Simon Brookes general counsel, Telstra Bigpond Media Services and Sensis

Simon Brookes has recently returned to Australia from Hong Kong, where he was Telstra's international general counsel. He has also worked in Jakarta and Hanoi.

In acknowledging the stiff competition Australian firms are up against in Asia - particularly in Hong Kong, where UK and US firms have been long established - Brookes puts it simply: "In Australia, the leading firms have a brand name. Offshore, they haven't."

But it is not an impossible proposition. And Australian firms have an edge, claims Brookes, whether or not they have identified it. With clients becoming increasingly cost conscious, the ability of firms to handle "back office work in Australia at Australian rates while still maintaining a presence in the region is, Brookes says, a "significant competitive advantage".

"Why don't Australian firms play to their strengths?" he asks. "To open a local office is a very expensive proposition. Australian charge-out rates are very competitive on an international scale. You can take advantage of the Australian infrastructure and yet have the expertise off shore. From a customer perspective, I find it an attractive proposition, because then you have a firm that is knowledgeable on the ground, yet is able to compete on the basis of service and price."

While having a presence on the ground can be an advantage, this is only the case where there is a "genuine" commitment to the region, reflected in a sound local knowledge. "It's got to be a real office in the sense that good people are put on the ground there, and not people who've failed in Australia and are being given a second chance," he says. "The people who are there it's got to be the 'A' team, not the 'B' team." Understanding the local business environment and culture is also critical. "You really need someone who's prepared to make a long-term commitment to building a practice there not someone who's practised in Collins Street and thinks they can hang out a shingle in Beijing."

Brookes would not be drawn on the merits of one firm's Asia strategy over another. But he says any strategy should be driven from a client and not a firm perspective. "No one model's got all the answers," he says. "But it's important to keep sight of all the principles. We're moving into a different environment. The economy's tight people are looking to cut costs... I think it's going to be difficult for firms to justify doing work in Hong Kong or a very high cost centre if it can be moved to a lower cost centre."

He says it will be some time before Australian firms establish brand recognition in the region. "It's a long, hard process. Word of mouth is probably, at the end of the day, the best form of advertising."

Choosing a firm
Brookes says a number of factors come into play when deciding on external legal advisers. "To us, the most important thing is quality and we can't compromise quality, particularly when you're doing deals off shore. They [deals] attract a disproportionate amount of interest in the market that's the reality. Secondly, you're operating out of your home market, so the risks are higher. It's more important than normal to make sure you're managing that risk. The deals being done and the investments being made are very significant."

He says SARS has noticeably impacted the volume of business being done in the region. "The whole atmosphere and ability to do business in  Asia was dramatically affected. It really pushed out timelines and flexibility. What's not clear is whether it's [SARS] a temporal thing or whether it's going to be a long-term effect."

David Graham - general counsel, Morgan Stanley Asia-Pacific

Q: Australian firms are being encouraged to sell' their services into Asia, but some have suggested they will struggle. What is your view of where Australian firms stand in the 'food chain' in Hong Kong? How can they expect to compete with a Freshfields or an Allen & Overy or a Clifford Chance?
A: There are a considerable number of challenges facing them, looking at it from the perspective of a major international investment bank and the sort of services we require from our outside counsel. I think that there remains a natural tendency for the major investment banks to go to their traditional UK or US law firms who provide services to them on a worldwide basis, and to perceive (wrongly in my view) the Australian law firms as providing only local Australian advice on Australian issues, rather than providing international advice on non-Australian issues.
However, in my view, they can compete in this part of the world on the basis that first, they have very good lawyers; secondly, many of their lawyers have international skill sets and experience; and thirdly, their cost base is lower than the equivalent UK and US firms and therefore they can afford to undertake matters at a lower cost without undermining their profitability.

Q: How much is price a factor?
A: It is an issue on some projects, but not all. As you would expect, we have demands for different types of legal services. In relation to transactional legal services, where firms are working with us or with a client on a specific transaction, cost is not so much an issue as experience and track record.
However, we do have a lot of internal projects which are not necessarily time critical but which require assistance on a regular basis not particularly high powered, but a consistent requirement for help on, say, customer documentation reviews. If the cost per document from a UK firm is, say, HK$2,000 and the cost from an Australian firm is HK $1500 then, over the course of that project, that is a significant cost saving and would influence our choice of counsel.

Q: Do you instruct Australian law firms?
A: We do and would be prepared to use them more. On a number of ongoing projects, we already have law firms in situ, and the Australian law firms have come forward to us with proposals which would undercut the prices currently offered by our other law firms. We haven't actually moved any of these over yet, because to move them over would itself be quite costly and disruptive. If, however, we found a situation where the quality of service we were getting from one of those law firms did not meet our requirements then, certainly, going forward, we would consider moving those projects over to an Australian law firm.

Q: Is that likely to occur?
A: It could do, because this is work that is not necessarily very attractive or remunerative work for the US and UK firms to do. They are doing it more for relationship reasons.

Q: Australian firms have different Asia' strategies ... What would you say in terms of the merits of [different] approaches?
A: You have to play to your strengths. There are clearly some areas where it is very difficult, in my view, for the Australian law firms to compete on the international stage [for example] capital markets, because they don't typically have a US capability; and public M&A insofar as it's not Australia-related. Where I think the Australian law firms do have some opportunities are in the Funds and the REITs area, because that area is very big in Australia. Securitisation is another area where I know some firms have been successful.  And the whole structured products/derivatives area has also been one where they have made inroads. I can also see opportunities in employment law and IP/IT.

Q: How necessary is it to have people on the ground with the relevant expertise?
A: My view is that it is very important. You need a critical mass and you need good people. It should not just be a post box, and I am not a fan of the fly in, fly out' strategy. I would much rather be able to go around to an office two buildings away from me and talk to a lawyer who I think is very good and can deal with my issue, rather than speak to somebody who will then pass me through to the Sydney office.

David Pestridge group commercial manager, Leighton Asia

Leighton Asia is part of Australia's largest project development and contracting group. It has diversified geographically and into new industry sectors in the face of reduced construction spending in Australia.

According to Leighton Asia's group commercial manager (corporate), David Pestridge, the company uses a number of law firms across the region. But in Hong Kong, Minter Ellison and Mallesons Stephen Jaques are lead advisors for corporate and construction matters respectively. "The continued use of these particular companies has arisen because of, in our opinion, their prompt and accurate responses to our needs, although the services are always under review, says Pestridge.

In respect of each country operation within the region, the choice of legal advisor is generally a matter for the country manager or director in charge "to locate and work with the practice best suited to his operation and needs. Nevertheless, because a number of contracts entered into across the region and within each country are sometimes based on International Forms of Contract, the company prefers to use Mallesons Stephen Jaques for both pre- and post-contract issues "in order to obtain some consistency in approach.

Leighton Asia is currently undertaking four major rail projects in Hong Kong, and has also been active in rail projects in Taiwan, Indonesia and Thailand, with other projects in the Philippines, Malaysia, Vietnam and Sri Lanka. Its largest project to date is the HK$3.8bn Central reclamation project, involving the reclamation of over 18 hectares of land from Hong Kong harbour. Other major projects include the US$140m North Luzon Expressway in the Philippines, the HK$806m Eastern Harbour Crossing housing development in Hong Kong and the RM120m Duta Plaza commercial development in Kuala Lumpur.