The legal profession is a service sector like any other, and the economic downturn has been felt just as keenly by Hong Kong's corporate law firms as any other company. Indeed, for a sector that saw remarkable returns during the boom years of the mid-90s, the financial fall-out of recent times has proved to be a sobering experience. David Fleming is a managing partner at Baker & McKenzie with eight years' experience in Hong Kong. He believes that some significant lessons have been learned from the downturn. 'The lessons learned include the need to be ready for the unexpected - to recognise that markets and business generally are unpredictable when faced with something unexpected so you have to look ahead and be ready to take the challenges head on,' he says. For some firms, however, the challenge has proven too great, and the past year has seen a spate of closures and downsizings. United States firms Dewey Ballantine and Cravath Swaine & Moore closed their Hong Kong offices, while British giant Cameron McKenna downsized significantly. It is worth noting that both US firms concentrated on US capital markets work, which has slowed to a trickle. Cameron McKenna, meanwhile, was viewed as particularly reliant on its construction practice, another hard-hit sector. In addition, a number of small, local, conveyancing firms have been forced to close by the property market's spectacular free fall. Large diversified firms have found themselves better equipped to handle periods that see lower transaction volume. Deacons managing partner Lindsay Esler explains that a good litigation practice can often be of immense value during difficult times. 'With a balance of 50 per cent of our revenues coming from litigation and 50 per cent from transactional work, the traditional increase in the level of litigation during the economic downturn has largely made up for the temporary drop in the level of transactional work,' Mr Esler says. Mr Fleming, for his part, points out: 'Litigation, dispute resolution, restructuring and workouts and China foreign direct investment have been busy despite the market downturn, as have tax and intellectual property.' Any talk of a rebound, furthermore, elicits mixed reactions. Mr Esler is bullish, suggesting that the rebound is well under way. 'There is an obvious rebound, with levels of work coming into all of our departments now higher than they have been for many months,' he says. Mr Fleming, however, is more circumspect, and believes that a measure of caution is necessary. 'We are cautiously optimistic for [the second quarter of next year] - indicators include more deal flow and an increasing number of pitches received in the office,' he says. Mallesons Stephen Jaques partner Robert Milliner, meanwhile, thinks that the worst may be over, which could signal the end to a period of sustained cost pressure. 'We are just seeing the return of the market to levels of activity that were closer to those in early 2002,' Mr Milliner says. 'The impact of these depressed conditions, particularly in the highly competitive Hong Kong market, has led to a general lowering of rates for legal work.'