Mr. Lester Huang, Managing Partner and Co-Chairman of P.C. Woo & Co. and former President of the Law Society of Hong Kong, reflects on the current practice environment for solicitors in Hong Kong and how it might be further improved.
While lawyers may rely on precedent banks, it is no longer safe to bank on precedent in this time of unparalleled change. The transformation of the legal industry is being fuelled by competitive pressures, economic uncertainties and disruptive technology. The legal market continues to grow, but buyers’ changing purchasing patterns and their evolving expectations of legal service providers is putting significant pressure on firms and their business models, with small to medium-sized law firms being particularly affected.
Mr. Lester Huang believes SME law firms have an important role to play in the coming years, but explained that their leaders will need to understand their business and their place in the market and then determine how to continue to attract the types of clients that they want. Just as in the past, challenges and opportunities will continue to arise in tandem. However, to remain relevant, Hong Kong law firms must continue to diversify their service offerings and seek new business opportunities in places outside of Hong Kong.
A Steady Hand at the Tiller
Since 1985, Mr. Huang has built his private practice at P.C. Woo & Co., where he started as an articled clerk and worked his way up to become the firm’s co-Chairman. Throughout his 32-year tenure, he has spent 26 as a managing partner, not only assisting the firm transform from a property-based practice to a diversified commercial legal service provider, but also helping it open offices in New Territories, Chengdu and Nanjing. The official opening of the Chengdu Representative Office in 2002 distinguished P.C. Woo & Co. as the first Hong Kong law firm to establish a vital link between Southwestern China and Hong Kong.
In addition to his work in the private sector, Mr. Huang has dedicated substantial time and energy to public service initiatives. He has been particularly instrumental in his work with the Law Society as a former President and Council Member and with government bodies and NGOs in principal positions. Through these roles, he has vigorously pushed for changes that would improve the practice environment for solicitors in Hong Kong, among other things.
Reflecting on the challenges that may lay ahead for SME law firms in Hong Kong, Mr. Huang highlighted a number of issues P.C. Woo & Co. has encountered, indicating that they were not unique to his particular firm.
Competing for Local Talent
One of the first issues Mr. Huang addressed was the fierce competition for local talent, which he has found “to be one of the most interesting exercises” in running the firm. There is always talent present in the market, but being able to capture it is a different story, he explained. “In vying for good trainees, we find ourselves having to start earlier and earlier in our recruitment exercises. Of course, after having brought them in and trained them up, it is also a challenge to hold on to them. Over 60 of the world’s top 100 firms are represented in Hong Kong. So, they, like us, are trying to attract young local talent. This is a challenge for us because our larger international counterparts can offer more attractive packages than we can – and not just in terms of pecuniary remuneration, but also in arranging international secondments and a variety of other opportunities that provide young lawyers with sterling CVs at the end of their training contacts. The growing appeal of working for an international firm upon graduation has meant one thing for local firms – we are losing our youngsters,” Mr. Huang said.
“Fortunately, P.C. Woo & Co. has been able to bring some of them within its fold. I would like to think that the kind of work the firm can offer juniors adds to our attractiveness as an employer, as does the firm’s culture of valuing work-life balance. We also have a strong record of rewarding loyal staff. We have inculcated the notion that everyone is entitled to make their way up to the top, which is something you may not find at other firms. Just as many of my partners and I have done, many staff have worked their way up the ranks at the firm. The way staff are trained, nurtured and advanced has created a family spirit, which is very difficult to replicate and also hopefully adds to the firm’s appeal.”
To remain competitive and relevant, smaller firms will have to find ways to distinguish themselves to attract local talent.
Another key issue SME law firms face is finding ways to sustain formerly lucrative practice areas or those that primarily focus on providing services to individual clients, such as conveyancing, family law and succession. In recent years, these practice areas have failed to generate sufficient income, forcing Hong Kong firms to expand their offerings and diversify their client base to remain afloat.
When speaking on the difficulty of maintaining a property practice, Mr. Huang first noted that P.C. Woo & Co. started off as a conveyancing firm. He explained that the founding partner, Dr. Pak Chuen Woo, opened the firm’s first office just six weeks after the close of World War II to help clients with property that had been requisitioned by the British and Japanese armies. Until a certain point before 1997, Hong Kong property market was thriving and conveyancing work generated enough income to enable firms to survive and develop. However, if you look at the legal market for property work today, property transactions are no longer lucrative legal work.
“While we have not had to decrease the size of our property department, it is no longer a prominent fee-earning practice. Some months, the department barely breaks even because the fees we can charge clients are so low. All of this has made it increasingly difficult to persuade young lawyers to specialise in this area. If we cast our minds forward five to 10 years, it is difficult to say where our property practice will be or who will be doing this work. This issue is not unique to P.C. Woo & Co., but as property has always been a mainstay of the Hong Kong economy, it is worrisome. We need brilliant lawyers in the property sector just as much as in the commercial or financial sector.”
As President of the Law Society, Mr. Huang expressed his concern with the severe competition and pressure on legal fees for conveyancing work and proposed various measures to resolve the unhealthy situation. However, the situation has persisted.
Impact of ADR
Another interesting development, which Mr. Huang noted was exemplified in personal injury cases, is the increased reliance of parties on alternative dispute resolution techniques to resolve disputes. ADR tools enable parties to confidentially settle cases outside of the court system and thereby avoid public scrutiny.
While ADR has many benefits, Mr. Huang explained that it also poses a number of unique challenges for common law-based societies, like Hong Kong, whose lawyers base their advice on precedent. With decisions being rendered confidentially, current trends or thinking on certain legal issues may be unascertainable. For instance, instead of looking at a precedent for an award of damages in a personal injuries case, lawyers will now have to go by their feel for the rates based on personal experience in other cases or anecdotal information.
With China moving forward with its Belt and Road initiative and predictions that ASEAN will continue to expand in 2017, there are many potential economic opportunities on the horizon. In noting the significant role lawyers play in guiding and advising business, promoting legitimate interests and fostering trust, Mr. Huang hopes the Law Society will continue to work closely with Hong Kong law firms to ensure they are well positioned to capture new business as it is generated.
Law Society’s Role
During his time as President of the Law Society, Mr. Huang observed that the globalisation of legal services brings benefits and challenges. “For law societies and regulators there are always concerns of practice rights eroding local interests. Hong Kong exercises a very liberal policy for foreign lawyers, in the belief that foreign lawyers with particular expertise bring benefits to Hong Kong with increased investment. In turn, the local profession stands to benefit through developing new skill sets. Furthermore, the Hong Kong legal profession also gains by being able to develop access to work outside of Hong Kong,” he wrote in his January 2009 President’s Message.
In terms of the Belt and Road initiative, Mr. Huang believes it will generate huge opportunities, but explained that the challenge for Hong Kong will be in language and the profession’s readiness to work in less familiar territories. “It’s a mentality that we have to develop and cultivate among the younger generation – to be ready to encounter this adventure and build and seize upon opportunities as they come our way. The Law Society is well positioned to lead this initiative,” he said.
To develop access to work outside of Hong Kong, Mr. Huang believes it is vital for members of the profession to forge relationships with those overseas. “During my time as President, one initiative I spearheaded was inviting different Bar Associations from around the world to attend our Opening of the Legal Year ceremonies. The rationale was to use this event to promote Hong Kong and support efforts to take Hong Kong international through cultivating relationships with our overseas counterparts. With our global aspirations, it is important to consolidate friendships through activities, such as the Opening of the Legal Year; we will need friends to achieve our goals over the long-term. I am glad to see that the Law Society has made extending invitations to Bar Associations and overseas dignitaries to attend the Opening of the Legal Year ceremonies a permanent fixture.”
Mr. Huang indicated that it has also been encouraging to see the Law Society continue to build and develop relationships through signing Memoranda of Understanding with different jurisdictions. One additional development he hopes to see in the future is the involvement of more junior lawyers in these relationship-building initiatives. “If they can develop their network in different jurisdictions and promote Hong Kong Law, it would only be for Hong Kong’s betterment.”
Over the long-term, Mr. Huang hopes the Hong Kong legal community will put more emphasis on extending its markets by establishing a presence in major centres of economic activity around the world.
“We have skills and experience that compare with some of the best in the world and these should be used to good effect. To be able to branch out, however, local firms must have not only skills, but also manpower. To be able to send skilled personnel abroad, the firm must have capacity to spare and this is where size maters. The fact that the vast majority of Hong Kong firms are relatively small explains the absence of Hong Kong firms abroad.”
“If there was a consolidation of smaller practices into larger ones, I think it would be for Hong Kong’s better good. This was something, even as a President of the Law Society, I had hoped to see, but it is not easy. In a way, I feel that this holds back Hong Kong practitioners from going into more challenging regions to make a living. Whereas so many lawyers from overseas are able to set up foreign practices in Hong Kong, we should see if Hong Kong law firms can and are doing the same,” he said.
For this reason, he believes laws such as the ones to enable limited liability partnerships and solicitor corporations are important. He hopes to continue to see the Law Society do what it can to further encourage firms to amalgamate and grow. “Regulation must not stand in the way of good progress. If there is the possibility of Hong Kong firms growing, I think the Law Society should support that.”
Net Legal Service Exporter
Mr. Huang also hopes to see Hong Kong become a net exporter of legal services. “With our open market environment, we have the necessary basis to export our expertise. In any event, international clients are not restricted on who they must use, and will go to the best even if it means shifting the work offshore to Hong Kong. Hong Kong attracts much foreign investment for itself and for onward investment into China. We also serve as a trading hub between China and the rest of the world. Local lawyers must aim to export their services to the investors and overseas traders to reap the benefits. The Law Society [has] complemented these by continuing to promote Hong Kong’s strengths, including our capacity as an international dispute resolution centre,” he has previously written.
He also noted that lawyers in other jurisdictions, such as the US and UK, have developed a wide network of overseas offices, which can lead to a number of benefits (eg, the use of cross-selling, increased productivity, client expansion, work referrals from other offices and ability to leverage global resources). Mr. Huang believes Hong Kong solicitors can further develop by expanding internationally.
“Hong Kong solicitors are properly positioned to serve both local and international interests. A bolder mindset and a readiness to commit to longer term returns will strengthen the profession in all ways.”
Pro Bono Culture
“When you think of pro bono, often times you associate the term with helping clients who are facing a court action and need representation to get through their case on a low bono or pro bono basis. As such, the term pro bono is often associated with the issue of access to justice. P.C. Woo & Co. does some pro bono work like that, but that is not the only type of pro bono or low bono work we do. We also serve on boards of different NGOs and advise a variety of bodies and non-commercial entities on their work. Our involvement can range from setting up charities to advising clients on governance issues,” Mr. Huang explained.
“Many solicitors in Hong Kong contribute their time in this way. I think that is a huge strength of the legal profession in Hong Kong. The Law Society recognises solicitors’ efforts on this front every year through its pro bono awards.” Mr. Huang thinks this is an important feature of Hong Kong’s legal culture that the community should continue to promote.
For Mr. Huang personally, he said that this kind of work is “the spice” of his legal practice. “If I was confined to my desk job, doing the same things and dealing with the same kinds of issues and clients day in and day out, my last 30 odd years would likely have been quite mundane. Going out and meeting different people who are doing totally different things and learning about these different sectors gives me a richness in life that I might not otherwise enjoy. In that sense, I not only hope to continue to have the opportunity to serve, but also to learn. That has been the kind of spirit that I’ve always adopted.”
One aspect that he hopes will evolve on the pro bono front is in the appointment of people to government committees. “Junior lawyers are not often appointed to contribute on these committees. I hope this will change in the future, as their increased involvement will only be good for Hong Kong. The voices of the younger members of our community are very important and I feel that through the consultative set up that the government has, it is a very useful channel for their voices to be heard.”