Domestic Australian law firms are increasingly using ‘country desks’ to attract work from foreign markets, from China to Japan, the Middle East, Europe and beyond. The 2017 Australia: State of the Legal Market report by the Melbourne Law School and Thomson Reuters Peer Monitor® highlights this trend, based on anecdotal evidence, and notes that domestic firms are using country desks to win and execute “legal work related to inbound investment transactions and servicing multinationals”.
What are country desks and why are law firms creating them?
A ‘country desk’ is, of course, not a physical desk. It is shorthand for firms creating nominated teams of lawyers who have a focus on inbound legal work coming from specific countries.
There are two main drivers behind the creation of country desks:
- A real opportunity for growth in a slow market: With slow market conditions, there’s only so much work to go around within the Australian legal market. Domestic firms may see that they can’t grow their practice sustainably by relying on winning work away from their competitors, but there is potential for growth by winning inbound work from overseas.
- Australia’s ‘open for business’ policy: Australia’s free trade agreements, economic partnerships and general ‘open for business’ policy at government level makes our country an attractive destination for foreign investment. Our stable legal system and economy are added incentives.
Countries and regions: The focus of country desks
Unsurprisingly, the countries and regions Australian domestic firms are focusing on are those with which we have the closest business relations. That is, those countries that are most likely to invest in, extend their market reach to, or export to Australia.
Mining, manufacturing, real estate, finance/insurance and wholesale/retail are the top Australian industries attracting foreign investment, while the top 10 countries investing in Australia are:
- Hong Kong
- The Netherlands
There are plenty of domestic firms who are focusing on these countries and beyond. MinterEllison offers country desks for China, Japan, Korea, Singapore, the US, Canada, France, the UK, Hong Kong, Mongolia and the Gulf states, while Dentons offers a China and Singapore desk, and DibbsBarker offers a general international desk.
International firms looking for alliances
The activities of the international firms are an interesting counterpoint to the Australian country desk trend – and in some way another of its drivers.
International firms that lack a presence here in Australian need Australian domestic firms that they can trust and refer work to. Since many of the big Australian domestic firms are now part of or tied to global giants – King & Wood Mallesons, Herbert Smith Freehills, Ashurst, Allens and DLA Piper, for example – they may compete with those international firms in other jurisdictions. The international firms therefore look for domestic firms that aren’t part of a global network to form less formal country desk alliances.
Indeed, Hall & Wilcox refers to this strategic advantage on its international desk webpage:
“By remaining an independent firm, when many in Australia merged to become global, we have the flexibility to work with clients and other firms with fewer restrictions.”
Global boutiques – a parallel trend
An interesting parallel to the creation of country desks by domestic firms is the growth of global boutique firms. There is a trend, identified in the 2017 Australia: State of the Legal Market report, of global firms opening one or more Australian offices that specialise in selected practises, rather than creating a full service offering. These are firms choosing to enter the Australian market rather than forming an alliance with an Australian domestic firm. In the Australian market, these offshore firms largely do work sourced from offshore, keeping their client relationships and delivery of services under one roof.
UK firm Hogan Lovells opened offices in Sydney and Perth in 2015, with reports indicating this step was in recognition of the “strategic importance of having an Australian capability in order to successfully develop its Asian practice”.
“Having a focused high-end legal practice in Australia was strategically important to ensure the ambitions of our long established global practice with a view to servicing both our existing global and domestic clients. A direct entry into the Australian market allows Hogan Lovells to grow organically in line with market opportunities and to provide our cross border legal services in a manner which is truly collaborative, seamless and of consistent quality”, says Scott Harris, partner at Hogan Lovells.
The global boutiques segment is estimated to number 20 firms, have just under 200 partners and attract more than $350 million of (mostly high-margin) fees. This segment includes the legal practices of the Big 4 accountants. Having a globally recognised brand, extensive networks and superior support infrastructure are some of the benefits these boutiques enjoy, however they do have to deal with the added managerial burden and administrative overheads. Not all international firms have sufficient scale to invest in this strategy, and many will continue to look to domestic firms for assistance.
Thinking of creating a country desk?
There are obvious benefits that come with adopting a country desk strategy. Properly staffed and promoted country desks open up the possibility of attracting additional legal work related to inbound investment transactions and servicing multinationals, and they add a marketing edge that can help win more inbound work from overseas.
The firms making the most from this trend, however, do two things well:
- They have a demonstrated commitment to, and expertise in, dealing with inbound investment from a specific country or well-defined region. Cross-disciplinary teams, dual qualified lawyers and (in some cases) bilingual lawyers are the foundation of country desks that can truly bridge the gap between regions.
- They work hard at developing and building multiple ‘best friend’ relationships with referral law firms in target countries so that they can enjoy a feeder network that sends deals their way.
With unaffiliated domestic law firms facing continued pressures as a result of globalisation, relentless disruption, change and innovation, many will be attracted to the strategy of establishing country desks as a means to generate growth. To succeed in securing a reliable feeder network, though, they will need to invest in building relevant expertise, international awareness and relationships.