Singapore is also keen to become a hub for intellectual property after the government published its IP "master plan" in 2013.

"We see [IP] as a growth area and one where we can play a big role. You can't just do IP alone, it's got to be alongside the financial, legal and accounting sectors as well."

Tong explained that how intellectual property is valued and protected is increasingly important to Asian companies and that the focus on IP neatly dovetailed with Singapore's focus on disputes, as IP matters often end up court.

"We see [IP] as a growth area and one where we can play a big role", said Tong. "You can't just do IP alone, it's got to be alongside the financial, legal and accounting sectors as well. So we looked at that and IP is one area that we feel has the best growth potential."

Significant changes to Singapore's Copyright Act are also in the pipeline, with a public consultation released in November 2019 proposing beefing up provisions for creators, streamlining the act and also making it easier for companies to use big data without breaking copyright laws.

New standards regarding the way intellectual property, such as trademarks and mining rights, are valued and disclosed are also expected in the coming years, which should make it easier for companies to "monetise" their intellectual property, according to Tong.

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Challenges Ahead

The Singapore Exchange is a fraction of the size of its Hong Kong rival.

That is not to say that Singapore does not face challenges. Its capital markets are still not developed enough to handle large listings, particularly when compared to Hong Kong. The has a total market capitalisation of $566 billion, a fraction of the size of Hong Kong's, and just 11 companies listed on it last year.

Meanwhile other financial centres are also vying for business from Hong Kong. Tokyo is looking to lure financial firms from Hong Kong, with the government considering offering free office space, tax advice and visa waivers to traders, bankers and asset managers looking to relocate.

There are also challenges companies and law firms face in moving staff to Singapore.

Olivia Seet, a recruiter at Major Lindsey & Africa, has seen an uptick in enquiries from lawyers in Hong Kong keen to relocate to Singapore. Many are motivated by the protests and worry that they will not be able to progress their careers because they do not speak Mandarin. But moving is not always as easy as they hope.

"It's not impossible [to relocate but] there are a lot more hoops and a lot more uncertainty."

"At the moment, Singapore is really putting pressure to hire locally" said Seet. "I'm working with a number of clients now who are only looking at people who are Singaporean or have permanent residency. It's not impossible [to relocate but] there are a lot more hoops and a lot more uncertainty."

To add to that, the pandemic and the rise of remote working has made many firms question their own levels of staffing and whether they need as many expensive lawyers based in the city-state as they once thought. In June, DWF announced that it would close its six-lawyer Singapore office and Eversheds Sutherland ended its merger with Singaporean firm Harry Elias.

Foreign law firms are also hamstrung in their growth by licencing regulations from the ministry of law. Foreign law firms can only practice foreign law and are not generally permitted to have lawyers practicing Singaporean law. There are a few exceptions, such as disputes work and some firms that have special dispensation to practice in certain areas, but it means that US and UK law firms generally have to team up with a local firm or accept they can only grow so much in the city-state.

Tong said that Singapore had always had a "progressive" attitude and offered a range of different operating models for foreign law firms, with around 120 foreign firms currently operating in Singapore. But he added he didn't want to grow the number of international lawyers in the city-state for the sake of it, instead they had to offer services that were relevant to international clients and the economy.

For Singaporean firms there can be big advantages in having their own lawyers work in other lower cost countries, for instance partners in Malaysia earn a similar amount to first year associates at many Singaporean firms.

"Ordinarily it would have been very expensive to bring him to Singapore and hire him, but now we are telling him – 'work out of New York, work from home'."

At Drew & Napier, Ong Sim Ho said that his firm was looking to use more projects based lawyers or even to hire lawyers who are based permanently in other countries.

"We are talking to a very qualified young lawyer who is in the States", he said. "Ordinarily it would have been very expensive to bring him to Singapore and hire him, but now we are telling him – 'work out of New York, work from home'. It is much more feasible now."

He added that the firm hoped to "leverage on the advantage of the change in mindset" that the pandemic had brought.

That is echoed by Jabbar at Rajah & Tann. The pandemic has made the firm start to reassess how it works, in particular looking to use more lawyers in lower cost jurisdictions.

"What this has taught us most importantly is that we need to relook at the use of people and where our talent sits" he said. "Working from home has shown us that we don't need our lawyers with us at home in Singapore."

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