The heavily-lawyered Aussie market may struggle to fulfil Eastern promise

News that Ashurst has become the latest City law firm looking to stretch its international reach into Australia has got a market already stirred up by the entrance of two magic circle firms within the last 18 months more than a little excited.

And that's even before taking into account an abundance of reports about other British law firms courting Australian outfits, such as City rival Herbert Smith.

Given the country's relative proximity to China and the strong trade flows between Beijing and Perth, it is easy to see why a UK firm like Ashurst would be keen to secure some kind of tie-up with a leading local player such as Blake Dawson. And potential benefits are also clear for local firms who may be able to gain more credibility from an ever-more global client base through the larger international presence of UK firms.

Baker & McKenzie Australian managing partner Chris Freeland comments: "Australia is continuing to economically integrate into the powerhouse of Asia and clients are increasingly looking for regional and global capacity in their legal advisers."

It is this logic – coupled with the relative strength of the Australian economy compared with Europe – that is pushing a number of firms closer to the country, whether they choose a full-scale tie-up like that of Norton Rose and Deacons, or to go down the route of cherry-picking individual partners from local firms, like Allen & Overy and Clifford Chance (CC).

Certainly it's a strategy that seems to have paid off for Norton Rose, which has managed to pick up mandates from leading Australian institutions such as National Australia Bank, Macquarie and Commonwealth Bank, as well as several sovereign wealth funds.

As one partner comments: "Although we are dealing with the same people we used to know under the Deacons banner, it feels as though they are really building momentum and benefiting massively from the Norton Rose brand."

However, for almost every Australian partner singing the praises of UK/Australian tie-ups, there are almost as many sounding cautious – suggesting that an alliance rather than a full-blown launch (as understood to be under discussion between Ashurst and Blakes) could prove a safer option.

Not least because of the huge differences in profitability between Australian and British firms and the strong competition in the market. "There was some collective head-scratching at the magic circle firms' approach," comments a Mallesons corporate partner. "We are notoriously over-lawyered and pricing competition is fierce."

An alliance is also likely to prove a much easier option in a market littered with failed mergers between local and UK firms, with CC alone holding talks with Mallesons twice in a decade before launching in Australia earlier this year through local hires.

But while ties with a local practice will not hurt City firms' efforts to build ties with Asian companies keen to invest in Australia's mining, resources and agriculture sectors, nor will they necessarily guarantee results. In an increasingly competitive marketplace, firms will be competing not just with Australian firms but also with a growing band of Asian law firms increasingly looking to the pan-regional market.

UK firms hoping for a quick fix across the whole of Asia through Australia need to be careful. As one partner comments: "It is not a region that can be viewed through the lens of Australia."