What should law firms do when outside forces—events and conditions beyond their control—stymie their operations?
They can cut and run, of course, but they risk losing potential profits that, although elusive now, could return. They can consolidate regional operations into one office, hoping they will be better insulated while continuing to serve clients. Or, they can lay off lawyers and staff and make adjustments designed to protect their operations as they assess whether it’s worth staying.
But it certainly can’t be easy. And judging by recent actions taken by international law firms in Greater China, law firm leaders don’t really know what to do. All they know is, it’s getting increasingly difficult to operate a law firm in there.
Last week, we learned that Weil Gotshal & Manges has closed its Beijing office and is considering shuttering its longstanding office in Shanghai. That would leave it with one office in Greater China—in Hong Kong.
Just days earlier, Orrick, Herrington & Sutcliffe said it plans to close its offices in Shanghai and Taipei and consolidate its China offering in Beijing.
These firms are not alone. In the past year, other top international firms, including Latham & Watkins, Perkins Coie, Proskauer Rose, and Akin Gump Strauss Hauer & Feld, have closed offices in mainland China.
Meanwhile, Ropes & Gray cut its Shanghai head count last year, and Dentons ended its combination with one of China’s largest law firms, Dacheng Law Offices, blaming the Chinese government’s new rules on data privacy and cybersecurity. In early March, Kirkland & Ellis, the world’s largest law firm by revenue, laid off at least nine of its capital markets lawyers in Greater China, citing “market conditions” as the cause.
And it’s not just U.S.-headquartered firms that have been affected. Last year, U.K.-based Linklaters said it was cutting its lawyer head count in all three of its Greater China offices—Beijing, Shanghai and Hong Kong—citing the prolonged economic downturn in the region.
The moves are understandable. Geopolitical tensions between the U.S. and China have prompted both countries to be wary of national security risks, reducing deal opportunities for the world’s largest law firms and their clients, as mergers are closely scrutinized, IPOs are put on hold and economic growth in China slows...
