The Offshore Top 30, 2014: The byteback begins
By Joanne Harris From The Lawyer
After the activity lull last year, offshore firms have regrouped and come out fighting with state-of-the-art technology that takes client service to a new level
After a year of substantial change in the offshore legal market in 2012, last year proved to be a much quieter affair.
But while there were fewer management changes and global expansions, it was, according to firms, a much better year across the board. The little information provided by the offshore market on turnover indicates that revenues were generally up and headcount on the rise.
While new office openings were primarily restricted to a handful of firms launching in London – take a bow, and welcome to the City, Collas Crill and O’Neal Webster – that did not deter investment. Instead, offshore firms have been putting their money elsewhere.
For the first time, this year’s survey asks questions about offshore firms’ operational management. And the undeniable theme running through their answers is that technology is top of most agendas, with almost all saying they invested in one system or another last year.
Document management and knowledge management systems, cloud computing and new websites were popping up all over the offshore world from the Cayman Islands to Jersey, with firms also investing in people. Hires on the operational side of things included Appleby’s recruitment of Conyers Dill & Pearman knowledge management head Barbara Padega.
Count those qualified lawyers
First, to the rankings. After years of ranking firms by partner count, we have shifted the methodology and are now ranking by number of qualified lawyers instead. However,
Maples and Calder, which regained top spot by partner numbers last year over Appleby, is still the biggest firm by this metric, with 254 lawyers – almost 30 per cent more than its nearest rival.
Changing the metrics pushes Ogier, which has 172 qualified lawyers but only 42 partners, into fourth place, just behind Channel Islands rival Mourant Ozannes. Ogier has always had a higher partner-to-associate ratio than its rivals – indeed, one of the highest among all 30 offshore firms surveyed.
Another firm to benefit from the change is Carey Olsen, which leapfrogs Conyers Dill & Pearman to sit behind Walkers on lawyer numbers. Conyers’ lawyer headcount dropped by 10 between 2012 and 2013, with its partner numbers static at 49, while Carey Olsen added four lawyers and three partners in its continuing expansion in the Caribbean.
The remaining three firms in the top 10 – Harneys, Hassans and Bedell Cristin – also shift around the rankings due to the focus on lawyer numbers. However, Bedell Cristin has closed the gap somewhat between the other two on this metric compared with last year, and there is a 19-lawyer difference between it and 11th-placed Collas Crill.
The firm with the biggest drop down the rankings is Bermuda’s Marshall Diel & Myers. Of its 11 fee-earners 10 are lawyers and eight directors (the partner equivalent in Bermuda). This gives the firm by far the lowest partner-to-associate ratio of the offshore pack, but also moves it down from 18th place when ranked by partner numbers to 31st, just out of the rankings. Fellow Bermuda firm Trott & Duncan and Cayman outfit Stuarts Walker Hersant also just miss out thanks to the reshuffle, each with 10 lawyers.
Overall lawyer headcount growth among the 10 biggest firms stands at about 16 per cent between 2007 and 2013. Recruitment seems to have slowed between 2012 and 2013 for some firms, with a net loss of 11 lawyers among the top 10 last year.
Turnover-achievers
But when it comes to gauging the health of the offshore market, nothing does it better than the financials. Once again a number of firms provided an indication of their turnover change but no actual figures.
Jersey firm Hatstone Lawyers, making its Offshore Top 30 debut after a year of rapid expansion, reported the biggest turnover change – doubling it on last year. Once again Cayman boutique Travers Thorp Alberga (TTA) is among the big movers, saying its revenues rose by 25 per cent year-on-year.
Other firms reporting double-digit increases include Bermuda firm Cox Hallett Wilkinson – turning around a poor 2012 with a 15 per cent rise – Isle of Man firm Dougherty Quinn with a 13 per cent increase and, just outside the Top 30, Stuarts Walker Hersant with a 10 per cent revenue boost.
Channel Islands firm Collas Crill said it had seen double-digit growth, without specifying the figure. Also in the Channel Islands, Bedell Cristin, Carey Olsen and Mourant Ozannes gave turnover increases of 5 per cent, 5.5 per cent and 2 per cent respectively. For Gibraltar’s Hassans turnover rose by 6 per cent, and Manx firm Cains saw revenues rise by 3 per cent compared with the previous year.
What is noticeable, compared with 2012, is that the increases in turnover are across the full range of firm types, sizes and jurisdictions represented in the Offshore Top 30. Last year the Bermuda firms in particular struggled, while growth elsewhere in the world was not as strong as this year.
The uptick is reflected in anecdotal evidence that activity levels picked up in a pronounced way in the past six months of 2013. Ogier CEO Nick Kershaw says he feels these levels are now sustainable, in contrast to previous indications that the market was returning to health over the past few years.
Ed Strickland of Glass Consultancy says he has picked up the same impression from offshore firms around the world, and that the market is now confident that transactional work is on its way back.
Heads in the cloud
While firms have not been investing much in people over the past 12 months they have certainly been investing in other things. Technology is firmly top of the agenda across the legal market, onshore and offshore, and the majority of firms that answered the question on whether they had made investments in IT last year said a resounding ‘yes’.
The greatest area of investment seems to be in systems that give clients a single place to access and share documents relating to the work the firm is advising them on, whether that work is purely legal or legal and fiduciary. Many firms are also implementing similar tools for their fee-earners, such as Bedell Cristin, which has developed an in-house package that brings content from its various client management systems together in one place.
Offshore firms are finding cloud computing an advantage. TTA, which has the advantage of being newer than most, says it went for a wholly cloud-based approach from the start, while Walkers is introducing a cloud-based system that will enable lawyers to interact better with clients. Cains has gone for a “semi-cloud-based” approach for its new document management system.
New websites are also being developed by several firms, including Dougherty Quinn and Hatstone.
Investment in technology looks set to continue over the next 12 months. For example Ogier, off the back of the recent sale of its fiduciary business, is planning to “start from scratch” in building systems designed for its status as a law firm instead of a combined legal and fiduciary outfit.
The road to Indonesia
Other trends in the next year will, it seems, include the continuing geographical expansion of the offshore market. Asia remains a focus, but attention may well shift to less developed jurisdictions such as Indonesia, rather than more established centres.
There is also a decided emphasis on regulatory and compliance issues, with offshore firms realising they have a key part to play in the fight for acceptance of their jurisdictions. Establishing or expanding teams advising on regulatory issues to help steer clients through the increasingly complex environment of international finance centres is a good way of doing that.
A symptom of that trend is the number of firms that have set up litigation teams advising on British Virgin Islands (BVI) or Cayman law in Asia or London, recognising that clients want real-time advice on contentious issues.
The investments firms have made in their structure and operations in the past 12 months will also start to pay off in the next 12, especially if work is back to stay.
Glass’s Strickland says if work levels continue, the hiring may well begin again.
“There’s lots of jostling going on,” he notes. “Come the summer, we’ll see a big uptick in recruitment.”
Strickland adds that offshore firms are seeing a “second generation” of young partners coming through, keen to make their mark and prepared to do so at a new firm if necessary. There is also plenty of mobility still between onshore and offshore. Lawyers from jurisdictions such as Ireland, who may not previously have considered a move offshore, are now exploring their options.
The mood among the offshore firms, despite continued attacks from politicians and the media, is positive. This year’s survey shows that the offshore legal market is in robust health. It is continuing to develop and further consolidation is likely, but its survival does not seem to be under threat.
Onshore/offshore: a changing relationship
Onshore firms have always been the main providers of work for their offshore counterparts. This does not seem to be changing, but it is perhaps true that the relationship between the two types of firm is shifting.
Some firms think clients are becoming more used to instructing offshore firms directly, particularly from ‘non-traditional markets. Collas Crill managing partner Jason Romer comments that the firm is getting more enquiries these days from clients being referred onshore – for AIM listings, for example.
More work is coming in from markets such as the Middle East and Latin America, where the relationships with onshore firms are less well-established.
Methodology
This is the ninth edition of The Lawyer’s offshore survey, and the third to cover 30 firms rather than 20.
The jurisdictions covered this year are the same as for the past three – the major Caribbean jurisdictions of Bermuda, the British Virgin Islands and the Cayman Islands, Crown Dependencies Guernsey, Jersey and the Isle of Man, and Gibraltar.
In late 2013 firms were sent a questionnaire asking for information on headcount, revenue, key clients and strategic developments. Information that was not provided by a firm was sourced from its website.
Firms are ranked by number of qualified lawyers and, in the case of a tie, by number of partners.
Where in the world are all the lawyers?
This year firms were asked to provide a breakdown of their headcount by jurisdiction, to give an idea of where the greatest concentration of lawyers are.
The resulting data shows that Cayman and Jersey are, by some stretch, the biggest jurisdictions. The 12 firms in the Top 30 with offices in Cayman employ a total of 367 lawyers there, an average of 31 each. Maples and Calder, which has 110 lawyers and 48 partners in Cayman, is about twice the size of nearest rival Walkers.
In Jersey, there are 370 lawyers employed at nine firms, almost 20 per cent of the total lawyer count of the Top 30. The average number of lawyers at these firms is 41. Carey Olsen is the largest here by lawyer headcount, but Bedell Cristin has most partners, with 25.
Jersey’s neighbour Guernsey is the next-largest jurisdiction with 244 lawyers, making the Channel Islands a powerful offshore player – and explaining why four firms in the top 10 began life on either Guernsey or Jersey. Mourant Ozannes just edges out rival Carey Olsen to take bragging rights as the firm employing the most lawyers, although Carey Olsen and Collas Crill have more partners than Mourant Ozannes in Guernsey.
Bermuda, which remains the biggest office for both Appleby and Conyers Dill & Pearman, is the next-largest jurisdiction by lawyer headcount. With 53 lawyers, Conyers employs over a third of the 149 lawyers working at Top 30 firms in Bermuda.
The BVI, Gibraltar and Isle of Man between them employ about the same number of lawyers as Cayman. The legal market is perhaps most concentrated in Gibraltar, with four firms – Hassans, Isolas, Triay Stagnetto Neish and Triay & Triay – among the Offshore Top 30. With 80 lawyers, Hassans is four times the size of the other three firms, which in turn are around twice the size of the next-biggest Gibraltarian outfits.
In the Isle of Man, power is also concentrated in a handful of firms. Appleby, several years on from its merger with Dickinson Cruickshank, is comfortably the largest, with nine partners and another 25 lawyers.
The fact that 160 lawyers are working in the offshore world’s largest firms in Asia shows the focus put on the region in recent years. There are now 10 offshore firms with a presence in Asia, split across offices in China, Hong Kong and Singapore. Footprints range in size from Collas Crill’s two-lawyer operation in Singapore to Maples’ 35-strong team across Hong Kong and Singapore.
After Cayman, London now plays host to the greatest concentration of Top 30 firms. Even though Ogier pulled out of the City last year, the arrival of Forbes Hare and O’Neal Webster brings the number of firms with a representative presence in the UK to 12, and the number of lawyers to 74. BVI, Cayman, Guernsey and Jersey law expertise are all well-represented in London.
Towards flexibility
In the onshore world, creative pricing is now the norm. This year we asked offshore firms to tell us how common alternative fee arrangements are in their world.
Only Conyers Dill & Pearman said outright that it does not accept alternative fee arrangements. Most firms said they were happy to be flexible as and when clients asked for flexibility in pricing, and most had put some sort of flexible fees in place recently for some cases.
Bedell Cristin noted that while it does not have a formal policy on alternative fee arrangements, there was pressure to move away from hourly rates. This was backed up by Mourant Ozannes, which said it prices work in a variety of ways. However, Mourant Ozannes added that it is building a suite of alternative fee arrangements, offering clients choices such as fixed fees, performance billing and scaled recovery.
There is a wide range across the offshore world in terms of what is permitted in alternative fees in various jurisdictions. Bermuda, for example, does not allow conditional fee arrangements but the Bermuda bar is lobbying to get this changed.
Appleby noted that flexible fee arrangements are particularly common for financial institution clients where the firm sits on the client’s panel.
When offshore hit the headlines in 2013
January
• Appleby elects HK head Frances Woo first female chairman
• Carey Olsen enters association with BVI firm Hempel & Boyd, gaining a presence in South Africa
February
• Harneys seals an association with BLC Chambers to establish a footprint in Mauritius
• Appleby partner Matthew Feargrieve moves onshore to join Withers’ Zurich office
April
• Mourant Ozannes tempts back former partner Barney Lee from Appleby’s Guernsey office
• Forbes Hare hires Dentons’ Alistair Abbott to set up a BVI-focused contentious advisory practice in London
May
• Dougherty Quinn bolts on fellow Isle of Man firm Kerruish Law & Trust
• Harneys hires Ogier partner Andrew Morehouse and counsel Colin Berryman in Cayman boost
June
• Conyers Dill & Pearman closes Moscow office after five years, citing a drop-off in work from Cyprus
July
• Ogier relocates London head Simon Dinning and senior associate Wendy Walker to Jersey, leaving firm with no City lawyers
• BVI firm O’Neal Webster opens in London, headed by former Walkers partner Christopher McKenzie
August
• Walkers hires Maples and Calder funds partner Dawn Howe, boosting its Cayman funds practice
• Maples litigation partner Colin McKie is one of four Cayman lawyers to be appointed silk
September
• Jersey firm Verras Law agrees a merger with London asset management boutique MJ Hudson
November
• Collas Crill opens in London, relocating two lawyers to launch its second office outside the Channel Islands
December
• Travers Thorp Alberga merges with Cayman boutique Paget-Brown
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