English law remains one of the preferred choices for governing law and jurisdiction clauses in marine commercial and insurance contracts, providing a tested, robust framework for resolving disputes and maintaining high regulatory standards for its legal professionals. Many English law firms have flourished in establishing offices internationally; the demand is often driven by existing clients who require a local presence within the same time-zone for the provision of existing services and complementary local legal advice. We have seen this in our own firm, which has established marine-focused offices in London, Piraeus, Singapore, Hong Kong and most recently Monaco as a result of client demand.
The demand for legal services in southeast Asia, whether English law-based or otherwise, will inevitably increase if and when the much talked about ASEAN Economic Community (AEC) is launched at the end of this year. The aim of the AEC is to open up a single market, which will liberalise trade by removing barriers to the movement of goods, people and services among 10 of its member states (Indonesia, Thailand, Malaysia, Singapore, the Philippines, Brunei, Vietnam, Laos, Myanmar and Cambodia) in a similar vein to the European Economic Community. From a legal perspective the contrasting legal systems in these areas, such as common law, civil law, socialist law and sharia law, will dictate that international law firms will need to offer much more in the way of specific local advice to complement their wider offering. Channelling local knowledge and working together with local firms in these developing regions could open up new opportunities whilst using the international firms’ transnational legal skills that most ASEAN-based firms are lacking. This not only will create a better and more sophisticated legal market in the region, but with more trade and foreign investment-based legal deals, this will bolster demand for the infrastructure that accompanies a growing economy.
Out of the prospective AEC members Singapore has been the front runner in terms of financial growth and demand for legal services, recently catching up with Asia’s other historically dominant business hub of Hong Kong. Both Singapore and Hong Kong have lured foreign investors in due to their tax regimes, excellent infrastructure and ease of business incorporation, resulting in an increasing number of Eastern and Western UHNWIs being based in and managing their wealth out of the region. The demand for legal services with international expertise is very much on the up in Singapore and Hong Kong due to these advantageous conditions and central location, with more UK law firms choosing to set up in these areas to provide a satellite office which can offer services to the ASEAN region. Although some may feel that there is an oversaturation of law firms trying to cash in on the demand, there appears to remain high levels of investment in the region by western law firms.
How are they doing this? Principally through the acquisition of locally-based practices that are well-established with a dedicated following and requisite practicing licences in situ. In addition to complementing existing global offerings in the hubs, some of the bigger firms are setting up shop speculatively in countries such as Myanmar. As a case in point, after 50 years of military rule, there is potential for Myanmar to command the same level of legal demand as other more established economies, given time and investment into its infrastructure and better political stability. The country has been on the up since 2011 when President Thein Sein took power, helping the stability of the country to improve – the media censorship has eased as well as the release of political detainees and most importantly the suspension of many European and US sanctions which has helped to encourage foreign investment into the country. There is a long way to go and Myanmar still has a lot of political changes to be made, however the country is opening up to multinationals and foreign investment which in turn will see growth in the demand for legal services.
In comparison to Myanmar, Vietnam is an attraction to investors due to its political stability. In terms of its own economy it is currently second only to China in terms of inbound investment into southeast Asia and is an increasingly significant market for regional investors with Korean, Japanese and Singaporean companies contributing the bulk of the investment. However while some regions are embracing the level of investment, some countries have adopted a protectionist approach, such as Malaysia whose Government has taken favour with the locally-based law firms over international players by ensuring that the number of foreign entrants is tightly regulated. This does, arguably, compromise the growth of the legal market in Malaysia, however it remains to be seen whether the potential is enough for international firms to work with the Malaysian Government to find a compromise.
With all of the investment and buzz surrounding the ASEAN area and perhaps partly as a result of this, there has also been the healthy but steady development of the superyacht industry in Asia which has in turn seen a rise in the demand for yachting-related service industries, including legal. We have observed this growth amongst our own client base in recent years; the number of sale and purchase and construction contracts that we are seeing emanating from the region increases year in, year out. Alongside that comes a growing demand for local legal and fiscal knowledge in visited countries to advise on the likes of cruising permits, chartering and VAT.
On that note, the issue of VAT and its application to yachts is perhaps the most intriguing one in the AEC story. Much like the EEC, the very first point in the blueprint for the AEC relates to the ‘free flow of goods’ within the community which hints at, for example, the ability for a Singaporean flagged superyacht to cruise in Vietnam or Indonesia without incurring a tax or customs duties liability. Either way, the stated goals of ‘integrating customs procedures’ and ‘harmonising standards and conformance procedures’ sound promising, and it remains to be seen if and how a temporary admission mechanism may be applied to foreign flagged vessels as in Europe.
There are other signs that governments are opening up to the promotion of superyachting. The Thai Government has taken a tactical step by recently announcing the approval of a long-awaited special charter licence for superyachts chartering in Thailand’s waters. The plans are to allow for a year-long charter licence which will allow for yachts to leave and re-enter Thailand as many times within that year-long period as the owner or charterer wishes without incurring any further liabilities.
Overall, the demand for legal services within southeast Asia, whether English law-based or otherwise, is on the up; with further investment into the already established legal hubs and for international law firms looking to tap into a new market. With the buzz that is surrounding the establishment of the AEC at the end of this year, it is thought that the potential for foreign investment and the influx of cash into this region will further fuel the demand for legal services as deals get larger and on more of an international scale. The AEC will also mark an opportunity for the yachting community to develop more of an international presence, especially if the free flow of goods allows for easier chartering within the region. With that will come greater demand for other goods and services. Our view is that whilst the bulk of sale and construction contracts will continue to be subject to English law and jurisdiction, there will continue to be a greater demand for niche practices to establish in each country to cater to local issues, and that the establishment of such an infrastructure can only be a good thing.
This article was first published in the November issue of The Superyacht Report.