Mayer Brown Splits From Hong Kong Unit Amid US-China Tension (2)

Mayer Brown is breaking away from its offices in Hong Kong, the latest international law firm to reduce its presence in the region amid escalating tensions between the US and China.

Mayer Brown’s Hong Kong partnership has agreed in principle to separate from the firm, Mayer Brown said in a Thursday statement. The firm, which has hundreds of lawyers throughout Asia, will continue to operate in Hong Kong through a new partnership, however it was unclear how large that practice would be and if it would retain any of its regionally-based lawyers.

“This arrangement allows Mayer Brown to continue its presence in Hong Kong with a practice that aligns with our strategic priorities,” firm chair Jon Van Gorp said in a statement.

Mayer Brown’s move comes as deteriorating US-China relations, combined with an economic downturn in greater China, make operations more tenuous for US businesses. Hong Kong’s Hang Seng Index of equities fell 14% last year, among the world’s biggest declines and an indicator of the slowing deals market there.

Winston & Strawn in December announced it was shuttering its office in Hong Kong, which has come under increasing control by China in recent years. Large international law firms Deacons and DLA Piper have trimmed their footprints in the city. Big Four accountancy KPMG is also closing its Hong Kong law firm.

In mainland China, Dentons said last August that it was separating from its operation there because of government mandates around data that give President Xi Jinping’s administration the authority to shut down or fine companies that mishandle sensitive information.

“The Chinese economy has been in the doldrums and the national security issues have resulted in a dramatic downturn in foreign direct investment in China,” said Peter Zeughauser, a management consultant who advises law firms in China. “If you look at the other side, you’ve got tremendous pressure on firms to grow their presence in the US and a need to focus resources here.”

Deals Market Slows

Mayer Brown, which combined with the Hong Kong firm Johnson Stokes & Master in 2008, has 160 attorneys who work in Hong Kong, according to its website. Under the agreement, subject to approval of The Law Society of Hong Kong, the partnership will continue operating under its former name.

Offices in Beijing and Shanghai will also come under the Johnson Stokes & Master banner. Mayer Brown currently employs 10 lawyers in the Chinese cities, according to its website.

Mayer Brown said a new Hong Kong partnership will focus on corporate and finance work, including capital markets and mergers and acquisitions.

Mayer Brown has nearly 2,000 lawyers around the world and major clients that include JPMorgan Chase & Co. and Wells Fargo. It has had one of the largest presences in Asia among US law firms, partly due to its 2008 merger with Johnson Stokes & Master.

But the firm has recently faced some struggles in the Asia market. Prior to Thursday’s announcement, it reportedly laid off some attorneys in its corporate, funds, and capital markets practices in Hong Kong amid a slowdown in the deals market.

“If you talk to the leading Chinese law firms, they’ll tell you foreign direct investment is down 90%,” Zeughauser said. Foreign law firms with China offices fell to 205 in 2022 from 244 in 2017, according to an annual report of the Chinese Ministry of Justice.

Hogan Lovells, Baker McKenzie and Davis Polk & Wardwell are among the large law firms that still have offices in Hong Kong and China. Quinn Emanuel Urquhart & Sullivan last year launched a new Beijing office, its second in mainland China, citing “phenomenal growth” since the firm started a China practice in 2016.