Mainland firms' influx brings new opportunities for local lawyers

GBA development allows qualified lawyers to practise domestic law within the area.

In 2022, Hong Kong’s legal industry saw a growing number of Mainland firms setting up operations in the city. Rather than perceiving this as a threat, local firms saw it as chance to increase collaboration with firms in the Mainland which will be beneficial to them given the improvements in the Greater Bay Area (GBA).

Recent developments in the GBA that have brought local industry opportunities is the Qianhai Cooperation Zone in Shenzhen, Guangdong which allowed wholly-owned Hong Kong enterprises to adopt Hong Kong law when entering into civil and commercial contracts in the free trade zone. 

"The government explored ways to enable wholly owned Hong Kong businesses in Qianhai to adopt Hong Kong law and arbitration for their commercial contracts," HFW Hong Kong Head Peter Murphy told Hong Kong Business.

The entry of more Mainland firms is also beneficial to Hong Kong given that the city has been transitioning to primarily being a China-focused finance centre, added Stephenson Harwood Greater China Office Managing Partner Jamie Stranger.

The GBA has allowed Stephenson Harwood's HK-qualified lawyers to practice domestic and Peoples' Republic of China (PRC) law within the megalopolis.

Whilst Hong Kong's linkage to the Mainland has its advantages, it also has drawbacks. 

“The GBA is an example of how Hong Kong's economy is more integrated with that of Mainland China. They are inextricably linked," Denise Jong, partner at Reed Smith Richards Butler, said, noting that the reduced economic activity due to COVID restrictions "has negatively impacted transactional practices in Greater China." 

Jong, however, said litigation practices remained strong.

Shift in workforce

Since China has slowly relaxed its restrictions, Hong Kong's business environment also began improving, said Stranger.

Given this development, Murphy saw increasing demand for international arbitration and commercial litigation expertise during the year.

Regulatory and compliance practices were also in demand during this year, particularly on crypto-related litigation, said Jong.
China's impact on Hong Kong's legal market was not only seen in terms of practices but also in the workforce.

According to Stranger, firms are significantly growing their business service teams to support China's growth strategy.

Firms are also looking to grow at the "partner level" around their sector focus strategy.

In 2022, Jong said there had been visible "partner lateral movement" in the market.

"It is more likely that the majority, not all, of such movement is due to the partner choosing to leave for another country or having to leave as opposed to being actively recruited," Jong said.

Jong also noted that there had been "redundancies" amongst international law firms with offices in Hong Kong.

Job portal Indeed defines redundancy as the "process when employers have to let go of one or more employees due to circumstances unrelated to job performance or behaviour."

A year of rebound

Whilst there was still a talent movement, Stranger believes that the legal workforce had already steadied after two years of "strategic contraction." 

During the two years, firms also changed their way of working. Stephenson Harwood, for example, has adopted a 60% office and 40% work-from-home setup. HFW has likewise adopted flexibility. 

"[We have] been giving all employees the flexibility to work from remote locations, whether in or outside Hong Kong, during the darkest days of Covid," Murphy said.

"At HFW, we strive to create a flexible, inclusive, and engaging work environment for all of our staff," Murphy added.

In terms of maintaining engagements with clients, Murphy said firms have become "quite creative," doing either "remote coffees" or " more formal online seminars and presentations."

"The legal industry is still recovering from the impact of the last two years, with Hong Kong having had in place some of the strictest Covid policies of anywhere else in the region. On a practical level, the challenges around travel made it difficult to connect with clients, especially clients in the Mainland," Murphy said.

Stephenson Harwood's partners are also "on the road" to catch up for lost time with clients during the pandemic.

After a year of "staying lean" in 2022, Jong said the industry will be able to rebound in 2023.

Stranger is also positive about the next year, expecting an "opening-up" between Hong Kong and China regarding COVID restrictions.

"2023 will be the year of reconnection for the legal industry," Stranger said.