Internationals’ role small ... for now

THE arrival of international players in the Perth legal scene has been a talking point for more than a year, and remains a big issue in the sector.

Despite the emergence of Clifford Chance and Allen & Overy, which are global law gorillas, and equally large second tier players DLA Piper and Norton Rose, the locals appear to be largely unfazed by the changes.

They, quite rightly, point out that the global players’ presence in Perth is relatively small and involves mainly existing practitioners who have simply donned new colours.

In the short term, that may well be the case.

There are mixed reasons for the global firms’ presence; Perth’s market has matured, its client base has become internationally focused, and it’s one of the few places in the world firing on all cylinders at a corporate level.

With little going on in their home markets, Clifford Chance et al have decided there is little to lose in being represented in a global hotspot.

But what is taking place today is really only the start. What local players are thinking about is where things will be towards the end of the decade, when the construction phase of the latest resources boom cools down and the corporate work plateaus.

Right now the pie is growing at an exponential rate, which provides work for everyone. This type of scenario can cloud judgement and prompt decisions that might look like risky ones when viewed in hindsight.

Just remember how some of the mining contractors were caught out in the first boom, with the same happening now in commercial construction.

It is not as if the big local players are not aware of the market changes. For the better part of two decades the major law firms have been grappling with the need to restructure. The first phase was nationalisation, but internationalisation has always been on the cards, especially when Australia was seen as a place to get top legal work done cheaply. There is plenty of restructuring taking place to try to prepare these big firms for the threats and opportunities a more globalised legal market creates.

The nationalisation process is a helpful prism through which to view the changes taking place, even those of us who don’t follow the minutiae of the legal world’s changes.

For example, the late 1990s decision by leading east coast player Allens Arthur Robinson to jettison its alliance with the old Perth firm Parker & Parker to establish itself in Western Australia is an interesting case study.

It established in Perth by poaching some leading practitioners in key fields, much like the route taken by the two top UK firms that have chosen to enter the WA market.

Today, AAR sits in the top 10 WA law firms, by size. No doubt, if judged by total billings and premium corporate work, it could sit even higher.

Then again, there are lessons outside the world of law that show us the opposite to be true.

In the world of management consulting, the global leaders have previously dipped their toes into Perth’s waters and found them icy. McKinsey & Company set up a Perth base in the 1990s, creating a buzz in management circles that is similar to what we see in the legal world today.

That firm’s office didn’t last. But its rivals are now coming into the Perth market.

Resources sector players and analysts point to a peak of construction and development in LNG and mining somewhere around 2014, based on current plans. The music won’t stop instantly and the construction phase will shift into a new operational phase, which will also bring new and interesting work for all professional services players, including the law.

Nevertheless, the signs are that the tempo will slow in terms of rampant growth sometime in the next five to six years and start to tail off.

As a mere observer, it will be interesting to view the composition of the legal market at the end of the decade.