Chengdu’s supervisor and administrator of state-owned enterprises recently abolished the requirement for SOEs to engage the authority’s pool of designated agents and external law firms when they seek services from outside contractors.
The abolishment of the so-called “agent system” in Sichuan province allows government-owned companies to freely engage with outside vendors and law firms. Law offices in China have, understandably, welcomed the move since winning mandates from the city’s burgeoning state-owned entities will be much easier.
The now defunct database of designated law firms was set up five years ago by the State-owned Asset Supervision and Administration Commission of the State Council in Chengdu.
Industry experts said about 50 firms were included in the register, but they were subject to strict selection criteria: only law offices in operation for at least three years were eligible for the selection process.
Lin Xinwei, managing partner of Zhong Yin’s Chengdu branch, said although his firm was listed on the preferred list, the abolishment of the database has not impacted them. He said only firms that are competent enough to serve the big SOEs were selected in the first place — the SOEs would still seek legal advice from these firms even though the list no longer exists.
Nonetheless, Cheng Shoutai, managing partner of Tahota in Chengdu, said dispensing with the register not only gives SOEs free rein to choose the best lawyers, it also creates a level-playing field for firms that didn’t make it on the list. Leng Yunsong, managing partner of Dacheng's Chengdu branch, concurs. Abolishing the register allows SOEs to select the most appropriate outside counsels through public bidding or other mechanisms. “For instance, SOEs can engage mega law firms or boutique firms for high-end legal service or complex transactions. For less complicated matters, they can engage small to medium-sized firms. SOEs can lower their legal fees and make more efficient use of their legal budget that way,” he said.
The termination of the preferred law firm system signified the increased sophistication of Chengdu’s legal market, said Leng, who is also a legal advisor to SASAC. The register was set up because of the irregularities of the city’s legal market which prompted the authority to pre-select law firms for its state-owned entities, he explained.
Apart from law firms, Chengdu’s SASAC dispensed lists of preferred accounting firms, asset assessors, and evaluators of land, property, engineering contracts, and auction houses.
