Bernard Tézé and Reiga Shimizu (DS Avocats): "The profession of lawyer represents the elite of Japan
Posté le 12 mai 2015
"Establishing oneself in the market also involves developing new job functions which were not traditionally very widespread, such as the in-house counsel"
Bernard Tézé. The opening up of the market since 1986 has been very gradual. When I was seconded to a Japanese law firm from 1991 to 1994, foreign firms were still not allowed to employ Japanese lawyers or to enter into joint ventures with them.
It was not until 2005 that foreign law firms were finally able to recruit Japanese lawyers and develop locally, but they were restricted to certain niche markets, mainly financial law.
Reiga Shimizu. The profession of lawyer represents the elite of Japanese society. Before the law schools reform in 2004, the pass rate in entrance examinations was less than 3%. Paradoxically, the role of the lawyer in Japan is fairly limited and has for a long time been confined to judicial matters. Moreover, the culture in Japan tends to be to avoid litigation, so recourse to legal proceedings is very limited, hence the low demand for lawyers. There are far fewer than in Europe or the United States, but since the law schools reform, the pass rate has risen to around 30%, and we have seen the number of lawyers increase. The market is in the process of establishing its structure and the size of the law firms is gradually increasing, albeit less quickly than in other countries.
Leaders League. The number of in-house counsels has increased considerably in recent years. How do you explain this development?
R. S. The very fact that the number of lawyers has increased owing to the improved pass rate in the examination has made the employment market more competitive. Establishing oneself in the market also involves developing new job functions which were not traditionally very widespread, such as the in-house counsel. This does not only apply to Japanese lawyers. Many Japanese in-house counsels have an American legal qualification, and there are also foreign counsels, particularly Australians, in Japanese companies.
Leaders League. Which has the upper hand in the Japanese market – inbound or outbound investment?
B. T. Investment flows in Japan are clearly more outbound than inbound, and we mostly work alongside Japanese companies on legal services provided in France. Japanese groups have shown a marked upsurge in interest in Europe since 2008, particularly those from Japan’s “new economy”, over and above the traditional sectors of the electronics and automotive industries. This is the case notably for Uniqlo, for example, which now employs 5000 people in France. This group has bought the brands and shops of Princesse TamTam and Comptoir des Cotonniers, among others. Its founder and president, Mr. Yanai, is now the richest man in Japan. Similarly, the e-commerce giant Rakuten, founded in 1997, bought PriceMinister in 2010. Its young president, Mr. Mikitani, is the seventh richest internet entrepreneur in the world. This new Japanese economy is investing in Europe, where consumption is strong and “sophisticated”. In this regard, Japanese investors differ from the Chinese, who are more likely to buy in know-how in order to beat the competition in the Chinese market, which is more important to them than the European market. There are currently six hundred Japanese companies with offices in France, employing around sixty thousand people. Japan was the sixth-highest foreign investor in France in 2013, and the second-highest if European countries are excluded.
Leaders League. Have you identified other trends involving Japanese investments?
R. S. We have seen a trend for the large Japanese groups to show an interest in government contracts in France. We have thus worked alongside a major electrical equipment manufacturer on a high-tech government contract worth several tens of millions of euros as a joint venture with two French manufacturers. The multi-expertise of DS Avocats across multiple disciplines is an asset in these projects, particularly with its outstanding specialized public law team.
B. T. Another trend that has been identified is that of Japanese companies buying from investment funds, as the Suntory group did when purchasing Orangina Schweppes from Blackstone and Lion Capital. One final trend is the interest of Japanese investors in Africa, as demonstrated by Toyota Tsusho buying CFAO, a specialist in automobile and pharmaceutical distribution in Africa and the overseas territories.
Leaders League. Who works on your Japan Desk and what are the prospects for development?
B. T. Reiga Shimizu, whose legal training was in Japan and France, is in charge of the desk, and I am the partner in charge of France/Japan investments. The Japan Desk also comprises two other partners: Olivier Monange, who is in charge of Asia, based in Singapore, and Jean-Marie Salva, responsible for international trade issues and European law, who spends half his time in Brussels. Finally, we recruited a colleague last June, Henrick Emeriau, who has worked in law firms in Japan and speaks the language.
R. S. The Japanese are the leading investors in many countries in South-East Asia, particularly Vietnam, where DS Avocats has had offices since 1993, in Hanoi and Ho Chi Minh City. Last May, DS Avocats merged with the law firm Guiborat & Partners, in order to strengthen its teams on the ground, under the name DS Asean. We are developing the Japan-Vietnam-ASEAN axis, as well as the Japan-Canada axis, following the creation of a Canadian desk last year.
Leaders League. How is your activity in Japan organized?
R. S. We work with a number of selected Japanese law firms, in line with the specific needs of our clients (increasingly sophisticated expertise required, with reasonable, well-managed budgets), and are developing trusting relationships with them.
B. T. Our clientele is increasingly composed of medium-sized businesses which we advise on setting up in Asia, particularly in China, Vietnam and India. These are dynamic companies with a turnover of between three hundred million and three billion euros. We are also looking to work alongside these companies in Japan.
Leaders League. DS Avocats is already well established in Asia, but does not yet have a presence in Japan. Does the firm plan to open a local office?
B. T. The question of opening a DS Avocats office in Japan is not on the agenda at the moment. Personally, having worked in Japan for four years, I do not think that establishing a local micro-presence would meet the increasingly sophisticated demands of our clients. Moreover, we would not have high visibility with the Japanese groups who have been working for a long time with excellent Japanese law firms. It seems preferable to me to cooperate with the most suitable Japanese firms and to develop trusting relationships with them in order to meet our clients’ current needs better.
Leaders League. What advice would you give to a Japanese investor wishing to set up in France?
R. S. Most Japanese investments in France have been successful, although it is not always easy to understand our legislation, particularly our social law. However, the Japanese know how to deal with these mysteries and observe the formalities. Japanese companies are also fairly well viewed by French trade unions. Consequently, they can play a good game when up against foreign investors who are less patient and conscientious.
B. T. Also, the Japanese see France’s scientific potential, and are just behind the United States and Germany with regard to investment in research centers in France. For example, I am currently working on a multi-million euro investment by a Japanese electronics group in a high-tech French start-up. The tax credit regime for research is also attractive.
Moreover, LBOs offer possibilities for Japanese investors. There are some very high-quality companies in France which are LBO candidates but which cannot be bought by another fund because they lack prospects for growth and capital gains. There is therefore a need to find strategic investors. Right now, with interest rates almost at zero, a flourishing cash position and renewed competitiveness, the Japanese have what it takes.
J. S.
Photo: on the left: Bernard Tézé (partner, DS Avocats); on the right: Reiga Shimizu (Head of Japan Destk, DS Avocats)
Read more insight regarding Japanese legal services markets in our next International Report of Top 100 Law Firms. Publication in September 2015.