In a notable retrenchment move among legal service providers, KPMG is set to close its affiliate firm, SF Lawyers, in Hong Kong, as reported by Bloomberg Law. The economic downturn in Hong Kong and mounting tensions in China have prompted key players in the industry, among them Deacons and DLA Piper, to curtail their operations.
SF Lawyers, an independent five-attorney firm associated with KPMG, plans to halt its operations in Hong Kong as early as this month. The dissolution of SF Lawyers follows the closure of EY’s Hong Kong affiliate, LC Lawyers, earlier this year. Major firms such as Latham & Watkins have similarly abandoned their offices in mainland China, a reflection of the strained relations between Beijing and Washington, the sluggish growth, and increased competition from domestic firms.
In 2023, China introduced a new data protection law, entrusting the government with considerable power to penalize or dissolve companies found guilty of mishandling sensitive data. This regulatory change led to the raiding of the offices of international law firm Mintz and US-based consultancy Bain & Co. the subsequent year.
The United States is set to implement new visa restrictions for select Hong Kong officials, a response to what authorities deem an encroachment on civil liberties and freedom of speech. However, not all American law firms operating in greater China find themselves in a crisis, according to Evan Jowers of Lateral Link, an Asia-based legal recruitment firm. Jowers predicts the ‘top tier’ law firms will prosper when the volume of high-value, cross-border transactions picks up.
“Inferior international law firms and the Big Four legal arms are underperforming and being undercut by the impeccably improving elite local PRC law firms, which have hired numerous US-trained lawyers over the years,” says Jowers. He also pointed out the growing ‘patriotic push’ within China to support local law firms.