CASIC’s legal panel (established April 2010)

Having a panel of law firms to complement a well-established in-house legal department has been normal for foreign multinational companies for many years. However, now this model is being increasingly endorsed by domestic companies, particularly large SOEs, heralding another major phase in the evolution of the PRC legal market.

Beijing-headquartered China Aerospace Science & Industry Corporation (CASIC) has manifestly embraced the idea. The group recently established its first external legal panel (for its headquarters and eight Beijing-based subsidiaries) in a bid to streamline the legal outsourcing process and ensure cost-effective provision of services.

The procurement process was co-led by CASIC’s associate general counsel Wang Yaoguo. He said: “As a large conglomerate, we need to work with law firms on a very regular basis. In the past, we experienced many problems without a formal outsourcing procedure.  Establishing the panel is our solution to these problems.”

Before the panel was set up, CASIC, which consists of seven research academies, two R&D and manufacturing bases, six listed companies and over 600 subsidiaries and affiliated companies, had dealt with a significant number of law firms through individual business units. Wang found the service quality, fee levels, professional standards, skill sets and technical competencies vary greatly from firm to firm.

“Forming a panel of external legal service providers enables us to centralise the management and assessment of the firms working for the group. Therefore, we can ensure all our business units and companies receive timely and high-quality services at the best rate,” Wang said.

During a detailed tender process, initiated last October, around 50 Beijing firms competed to advise on a range of areas, including IP, finance, corporate and securities, real estate and construction, investment and M&A, international trade and employment.

The firms were reviewed rigorously on a wide range of criteria, including past performance, technical excellence, expertise in relevant areas, social networks, reputation and the ability to deliver sustainable cost-effective legal services. The size of the firms, in terms of number of lawyers and geographical coverage, was also an important consideration. Firms with less than 20 qualified lawyers were not eligible to bid for the tender.

Grandall Beijing office, Dacheng, Yingke and V&T are among the 11 successful appointees on the new panel. The panel firms, which are appointed for three years, will provide legal services to the group on a needs basis.

“Most firms on the panel are large, full-service firms, which not only have strong expertise and resources in the areas concerning our group but also have wider knowledge of the economy and legal system,” Wang added. “Often a case or a project involves complicated legal issues and only a multi-disciplinary team of lawyers drawn from a firm’s different practices can come up with the best solution.”

Push the bar higher for firms
In addition to the SOEs such as CASIC, Shanghai Electric Group and China Water Investment Group (the now “China Three Gorges New Energy Corp”), many local state-owned assets management authorities have also established a panel of lawyers on a standing offer basis to service local SOEs under their management.

Establishing a legal penal is the latest manoeuvre for domestic companies to further improve their risk management systems. It will also improve the quality and standards of legal services provided by law firms.

“To my knowledge, the majority of the SOEs administrated by SASAC have already appointed general counsel and established their in-house legal teams. Naturally, the next step for them is to optimise external resources and push for more value and better services from law firms. I expect more SOEs and large private companies to follow CASIC’s lead,” said Ma Dongxiao, an IP partner of Grandall’s Beijing office, who co-headed the firm’s bidding effort in CIASC’s tender. Although Grandall didn’t work with CASIC previously, the tender process provided it a great opportunity to earn new clients and business. On CIASC’s panel, the firm is listed as a preferred advisor for corporate, M&A and IP legal issues.

“Setting up a legal panel following a public tender process is in the best interest of a company and its shareholders. The tender process ensures the company can select the most suitable legal advisors with top credentials and best offering from a wide pool of contestants. And the panel model allows the in-house legal teams to effectively managing and monitoring the services provided by external advisors,” said Ma.

He also sees the positive impact this model has on private practices. “This process can foster an open, transparent and fair competition environment, which will drive law firms to lift their performances and standards. This move will also drive firms to shift their client relationship focus from personal to institutional,” Ma said.

The panel arrangement is undoubtedly gaining popularity in both in-house and private practice sides of the legal community. China Eastern Airlines is among several large corporations that have recently decided to take this route. The company’s legal department is in the process of establishing a legal panel and formalising the procedure for selection and monitor and measure the performance of each panel firm. The new legal panel will include a mix of accredited specialist, top-tier full-service and lower-cost mid-tier firms to provide quality legal advice, greater choice and flexibility. Foreign firms will also form part of the panel.

It’s clear that law firms will not only need to continuously improve their technical skills and competence, but also have to sharpen up their proposal and tender writing techniques. ALB