Further evolution
International firms will undoubtedly feel more pressure from leading PRC firms, but their prospects are far from gloomy if they manage to move up the value chain.
"With economic growth and the maturing of the local legal profession, local firms should be dominant in the local market. Foreign firms will play a role that's similar to the role they play in other markets - handling high-end work that has significant cross-border elements, as they have lawyers who have offshore capability and local understanding," said Robert Lewis, senior international legal consultant of AllBright in Beijing. "In the next five to ten years, the Beijing and Shanghai offices of international firms have to evolve to be able to provide the type of services which is currently provided out of their Hong Kong offices. They will have to improve their overall positioning and deliver that nature and quality of cross-border offshore services," he added.
The fee gap between top-tier PRC firms and international firms that are middle-market oriented will close over time. "As more and more PRC firms are recruiting internationally trained and qualified lawyers, their prices will gradually move towards international levels. Eventually, there will be less of a difference," said Todd Bissett, a partner at US firm Sheppard Mullin's Shanghai office. "One interesting question in the legal market today is about whether or not PRC firms are going to be constrained in going after cross-border work by their own price approach."
It certainly works from a client perspective if a firm can provide great service at a low price, but to be able to provide that great service PRC firms need to have not only partners but also other legal professions, especially associates, who are capable of delivering. "Most of these high-calibre lawyers are expecting to be paid at international levels. The real question is whether PRC firms are able to have the economies of scale in high-quality work to achieve that," said Todd.
As the market continues to evolve, many industry participants envision that PRC firms and international firms should and will become equal partners who often co-counsel on a transaction for the same client. "For the most part, international and PRC firms are still selling different products, focusing on onshore and offshore aspects respectively. In many transactions, clients will continue to need international counsels. PRC firms will always have advantages in the local market and be the primary gatekeepers to Chinese transactions. But the needs of the clients for international firms are not going to go away simply because of a price differential," said Todd. ALB
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