When Katie Lam was deciding what to study back in 2018, she thought that a law degree would open the most doors in a future career. She was overjoyed to be accepted into her chosen subject at the Chinese University of Hong Kong (CUHK).
Almost six years on, the outlook in the city has soured with top tier firms closing, foreign lawyers leaving and, according to recruiters, fewer trainees being retained. While Lam, 23, managed to secure work as a paralegal, an increasing number of graduates appear to be dropping out of the profession altogether.
Some industry leaders say the downturn is part of a normal economic cycle and the fundamentals remain strong. However, there are also concerns that US-China tensions and national security legislation have undermined faith in the rule of law and are further clouding the future.
The legal industry in Hong Kong is growing at the slowest pace in a decade. At the Law Society, which solicitors are required to join, membership grew by only 90 last year, down 83 percent from an increase of 532 members in 2020.
At least 16 law firms have left or shut down since 2020 after steady growth in the previous few years, including Philadelphia-founded Dechert LLP and Chicago-based Winston & Strawn LLP. DLA Piper LLP, one of the largest law firms in the world, has cut its office space, while Mayer Brown LLP was preparing to split off its Hong Kong operation, people familiar with the matter said earlier this year.
“Hong Kong’s status as a legal hub has changed significantly,” University of Hong Kong Faculty of Law adjunct professor Richard Cullen said. “It is caught in the crosshairs of an aggressive campaign by the US and other Western powers trying to contain China, with the National Security Law becoming a focus.”
There is no truth that the city’s courts are under any political pressure from Chinese central authorities or the hub’s government in the adjudication of national security cases, the Hong Kong government said in June.
“Hong Kong’s ability to remain as an international financial center is largely attributed to its stable environment with strong rule of law consisting of a robust legal system and a pool of diversified legal talents,” the Hong Kong Department of Justice said in an e-mailed response to questions on Thursday. The national security laws “will not affect normal business operations and worldwide exchanges of local institutions, organizations and individuals,” it said.
That said, foreign lawyers have left the city, Law Society data showed. Only 1,476 were registered last year, down 13 percent from a peak of 1,688 in 2019.
Meanwhile, the number of junior lawyers who are being taken on as associates after their two-year training period is declining.
“At the junior level, there has been roughly a 25 to 30 percent contraction in retention rates,” said Johnny Hui, a Hong Kong-based legal and compliance manager at recruitment company Robert Walters.
“To bump up these rates, some firms retain their trainees on six-month or rolling contracts, defer their commencement dates, or continue paying associates at far lower trainee rates,” he said.
In-house roles have also been falling since 2021, partly due to some companies moving their Asian hubs from Hong Kong to Singapore, according to a report by Lewis Sanders, a specialist legal and compliance recruitment consultancy.
Part of the reason some firms have withdrawn is due to concern they would be forced to divulge client information to the Hong Kong government after implementation of the National Security Law, a partner at a UK-based law firm said, who asked not to be named due to the sensitive subject matter.
The Financial Times reported in February that US firm Latham & Watkins LLP was cutting off default access to its international databases for its Hong Kong-based lawyers amid growing concern of China’s closer control of the territory.
Moreover, the decision by several overseas judges to step down from the former British colony’s top court has added to worries over the future of the rule of law.
“The decision by overseas judges to step down has an impact on Hong Kong’s rule of law, in particular when being perceived by the outsiders,” University of Hong Kong law professor Zhao Yun (趙雲) said.
Hong Kong needs to “consider possible ways to dissipate possible concerns from the public,” he said.
Nevertheless, industry associations say the recent decline is due to poor economic conditions rather than political fears.
“You can’t have nonstop expansion,” Hong Kong Bar Association chairman Victor Dawes said, adding that the local decline in deal volume was part of a worldwide trend.
“Dispute resolution in Hong Kong, including liquidation, restructuring and insolvency, has actually increased over the last few years,” he said.
Dawes said he is confident that Hong Kong would retain its legal hub status given it is a common law jurisdiction.
Arbitration and mediation in Hong Kong continue to grow, Hong Kong International Arbitration Centre Secretary-General Joanne Lau said.
“If you look at our fundamentals — we continue to have sophisticated laws, a strong judiciary, experienced arbitral institutions and a community of vibrant talent,” she said.
However, the career setbacks that Lam and her cohort face are symptomatic of the industry’s challenges. Even with academic scores that placed her well into the top half of her class and five law-related internships, she did not secure a full-time offer.
Fellow CUHK graduate Nicholas Chu, 22, said his year group had found it far harder to land jobs than previous cohorts. Out of 70 classmates, only a handful had received full-time offers from international firms, he said.
Chu, who has to wait a year before he can start a training contract, estimates that about 20 percent of his class would not take the Postgraduate Certificate in Laws — a one-year qualification that is a prerequisite for practicing as a lawyer in Hong Kong. These students might instead defer their graduation, seek opportunities overseas, or opt for careers in the civil service or in-house compliance.
The number of applications for the certificate has dropped from about 1,600 10 years ago to about 1,300 in cycle for last year to this year, while the number of undergraduate law students in Hong Kong has increased slightly over the same period, data compiled by Bloomberg showed. This indicates that an increasing proportion of students are choosing to leave the legal profession or to qualify elsewhere.
“It is not surprising that, with the increasing number of law students, some are not seeking professional qualification,” Cullen said. “They are looking at the difficult job prospects and the cost of the degree, and looking around for other employment opportunities.”
Lam, at least, is not ready to drop out. She hopes to be recruited as a trainee in a few years’ time and would work as a paralegal in the meantime.
“I did consider other options such as working at regulatory bodies, but I didn’t want to give up on working as a lawyer after five years of study,” she said.
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