When the global financial crisis (GFC) loomed over the West, multinationals turned their attentions to emerging markets, including many in Asia Pacific. Fast forward to 2015, and jurisdictions like China, Hong Kong and Singapore are key locations for global business, with a huge amount of foreign investment and a driving seat in the world markets.
But despite its status as an economic powerhouse, Asia can be accused of lagging behind in the business innovation stakes, especially when it comes to legal services. While countries like the UK and Australia are opening up their legal professions to non-lawyer investment, and experiencing a proliferation of alternative legal services providers, Asian jurisdictions – often conservative and suspicious of foreign players and new models – have arguably been slower to jump on the bandwagon. Former GC for the Asia Pacific division of global recruitment company Hays, Chris Dancey (who was based in Singapore up until late 2015), thinks this is down to the good times enjoyed by many Asian corporates, even while the GFC was in full swing. ‘I know there were some pockets of downturn in the region, particularly for Singapore, but for other parts of Asia Pacific it was pretty much still boom-time, particularly in China and Australia,’ he says. So when it came to seeking out ways to get more out of less, Asia Pacific GCs were less motivated than their Western counterparts to think outside the box. ‘The commercial imperatives weren’t really there,’ he explains.
But all that could be changing, especially in Singapore and Australia. The Singaporean government encourages start-ups and an entrepreneurial spirit, and in just a few years has created a regional tech, business and financial services hub, which is now home to regional headquarters for the likes of IBM, Google, PayPal and Airbnb. According to John Knox, the Singapore-based co-founder and managing director for Asia at Asia Pacific-focused alternative legal services provider AdventBalance, that desire to attract enterprise, particularly high-end ICT, has ‘permeated through the business community.’
Post-GFC, world markets remain volatile, and this time it seems that Asia Pacific is not immune, as recent concerns over China’s growth figures have shown. While in-house departments in the region have up until now been largely uninterested in the outsourcing adopted by other business functions, Chris Dancey believes that an increasingly pressurised economic backdrop will drive them to become more curious about alternative legal providers. ‘It’s those general business drivers which will perhaps not insulate the in-house legal functions from the trend [of outsourcing]. Often in-house legal functions are seen as reserved and protected areas. But I think GCs will get pushed by their businesses, particularly procurement and finance functions, to look at more innovative ways to deliver legal services by multisourcing.’ Knox agrees, observing that among the numerous multinationals on the ground in Singapore and other parts of Asia, the legal departments are often leanest in this region compared to Europe, the US and other non-Asian markets.
None of this means that general counsel all over Asia Pacific are about to be hit by a wave of alternative legal services options for any outsourcing or insourcing they might be considering. The regulatory environment in many Asian countries differs to that of, say, Australia, where non-lawyer ownership has seen a small number of firms becoming publicly listed. Chris Dancey points out that, ‘if you’re an outsourcing provider, in a lot of countries you have to position yourself as not being a legal services provider, otherwise the governments will say, “hold on, shouldn’t you be applying for all the same licences as a law firm?” They’re quite protective in the Asia region, specifically in Singapore and South East Asia.’
It is, of course possible to be a fully licensed and registered law firm in the region, including in Singapore, as AdventBalance will attest. And according to John Knox, the region is seeing deregulation of the legal profession – albeit at different rates, depending on where you look. In Singapore, the Ministry of Law approved future ABSs (alternative business structures) in 2014, thus paving the way for some non-lawyer ownership (capped at 25%), and similar noises are being made elsewhere. ‘It’s becoming more progressive, as is happening in Singapore, and the same has been happening in Hong Kong. All those markets have slightly different rules, and they’re developing in slightly different timeframes. But as that happens, it is making it easier for NewLaw businesses to set up and structure themselves,’ says Knox.
For now, GCs can avail themselves of NewLaw providers based in the region that are structured as licensed law firms, and in-house departments in the wider Asia Pacific region can also access ABSs based in Australia. A hybrid approach is the model adopted by Dancey who, after a 15-year career in-house (most recently as the Singapore-based general counsel for the Asia division of staffing firm Hays, but also within the telecoms, utilities and leisure sectors) is in the process of starting up Augment General Counsel. ‘There are lots of people with new and innovative ideas in the NewLaw firm space,’ he says, ‘but there doesn’t seem to be a lot of tailored solution offerings by in-house counsel for in-house counsel.’ He has set up a law firm based in Sydney, and his aim is to provide onshore and offshore legal services for corporate in-house departments across Asia Pacific. As well as lawyer leasing, his model includes consultancy on improving efficiency and effectiveness on the whole in-house function. The key to his planned offering is the establishment of a legal outsourcing ‘centre of law department excellence’ in the Philippines, staffed by Filipino lawyers, to service corporates across the Asia Pacific region, even those who might not yet have an existing in-house function.
NewLaw firm AdventBalance is also headquartered in Australia, with additional offices in Singapore and Hong Kong. It provides lawyers to in-house teams on a flexible (and fixed-fee) basis to plug expertise or manpower gaps and, increasingly, to manage large projects and transactions. Says Knox, ‘post-GFC, clients now realise that, with the growth of these NewLaw models, there are alternatives they’ve never had before. There’s this general phenomenon of unbundling. I have the view that NewLaw may be less than 1% of the market now, but in the near future it’s going to be 10-15%, and if that happens within the next five to ten years, it will be a massive opportunity for NewLaw firms.’
It seems that others agree. Players such as Axiom and Eversheds Agile are also now operating in the region, underscoring the perceived demand for dispersed services, often freed from the costs of expensive CBD locations. But are in-house departments using them? Veronica Lai, general counsel and company secretary of StarHub, a Singapore-based fully integrated info-comms company, says that there is some traction, but not a wholesale market disruption. ‘I think it’s still quite nascent. I have seen some of these new models coming in, but I don’t think they have caught on in a big way. I wouldn’t say that it is mass-market adopted,’ she observes. Secondments have been popular for a long time, she continues, and she has actually resourced maternity cover within her own team in this way: ‘I think for a long period like four months, it makes more sense for us to have somebody come in and sit within our team, as opposed to outsourcing every single piece of work that the lawyer on maternity leave would otherwise have done on an ad hoc basis.’ So are alternative services on the radar for her? Yes, she says, she has used the NewLaw model, but with caution: ‘I’ve actually done some preliminary checks on offshore outsourcing. I’m not yet comfortable enough to do offshore outsourcing, but I have seen other companies that have done it successfully.’
Lai thinks that the NewLaw movement is interesting enough to make traditional external suppliers do more than just sit up and take notice. ‘I think if they ignore it then they are probably not quite in touch with reality,’ she says. But she believes that the advent of new models is also having a positive effect on the service being offered to in-house teams: ‘Some [private practice firms] are even thinking of how to engage with the client, and come up with their own models on more attractive secondments. They are not just sitting around for someone else to eat their lunch.’
But if the evolution of the market is healthy competition for private practice, could it also be a threat to in-house teams themselves? AdventBalance’s John Knox is careful to deny this, emphasising the symbiotic nature of the relationship. Chris Dancey goes further, arguing that using alternative law providers will make GCs gain credibility with the business. ‘Boards will see their GCs as people who are aligned to the business objectives of driving productivity and efficiency. Actually, GCs will probably position themselves as better business managers,’ he says. At StarHub, Lai is not worried. ‘I think [alternative providers] are a welcome partner, because not everything is suitable to be outsourced and offshored,’ she says. ‘I don’t think it would threaten the existence of the in-house team; in fact, I think it’s complementary.’
It could be that for potential in-house lawyers themselves, NewLaw offers a flexible career alternative to the law firm treadmill or a full-time in-house position. Knox stresses that the lawyers employed by AdventBalance have both in-house and private practice experience, but want to work on their own terms, due to young families or other interests. ‘In our world, that is fine,’ he says.
For Dancey, there are three push factors for his decision to leave behind the in-house life and innovate at NewLaw. Aside from the liberalisation of legal services globally and the imperative for corporates to do more with less, he feels that the time is right to capitalise on a global trend for tech disruption to traditional platforms. ‘There is a lot more standardisation and automation of manual processes, and in-house departments are not always sufficiently resourced to embrace those technology-driven changes. But there has been a Pandora’s box opener of technological innovation; we’re living in a technology revolution and I think it will be difficult to go back to the old ways of doing things.’
For Lai, time will tell whether the risk is one that in-house departments have appetite for on a broad scale. ‘In terms of quality and delivery, NewLaw remains to be tested. Cost-saving is one thing, but if there’s a quality or timeliness compromise, it would not be attractive. We know what we will get from the local firms. So that part still needs to be sorted out,’ she says.
However the market develops, it seems that interesting and possibly empowering times for in-house teams in Asia Pacific are afoot.