When a long-drawn war is over a certain battle stands out as being pivotal. Think how Gettysburg destroyed the Confederates, how Henry V was propelled forward by Agincourt and how Dunkirk fueled the mettle of the Brits in 1940.

In the history of law firm evolution, Hong Kong will be seen as that pivotal point; where foreign firms battled it out with tools and strategies of varying types.

In the ongoing war for supremacy between US and UK law firms, the battle lines between the two camps have become blurred.

While Europe was once the exclusive playground of the Magic Circle, in recent years US firms have arrived - even daring to breach the citadel of the City with million-dollar bonuses luring the most true-blue Brit from the confines of Clifford Chance, Freshfields, and even from Slaughter and May.

While aficionados of the legal world might know the difference between the two groups, for others, including some clients, the distinctions between the two are dissolving as both US and UK firms morph into international firms. They hire each others' assistants and partners, set up next door to each other - nay, even in the same building - and offer a similar service at a similar price.

But the one line of difference between the two camps lies between the elite of both groups. While Freshfields and those of its ilk have embraced a strategy of practising local law where they set up shop, Wall Street's finest - Cravath, Swaine & Moore, Davis Polk & Wardwell, Shearman & Sterling and Simpson Thacher & Bartlett - remain resolute about only practising US law in most of their foreign offices.

But lately that resolution has been tested. Firms such as Simpson Thacher and Shearman & Sterling have admitted that to breach the walls of the City you need to take on the City's ways - and that includes practising UK law.

Mid-last year the venerable Davis Polk started - of all things - practising French law. "We practise US law, except in France," says the firm's Hong Kong partner William Barron in his deep baritone. This does not, he says, signify a change of strategy. "We've only started practising French law recently - and that's because it's an unusual market." He defends the firm's stance by saying: "Most of the international firms that are active there practise French law - there are other firms that don't practise local law in other jurisdictions but they do in France."

And now last year, closer to home, Skadden broke ranks with the hire of Nick Norris from Simmons & Simmons to launch a local law practice.

Norris quickly rushed out to get the requisite number of Hong Kong lawyers a firm needs in order to have a licence, and now he's out in the market preaching the benefits of dual capability. "Part of my motivation for moving was that it was a very professional opportunity to build a local law practice that would complement Skadden's existing practice," he says. And Skadden's motivation? Was this an offensive or defensive manoeuvre? "I don't think that Skadden was missing out on deals. It was looking at it for the past four or five years but it was a case of getting the right people on board," he says. But he does admit later that: "The US firms as a whole have missed out on 144A work on deals that have listed in Hong Kong."

That's apparent if you look at the tables on the *next* page. When it comes to a global offering where US advice is required, investment banks are whole-heartedly plumping for the one-stop-shop solution. This means that if US firms want to protect their home ground of 144A and 10b5 opinions, they may have to start dirtying their hands with local law.

As Bonnie Chan, in-house counsel at Morgan Stanley, says: "I think that some US firms have been effected by not practising Hong Kong law. I like Davis Polk [the firm has a strong institutional relationship with Morgan Stanley on Wall Street] but when you're doing a US$100m-200m deal and the choice is that Freshfields can do it as a one stop shop or you can bring in Davis Polk and they have to partner with Slaughter and May - then it's more expensive. Firms have to be able to do the job on a competitive basis."

Freshfields and Linklaters have both been winning instructions from the Morgan Stanley team on this basis. And it certainly showed for Freshfields last year as the firm topped the table for advising sponsors to Mainboard IPOs and in four of those deals it also advised on the US law aspect.

Three of those four deals were underwritten by Morgan Stanley and Chan says that the UK firm has put in a lot of shoe leather in Wall Street to get the US side of these transactions. "The relationship with Linklaters and Freshfields preceded my arrival, but I do know that they had visited our US offices and convinced them that they could do the US side."

US firms on the ground
Of course, US firms do practise local law - just not the elite group of Cravath, David Polk et. al.

Below that premier Wall Street tier, many US firms have been practising Hong Kong law for years. Take Sidley Austin Brown & Wood, for example, where the capital markets team had a stellar year. "We've been practicing Hong Kong law for at least five years," says partner Tim Li. "In fact, prior to the merger in 2000 [between Sidley & Austin and Brown & Wood] both legacy firms had a Hong Kong and a US team."

He says it's a matter of strategy for different firms, but that: "If you talk about managing different teams and cultures and take on the complexity of a dual listing, then it's easier to manage that in one firm than to have separate teams in different firms. And on the cost side we can do it much better."

He speaks the truth when he says that some companies make dual capability a condition of using a particular firm for a listing.

Herbert Smith has witnessed the same phenomenon. "I think that you will see more US firms developing Hong Kong law because of the decrease in US listings outside of the technology arena," says John Moore, the capital markets lawyer who arrived from Goldman Sachs to the UK firm last year. "And you need dual capacity. We were on a deal where the issuer was looking at three firms - Paul Hastings, Herbert Smith and Skadden - and the issuer was focused on dual capability."

The change in the market, the emphasis on dual capability, has undoubtedly put some pressure on the Wall Street elite. "The Hong Kong market has changed," says Skadden's Norris. "It used to be that on reasonably-sized deals you had dual counsel - Hong Kong and US. But then the City firms started being able to act as whole counsel for some significant deals and now it's just the jumbo deals that require separate US counsel."

At Morrison & Foerster, which has had a dual capability for some time in Hong Kong, managing partner Venantius Tan says: "I think that it depends on the firm - some firms have made a concerted effort not to develop HK law, but for a firm like ourselves we see the need to offer HK law - it's easier to pitch when you have an integrated platform."

That may be but the bigger US firms always come back with the same salvo: While the dual capability firms have been making inroads into the IPO market, it's still at the smaller end.

Case in point: Morgan Stanley may have trusted Freshfields with the HK and US sides of the US$579m Guangzhou R&F Properties, but when it came to the mega US$9bn China Construction Bank listing there was only ever one firm that was going to manage the US side - the old favourite, Davis Polk.

That's why William Barron can afford to remain relaxed when he's asked if he thinks the firm is losing out to dual capability firms. "It doesn't concern us," he says. "You can see that firms like ours and Sullivan & Cromwell that don't practise Hong Kong law still get hired for the biggest deals and that's been the case for some time." He's certainly not losing any sleep over upstarts. "Freshfields is a fine firm and has been practising NY law for quite some time, and we still get hired for the big deals."

The truth is, as Chan points out, while Hong Kong's a big battleground, some of its most influential generals live and breath on Wall Street. "Davis Polk & Wardwell is our regular US counsel - every time there's a big deal I push for them because the institutional relationship is so strong," she says. "They're like a seal of approval. If I have a problem and I ask my US colleagues they will ask me, 'have you checked with Davis Polk?'."

It will take a long time for the UK firms to breach these long-time US-based relationships in order to give in-house counsel the confidence that someone other than a US firm can deal with complex SEC-registered transactions. "On those transactions I would use a combination of a US firm and a Magic Circle firm with Hong Kong expertise," says David Graham, Asia-Pacific general counsel at UBS. "Where it's a SEC-registered deal then you would still go for a best-of-class US firm, but where it's a 144A deal then the one stop shop is more attractive."

Naturally UK firms aren't taking this lying down. Herbert Smith has been smoothly moving up the corporate charts both here and in Europe. Its latest steps on Asian ground have been to start a Hong Kong US capability with the arrival of Kevin Roy in 2004 and then boost its capability with John Moore from Goldman Sachs. For this confident team, even the mega-IPOs aren't out of reach. "We think that it will happen in the short to medium term. Some of those big deals have been going on for a long time - before we had US advice here or at least when our US practice didn't have much momentum," says Roy. "We'll get the US law piece of big deals." He cites the firm's London experience where it has done three US$1bn+ IPOs where the firm gave US advice as well.

Norton Rose is another firm with a resurgent dual capability practice since it re-opened in Hong Kong in 2002. "It's pretty normal for us to give a 10b5 opinion as we're focused on the upper end of the market," says managing partner David Stannard. The firm is currently recruiting to strengthen its US capability.

Of course, the battle is not just about capital markets work. Asia has become a more attractive market for US firms like Skadden per se. "Asia is seen as a very attractive growth opportunity," says UBS' Graham. "Some of the US firms could feel that they are missing out as the market grows but they don't have the local capability."

Unfortunately it's not as easy as deciding to practise Hong Kong law as it is to actually do it. Skadden considered the opportunity for years and it is rumoured that Shearman has had it under consideration for some time. However, partner Matthew Bersani puts that rumour to rest when he says: "We have no intention of obtaining HK law capability. We'll continue to provide high-end UK and US legal advice in Asia and will not go 'local'. We do provide local advice in many European countries, but believe the economics in Asia do not justify this."

The problem, in any case, is that the market is a closed one. In Hong Kong it's not just a case of hiring one top-flight Hong Kong capital markets lawyer to begin a local practice, it's about hiring a whole raft of them to comply with local bar rules that more than half of any practice that wants to give HK advice must be staffed with locally-qualified lawyers. "Given the experience that I have had it's not easy to enter the market because it's difficult to attract people of the right calibre," warns Norris. "The market is fairly thin."