Created Date:
09 December 2022

The view from offshore

Here, Carey Olsen managing partners Anthony McKenzie (Singapore) and Michael Padarin (Hong Kong) reflect on significant events and trends of 2022, how they have impacted the offshore legal market in Asia and how they will continue to shape the year ahead.

Looking back on 2022, what were some of the major events/trends that impacted the work you did as an offshore law firm? Do you see these impacts being felt going into 2023?

Anthony McKenzie (AM): 2021 was a blockbuster year for many offshore law firms in Asia. Booming deal flow saw revenues and profits surge. In order to service their clients, law firms increased their headcount. Fast forward to 2022 and beyond and the economic outlook is very different. Asia deals are being threatened by geopolitics, interest rate hikes, spiralling inflation, supply chain disruption, and slowing growth, especially in China which is Asia’s largest offshore legal market.

Michael Padarin (MP) : The growing acceptance of digital assets as a 'mainstream' asset class had a material impact on the corporate work we did during the early part of 2022, where we were involved in assisting with the launch of multiple Cayman Islands domiciled investment funds which focus on digital assets, Web 3 and blockchain related projects.  We were also involved in a good deal of regulatory advice for virtual asset service providers looking to commence business in the jurisdictions in which we operate.  The 'crypto winter' that blew in from around mid 2022 slowed activity on a number of digital asset related projects and looks to continue into 2023, or until there is a strengthening in sentiment and pricing of digital assets.

Are there any other macroeconomic changes such as rising inflation and a worry of the global economy slipping into a recession impacting the growth for offshore firms in 2023? How do you think the US-China standoff along with the Russia-Ukraine war impact growth in 2023?

MP: These macroeconomic factors are having a huge impact on deal certainty in markets across the world and are being felt acutely across Asia.  There are a number of factors at play here, including depressed company valuations; inflation, which amongst other things, is depressing certain key global currencies; and lingering restrictions on global travel, which is making it very difficult for dealmakers to meet, conduct diligence on assets and get deals done.  Each of these factors is impacting deal flow and we have seen a real slow down in M&A activity which is not forecast to rebound significantly in 2023.

What are some of your predictions for trends and developments you expect to see in major Asian markets in 2023, such as Singapore, Hong Kong, mainland China and others?

AM: For clients and law firms alike, the decision to base operations in markets such Hong Kong, Mainland China, Singapore or elsewhere must be considered not only by looking at each region’s strengths and weaknesses, but also how they fit into a broader strategy for Asia. Shenzhen continues to grow and is becoming more open to international business, while Shanghai remains China’s commercial and financial capital. Despite recent geopolitical developments, Hong Kong will likely continue to be an essential contributor to any successful China strategy.

With China’s economy slowing, Singapore is closer to the next wave of fast-growing economies in Southeast Asia and is ideally situated as a regional hub for international businesses. It has also become Asia’s leading tech, private client and asset management hub. As a result, we are seeing regional, international and offshore law firms fast expanding their footprint in Singapore or opening new offices there.

MP: The ripple effect of distress in the Chinese real estate market is being felt across Asia.  Particularly in our contentious practice, we are seeing an increase in shareholder disputes, insolvencies and restructuring transactions, and expect these types of work will continue strongly in 2023.

What are some of the jurisdictions and industry sectors where you expect to see strong demand for your services in the next year? What will be driving this demand?

AM: The next 12 months will likely be characterised by continued caution in terms of deployment of capital and opportunistic investment. However we expect that investors in the region will continue to allocate capital to alternatives. There’s still so much dry powder sitting on the sidelines and Asian private equity funds have continued to increase in size, despite global economic uncertainty. We are seeing such PE funds shift their focus away from China towards Southeast Asia because of China’s slowing growth, continued Covid-zero policies and geopolitical tensions. India, another Asian giant, will also benefit from such a shift.

Asia now accounts for the highest number of UHNWIs in the world. Many UHNWIs and affluent families have flocked to Singapore in recent years as a base to park their wealth. Singapore’s draw is a confluence of a number of factors, including its stability, rule of law, favourable tax rates and ease of doing business. Family offices in Singapore are gaining traction mostly due to the desire of wealthy families to institutionalise and diversify their family programmes. We continue to see tailored trust and family office structures being set up in Cayman, Jersey and BVI for HNW Asian families.

We have also seen an increase in instructions related to distressed structures, businesses and assets in Asia. As a result we continue to invest in our Asian litigation, restructuring and insolvency practice as US-China tensions continue to mount and Asian businesses deal with global uncertainty and the aftermath of the pandemic.

MP: In the investment fund space, we continue to see the Cayman Islands as the dominate jurisdiction of choice. It has a long established reputation for quality and is well recognised globally.  Attempts by Hong Kong and Singapore in recent years to introduce competing funds regimes have not had a material impact on the continuing strength of the Cayman Islands offering.

What are some of the major laws and regulations you are looking ahead to in 2023 in onshore Asian markets that will impact your clients and their business? Likewise, what about major offshore jurisdictions such as BVI and Caymans

AM: Cayman and BVI continue to be the preferred offshore choices in the Asian market. Bermuda is also an established offshore jurisdiction with a number of Hong Kong and Singapore listed companies incorporated there.

However recently we have seen Asian clients becoming increasingly interested in tapping into UK and European markets via other offshore jurisdictions such as Jersey and Guernsey. In addition, a number of Singapore-based managers are now using Jersey as the jurisdiction in which to domicile their crypto funds because of Singapore and Jersey tax considerations, including potential relief available under the Singapore-Jersey Double Tax Agreement.

Carey Olsen is the only offshore firm with a dedicated ‘Channel Islands desk' which is based in our Singapore office.

MP: In the BVI, a virtual asset service providers regime is to be introduced next year which we expect will generate significant interest from Asia based crypto service providers and will drive business to our regulatory practice which has been very active advising in the virtual asset space.

In the Cayman Islands, new transparency legislation is being discussed which (if fully implemented) will mean additional disclosures on ownership and control of Cayman Islands entities. This is likely to impact on both our clients and also the operation of our business in the Cayman Islands.

In addition, we expect that the new restructuring regime in the Cayman Islands (being a Restructuring Officer sitting outside of the liquidation wrapper) is likely to be a focus in 2023.

How are you planning to grow/adapt your presence in Asia/Asia-related work as a result? What is your strategy for your Asian services offering going forward?

AM: This is a time of unique opportunity to reshape the way lawyers work with their clients and rethink the structure and scale of our practice areas, sectors and geographic locations. Our Singapore and Hong Kong offices have continued to grow and evolve and are among the fastest growing in our global network. We have launched a trust and private client practice in Asia, welcomed several senior lateral hires, made a number of new promotions and we expect this to carry on into 2023 and beyond as we continue our growth trajectory in Asia.

In an increasingly complex and fluid geopolitical environment, clients require multidisciplinary, real-time solutions to business challenges. Our top priorities now (and going forward) are to continue to invest in our people and to be innovative in how we connect and engage with those clients, meet their commercial needs and address the challenges they are facing.

MP: The growth in insolvency and restructuring work has also meant we're looking to significantly add to the head count in this area.  One of our Hong Kong office USPs is on the ground Bermuda advice on contentious and non-contentious restructuring matters, which is particularly relevant given the number of legacy Bermuda companies listed on the Hong Kong Stock Exchange.  We'll look to continue to strengthen our expertise in this area as it is a key differentiator in this market.


This is our full response to the Q&A from Asian Legal Business (ALB) for the article Offshore View 2023 in the November 2022 issue of the ALB magazine.