New legislation prompts leading US outfits to bolster Asia litigation practices. Elizabeth Broomhall reports

Given the US cultural affinity for resolving matters inside a court room, it was perhaps only a matter of time. But finally, America's leading law firms appear to be taking litigation work in Asia seriously.

Latham & Watkins, Skadden Arps Slate Meagher & Flom and O'Melveny & Myers are among several US outfits with plans to strengthen their local disputes teams, while Davis Polk & Wardwell recently entered the litigation arena with the hire of two well-regarded litigators from Clifford Chance (CC).

Firms that are considering starting up local disputes practices include Kirkland & Ellis and Milbank Tweed Hadley & McCloy, both of which have strong litigation franchises globally.

The change in thinking comes in the wake of new legislation giving advocacy rights to Hong Kong solicitors, which came into effect last June and is in the final stages of implementation.

By expanding the scope of work solicitors can handle and creating an additional revenue stream for lawyers, the new rules have caught the attention of US advisers, which previously focused on more traditional areas such as corporate, capital markets and finance.

President of the Hong Kong Law Society Dieter Yih, who has been actively involved in trying to get solicitors higher rights of audience (HRA) in Hong Kong, says the rules are a logical step forward.

"We feel that because we've been handling all the case work anyway, it makes sense for us to represent the client in court, to advocate on their behalf.

"From a client or consumer point of view, you don't need to go and hire another set of lawyers… so logically speaking, there must be a cost saving."

Entry process

To qualify as a solicitor-advocate in Hong Kong, lawyers will need to undergo training by College of Law tutors in the city, before being examined by the Higher Rights Assessment Board – comprised of a small group of senior solicitors, barristers and judges.

On successful completion of the assessment, they will be granted HRA in the city, allowing them to appear in Hong Kong's High Court, Court of Appeal and Court of Final Appeal.

Applications to participate in the training and test were submitted to local authorities last September, with more than 100 individuals applying.

Those with substantial dispute resolution or litigation advocacy experience were allowed to request an exemption from the tests, which would also exclude them from training.

Yih expects an announcement soon regarding who has secured a place on the course and who is exempt, with solicitors potentially able to appear in court by April.

Up until now, barristers have dominated court roles, despite Hong Kong-qualified litigators being involved in almost all behind-the-scenes tasks such as preparing pleadings, putting together evidence and sourcing witnesses. This work has in turn largely been monopolised by UK-based law firms.

Yih argues that this dynamic is slowly shifting as competition in the market intensifies: "Traditionally, only British firms are Hong Kong-admitted and therefore, only they can do litigation work.

"But in recent years, a lot of the American firms have localised and as a result, there is no reason why they can't or shouldn't do it too. I think most [US] firms are looking [at strengthening their litigation teams]."

Growing attraction

Arguably the most significant evidence of this emerging trend came in December when Wall Street leader Davis Polk announced it was launching a litigation practice in Hong Kong with the hire of CC's top-ranked Asia-Pacific litigation and dispute resolution head Martin Rogers and partner James Wadham.

Other firms focusing on litigation include Latham, O'Melveny and Skadden, all of which have announced plans to grow in this area.

Latham, which currently has a small disputes practice led by one partner and one of counsel, said it is expecting to hire another Hong Kong-qualified litigation partner "very soon" and will continue to expand the practice.

"Having a high-end dispute practice is a must for any international firm serious about developing a first-tier Hong Kong law practice," says Latham Hong Kong office managing partner Michael Liu (pictured).

"In the past few years, Hong Kong has seen more than its fair share of shareholder disputes or disputes between family members of particularly large estates.

"Another area of potential growth or opportunities is regulatory investigations or breaches.

"The new statutory-based regime of disclosure of price-sensitive information by Hong Kong-listed companies will result in work, as any alleged breach of the new laws could result in regulatory investigations as well as civil proceedings."

Paul Mitchard QC, Asia head of litigation and arbitration at Skadden, also sees huge potential for the disputes market in the region.

He is one of several Skadden litigators to have applied for advocacy rights during the application window last September, while the firm plans to relocate another experienced litigation lawyer from London in early autumn this year.

"We are dedicated to expanding this practice area and would aim to offer a one-stop-shop for litigation services once I have advocacy rights," says Mitchard (pictured).

Earlier this month, Legal Week reported that Hong Kong is to take a step closer towards introducing class actions, with a working group of public officials and private sector representatives scheduled to meet for the first time in January.

Should class actions be permitted, this could further increase the amount of local litigation work by allowing consumers to band together to bring claims for fraud, mis-selling and product liability.

Cautionary outlook

Not all lawyers in the region agree that a move into local litigation is the right strategy for international firms. Matthew Bersani, Hong Kong managing partner for Shearman & Sterling, believes the local market may already be over-heated and that top litigators are likely to be given most of the work.

"I don't see a flood of firms moving over to Hong Kong litigation. I view the much bigger opportunities to be in US litigation work, general arbitration and work relating to the Foreign Corrupt Practices Act."

Bersani's reservations are a reminder that disputes work remains sharply divided between locally-focused matters – much of it low value – and the hard-to-get cross-border disputes.

But when firms as considered as Davis Polk start making substantial investments in building a local disputes capacity, it is clear more of the smart money is flowing towards the Hong Kong courts.

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