09/09/2010 - 00:00

International focus prompts changes to Perth market

09/09/2010 - 00:00

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Law firms are responding in different ways to WA’s increasing strategic significance.

International focus prompts changes to Perth market

BLAKISTON & Crabb’s managing partner Michael Blakiston seems to relish the internationalisation of Perth’s legal market.

The arrival earlier this year of London firm Allen & Overy stirred up the local legal profession and there are plenty of rumours that another so-called magic circle firm could set up shop in Australia, including a Perth office.

“Allen & Overy has committed serious money,” Mr Blakiston said.

“That is a challenge, clearly, but I want to be in their space.”

On the basis of size, Blakiston & Crabb is well down the ranks of Western Australian legal world, only just sneaking into the state’s top 20 law firms when it comes to numbers of legal professionals.

But its significant place in the key resources market puts it in the middle of the most international part of the sector, an area whose continued growth in these troubled economic times is attracting overseas law firms whose home markets are tight.

With a client base of junior and mid-tier miners, Blakiston & Crabb is already well versed in international law. Nevertheless, the West Perth firm has opted to keep changing with the times.

It recently formed an alliance with top-tier Sydney firm Gilbert + Tobin which gives it strong corporate credentials and has decided to diversify from its hard rock mining base by recruiting Apache Energy general counsel and former Allens Arthur Robinson partner David Martino to head up an energy-focused practice.

By adding Mr Martino’s energy focus to create a partnership of eight, Mr Blakiston questions whether the firm he started in 1985 might have come of age.

“I am starting to wonder at what stage we cease to be a boutique,” he said.

The evolution of Blakiston & Crabb is part of a host other well-documented changes that have occurred in the Perth market in recent times.

Apart from the arrival of Allen & Overy, national mid-tier firm Deacons merged with UK-based Norton Rose and three-partner mergers and acquisitions team from recent Perth newcomer Middletons defected to Corrs Westgarth Chambers.

While many are guarded about what these changes mean in the Perth market, there is no doubt that new arrivals can emerge quite rapidly to become major players.

A case in point is Allens Arthur Robinson, which opened a Perth office in 1997 and quickly became a market leader in Perth.

Interestingly, one of AAR’s first local recruits, energy lawyer Angus Jones, was the fourth Perth partner to sign up with Allen & Overy.

Freehills head of Perth office Jason Ricketts said that the rising quality and consistency of legal work in Perth, particularly during the GFC, initially attracted lawyers from the eastern states but more recently it was overseas players.

“Some are doing fly-in-fly-out in the same way we were doing fly-in-fly-out in South East Asia 10 years ago,” Mr Ricketts said.

The Freehills chief said the possibility of increased competition flowed from rising work in fields like oil and gas with international players like Chevron growing rapidly in Perth.

Notably, Freehills only new Perth partner this year was an oil and gas lawyer, Sharon Wilson, who had returned to WA after working for an international firm in Tokyo.

Minter Ellison Perth managing partner John Poulsen said major influences on the Perth market are the rise of offshore energy operations that are attracting service companies here from elsewhere, especially the UK where North Sea production is slowing.

And other companies are being attracted here on the back of major US and Chinese investment across the resources spectrum.

“What we are noticing is the international service companies are seeing WA as a strategic location,” Mr Poulsen said.

“WA is a centre of excellence for oil and gas and energy resources.”

“National firms have realised that Perth is strategically significant.

“If you went back five or six years there was real concern in Perth that it was just becoming a branch office and all major companies were moving their head offices to Sydney or Melbourne.”

“That is clearly not the case, look at the BHP office which is beginning to block my view as an example.”

Minter Ellison has just reopened its Beijing office, the purpose of which is to capture work from Chinese state-owned enterprises and other companies looking to do business or acquire projects in Australia.

“There is internationalisation; that is driving our strategy.”

Oddly enough, this newly recognised strategic importance has not yet proved magnetic enough to prompt a return of the Perth legal diaspora from London.

The economic woes of the UK and the US, especially the London-focused finance sector, had created an expectation of a wave of repatriation to a market seen as largely unaffected by the GFC.

Mr Poulsen said the slowdown in London had limited the losses of younger lawyers who normally leave for overseas experience – Minter Ellison still has most of the graduate employees taken in over the past three intakes – but the levels of experienced players returning had been limited.

“There has not been the flood that everyone anticipated, it has been more of a trickle,” said Mr Poulsen, a comment that was supported by other legal leaders.

Minter Ellison legal professional numbers have held reasonably firm in recent years, reflecting a mixed set of results among the top firms as ranked by the WA Business News Book of Lists (see page 20).

According to the list, the composition of the top 10 has not significantly changed in the past five years, although there have been some drastic changes behind the names.

Most obvious is Lavan Legal, which did not exist in 2005. It was created through the exit of the majority of the Perth-based Phillips Fox partners who merged with local boutique Bennett & Co.

The remnants of Phillips Fox joined up with what was the bulk of Gadens’ partners in a complicated set of moves. That group has aligned itself with UK-based DLA Piper. While Gadens has rebuilt its Perth presence.

Corrs Chambers Westgarth, which sits at number 11 on the current list, was eighth in the market in 2005. It is clearly rebuilding, hence the recent move earlier this year to add M&A lawyers Rob Franklyn, Christian Owen and Russell Philip

All three had been partners at Middletons following the firm's merger with Franklyn Legal and Salter Power in late 2008.

The changes between 2005 and 2010, though, don’t tell the full story. In 2009, just after the height of the boom and before the full ramifications of the GFC were known, the Book of Lists had seven firms with more than 100 legal professionals, while today there are four. Freehills had 210, compared to 170 today.

Apart from the international forces shaping the legal market, there are some other significant trends mentioned by leading lawyers.

The push to reduce the amount of fees charged on the basis of billable hours to other alternatives which put more emphasis on the value lawyers offer and the amount of risk they take is one that has become quite acute (see fees story, right).

Partly this represents the rise of the in-house corporate lawyer, a client who understands the legal world as well as the firms they employ. These clients are more cost-conscious, especially as a result of the GFC.

Another factor is the market opportunity it offers firms to challenge the status quo. Lavan Legal has been one of the key players in that space.

Several leading lawyers also mentioned as a trend the strategy of Balance Legal, which sought to cut client costs by supplying seconded lawyers as a kind of outsourced in-house counsel.

Another trend is at graduate and articled clerk level where long-running practices are changing quite rapidly.

It appears that the August round of offers to graduates has lost its place as firms seek to make offers to undergraduates after they have done their last summer’s internships.

And for those that start full-time employment, the articled clerkship process has changed significantly.

The national law firms push to use the Sydney-based College of Law, which now has a Perth course, has changed the market.

The WA Legal Practice Board will no longer offer articles training from the end of this year and as actively promoting a new player in the WA market, the Melbourne-based Leo Cussen Centre for Law, which is now offering course in Perth.

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