As international financial and legal environments become increasingly complex and interwoven, it should come as no surprise that the line delineating “offshore” and “onshore” law firms is no longer as clear as it once was.

What is clear, however, is that the unique market conditions of offshore finance combined with proactive approaches to governance and legislation have allowed offshore financial centres to enter a new era in the past few years. Valued and respected by an increasingly global clientele, these unique finance hubs – and the law firms that operate within them – are increasing their competitiveness, thus bolstering their future prospects.

There is no standard, one-size-fits-all approach for law firms offering services in offshore financial centres. Some firms may choose to operate within a purely offshore environment, whereas others may opt to provide services that go beyond traditional offshore notions.

With operations limited to Anguilla, the British Virgin Islands (BVI), Cayman Islands and Cyprus, the law firm Harneys considers itself an offshore firm.

“The jurisdictions in which Harneys operates all fit the IMF definition of an offshore financial centre as one which ‘provides financial services to non-residents on a scale that is incommensurate with the size and financing of its domestic economy,’” says Jonathan Culshaw, the firm’s Asia managing partner.

“More materially, and unlike some of our competitors, we have taken a decision not to practice in jurisdictions which would put us in direct competition with leading international law firms which comprise the majority of our clients.”

Maples and Calder, on the other hand, describes itself as an “international law firm” as opposed to an offshore law firm.

“We practise the laws of Cayman Islands, BVI and Ireland and have offices in a number of key global jurisdictions,” says Shaun Denton, Maples’ Hong Kong managing partner. “Through our affiliate MaplesFS, we also provide fund administration, fiduciary, incorporation and company secretarial services.”

Conyers Dill & Pearman operates in Bermuda, BVI, Cayman Islands and Mauritius. When asked if he considered the firm to be “offshore,” partner and co-chairman David Lamb takes a nuanced view.

“‘Yes’ is the short answer, because we don’t advise on onshore laws,” he says. “Having said that, in Hong Kong for example, we have to be very familiar with the listing rules and the takeover code. In other words, we have to be able to interact with the local onshore laws. But in no way do we practise onshore laws, even in London, where we’re all English-qualified lawyers. We have no plans to practise any of the local laws, because that is not our business model.”

Leon Santos, a group partner at Collas Crill in Singapore says the legal services that offshore firms offer “is changing quite dramatically.”

“Offshore law firms have moved to expand the number of jurisdictions for which they provide legal advice, and have also set up offices in strategic locations (like Singapore) to be closer to their clients and traditional referrers of business like onshore law firms and financial institutions,” Santos says.

A golden era for offshore

Indeed, most firms with a significant operational presence in offshore financial centres are not eager to break out of their current domains and expand into the realm of onshore law. One reason for this is that competition is greater as well as more intense. Additionally, offshore firms have the added ability to house a revenue-boosting services business.

“We are the experts in what we do and it really isn't worth trying to break the mould and offer onshore law services,” Harneys’ Culshaw says. “Onshore is a much bigger market in Asia, but it is already well serviced by excellent firms.”

As an international law firm, Maples and Calder clients are aware that the firm’s global offices offer the advantages of a worldwide network that provides a full suite of services.

“We don't consider ourselves as needing to break out of any particular mould, but our services continuously evolve in response to business opportunities, a recent example being the development of eServices,” says partner Anthony Webster. eServices is an entity management system that Maples and Calder offers as part of its registered office service to all its clients.

Another reason why many firms are content to stay put involves the changes that have come to offshore finance centres in the past decade or so. The size and quality of deals, especially in mergers and acquisitions, have grown.

The increased sophistication of offshore deals has acted as an effective barrier to entry, preventing onshore firms from jumping into the offshore sector.

“I don't think there has been a big change over the past couple of years but certainly over the last decade, there has been a change,” says Culshaw. “Offshore firms have grown in size and sophistication, the leading firms are now competing in each other's core markets making it a better, more competitive market for end consumers.”

Another significant development is the emergence of Asia as a relatively more important market for offshore services with continued growth, while the U.S. market has remained fairly static, he adds. With clients increasingly requiring real-time support, the Asia offices of leading offshore firms have had to grow to accommodate this new demand.

“The strength of our offering in Singapore is in the areas of alternative asset management, capital markets and private wealth,” says Santos. “It is very important to be focused on areas where we can add value for a client.”

It isn’t just firms that have had to adapt to competition, the offshore financial centres themselves have changed as well.

Lamb of Conyers Dill & Pearman attributes some of the success of offshore financial centres to their nimble approach towards self-improvement through legislation.

“One of the reasons why these jurisdictions are so successful is, every year, and sometimes more than once a year, they amend their legislation, primarily their companies law or companies act, to make sure that it is efficient,” he says. “If there is a problem in using it, then they will amend it. It makes a lot of sense to do that – an annual review of the legislation and the ability to make changes to that legislation relatively easily. It can take years for onshore jurisdictions to amend their legislation.”

“In this way, the jurisdictions facilitate complex international transactions and promote the efficient use of capital, maximising economic returns for investors and shareholders,” Lamb says.

This constant upgrading can do more than just change a legal or regulatory environment. Bermuda is one example of an offshore centre becoming so successful and prestigious that it has morphed into something more “mid-shore.” Today, Bermuda is a large reinsurance centre, with the likes of Ace and XL and other reinsurance companies with buildings housing executives, actuaries, accountants and other staff, giving it a “mini City of London” feel.

Services, services, services

Unlike onshore law firms which might be highly specialised, firms operating in the offshore arena are much more likely to distinguish themselves by the variety of services they offer.

At Harneys, the second-largest offshore firm in Hong Kong, there is no pressure to “go niche,” says Culshaw.

“We are the second-largest offshore firm in Hong Kong and offer the full range of services to cover finance, corporate, investment funds, litigation, private wealth and restructuring in our core offshore jurisdictions,” he says. “I don't see any benefit in being a niche player in offshore.”

Although much has changed in offshore law in terms of details, Lamb says Conyers’ role has essentially remained the same over the years: to advise on complex international and financial transactions together with onshore counsel.

Maples and Calder’s Denton says the firm’s fiduciary, incorporation, company secretarial and fund administration services allow the firm to provide its clients with a "one stop shop,” servicing entities formation in its core jurisdictions as well as Delaware, Luxembourg, Hong Kong and Singapore. 
“We also provide extensive coverage across the globe through our numerous offices, including, most recently, our second Asian office in Singapore,” Denton says.

Synergy, not competition

The general lack of head-to-head competition between offshore and onshore law firms creates space for effective and mutually beneficial cooperation. The relatively clear delineation of territory allows for complementary relationships between offshore and onshore firms to provide efficiency and value to their clients.

Harneys sometimes advises an end client, such as an investment bank, on issues of BVI and Cayman Islands law. But far more often, it is playing a support role on a material transaction which is being driven by an onshore firm, says Culshaw.

“The two roles are not in competition,” he says. “We do not offer advice on Hong Kong, New York or English laws and purely advise as to relevant offshore law issues so there is never a conflict.”

The symbiotic relationship between offshore and onshore firms can take many forms, depending on the business at hand, the participants in a transaction, the nature of the transaction, and other factors.

“Sometimes we are the main deal counsel, but not often,” says Lamb. “I do a lot of M&A work including structuring M&A deals, but there’s always English counsel, or U.S. counsel, or in the case of Hong Kong, Hong Kong counsel. There may be additional international ‘deal counsel’ too, all offering complimentary services.”

Maples and Calder, true to their “international firm” branding, plays roles that are more offshore in some situations and onshore in others. Denton says that Maples’ services are enhanced by strong relationships with leading onshore counsel. Rather than compete, the firms work alongside each other.

“Our role as Cayman Islands or BVI counsel on transactions is generally to support onshore counsel and advise specifically on the Cayman Islands or BVI aspects of the transaction,” says Denton. “However, given our extensive client base and the experience gained from having a presence in Asia, Europe and the Middle East for many years, we have found that we have become a ‘trusted adviser’ to many of our clients.”

Maples and Calder’s role as Irish counsel on transactions is more akin to that of traditional onshore counsel, adds Denton, as the firm often works alongside other major law firms on transactions where its role is to focus on checking the Irish legal aspects of a deal.

The talent factor

Law firms, whether offshore, onshore or international, are only as strong as the people they employ. Given the higher profile of offshore centres in global finance, the growing role of Asia – especially China – and the greater opportunities that this provides law firms in these jurisdictions, it makes sense that the game is no longer the same when it comes to bringing legal talent offshore.

In terms of what he looks for when recruiting, Culshaw says candidates should offer a combination of solid professional fundamentals, a wide professional network and cross-cultural skills.

“I view recruiting people as my most important role and am looking for driven, intelligent individuals with strong technical legal skills,” he says. “Useful connections are a secondary consideration and language skills are increasingly important, particularly in terms of PRC clients requiring Mandarin-speaking lawyers.”

Lamb says that years ago, it was relatively difficult to get the kind of quality people the firm needs. Because of the complex nature of the transactions in which Conyers is involved, these people tend to come from Magic Circle firms and typically from the City of London or other major financial centres.

“We have to take people from a Commonwealth jurisdiction because otherwise, they have to sit exams in order to get qualified,” says Lamb. “They’ve always had a good traditional career route in their home market, but the position has changed recently.”

There are two major reasons why working offshore has become more attractive to lawyers, he says.

First, the quality of work is highly attractive, and lawyers are finding offshore work options more attractive than before. Second, but still very important, is the issue of quality of life.

“To be honest, we’re lawyers and we work long hours,” says Lamb. “Typically, I work 12-hour days – starting at eight and leaving the office around eight o’clock at night. It may not be seven days a week, but it’s at least five. Quite often, because I’m co-chair, I will have other work to do on weekends or in the evenings as well, so it’s by no means easy. But nevertheless, I think especially if you go to one of the islands, like Cayman, Bermuda or BVI, at least you’ll find that the lifestyle there is a lot more relaxed than London or Hong Kong!”