Article: The Asian Lawyer – Paul Hastings “Refocusing”

The Asian Lawyer reports that US Firm Paul Hastings is now in the process of ?refocusing? Asia

Here’s the piece at the AM Law Daily http://amlawdaily.typepad.com/amlawdaily/2011/03/asianlawyerpaulhastings.html

They introduce the article by writing…

Paul, Hastings, Janofksy & Walker had a head start in Asia. While other large U.S. firms were still dithering over their strategy for the region, the Los Angeles-founded firm forged ahead, establishing and expanding large offices in the critical markets of Hong Kong, mainland China, and Japan.


But lately things have been going in reverse, at least as measured by head count in the region. A Tokyo office that reported 38 lawyers three years ago is down to around 20, according to the NLJ 250–with top Japanese partners Jun Usami and Yoshihiro Takatori departing within the last month for White & Case and Orrick, Herrington & Sutcliffe, respectively. The firm has seen similar drops in its Shanghai, Hong Kong, and Beijing head counts. Last month Shanghai head Mitchell Dudek and partner Alex Wang headed for the new Hong Kong office of SNR Denton.


Managing partner Greg Nitzkowski says Paul Hastings is now in the process of ?refocusing? Asia, moving away from inbound, foreign-investment-oriented practices that demanded large local staffs and concentrating more on higher-end cross-border work that will require fewer, more international-oriented lawyers.


“We were more focused before on work that dictated that we have a lot of lawyers,” says Nitzkowski, adding: “It’s a much more complicated market than it was only a few years ago. We?d be foolish not to adjust.”


Paul Hastings was one of the first international firms to enter the Japan market when it opened in Tokyo in 1988. By the end of the next decade, it was the top real estate capital markets firm in Japan, at a time when foreign banks and investment funds had a seeming insatiable appetite for securities backed by nonperforming Japanese real estate loans.


“For a number of years, they had something that was the best thing going in Japan in terms of real estate,? recalls ex-partner Alexander Jampel, a member of that practice that left to join Baker & McKenzie?s Tokyo office in 2009.


But it was a practice that needed Japanese lawyers, or bengoshi, to handle much of the work, and the office rapidly swelled with local hires. Integration of the new lawyers proved difficult: Many of the new recruits were new to international practice and many spoke little English. “It was essentially a two-language office,” says one former partner. “You either spoke English or you spoke Japanese.”


Though Nitzkowski agrees the office had integration issues, he says the biggest problem was the shift in the market: Global banks started pulling out of the Japanese real estate market around the time the subprime crisis began in the United States in 2007 and the local banks started handling most Japan securitization work, pitching them mainly to domestic, rather than international, investors. Paul Hastings simply could not compete for such work against big local firms like Nishimura & Asahi and Nagashima Ohno & Tsunematsu, whose billing rates are typically a third less.


Part of the reduction in head count in Tokyo was achieved through layoffs–the firm announced global cuts in March 2009, and Asia was not spared. An ex-partner estimates that around one-third of lawyers who left the office were let go. (At press time the firm had not confirmed this number.)
In China, the firm has also seen a dramatic market shift. The firm entered Beijing and Hong Kong in 2002 through a merger with Hong Kong firm Koo & Partners, opening in Shanghai the following year. At that time, says Nitzkowski, the firm made the decision to pursue a practice catering to multinationals entering the China market. Since foreign investment is governed by Chinese law, Chinese lawyers were needed.