The last 12 months has for China's legal services industry been a period of change as deep-seated as it has been fast-paced. Accelerating out of the Global Financial Crisis, the country's law firms and lawyers have deployed fresh strategies characterised by impressive pragmatism, dynamism and optimism. Here, ALB China takes a step back to reflect on the many milestones of a hectic year
JANUARY 2010
NEW YEAR, NEW RULES FOR FIRM NAMES
With a keen eye on the rapid expansion of PRC law firms and the increasing number of new entrants, the Ministry of Justice marks the first month of 2010 by promulgating new measures for the administration of domestic law firm names.
The new rules prohibit the use of labels like 'legal group' or 'law alliance', require local firms to rename their regional branches and forbid similar names amongst firms. This creates a whole host of problems for local firms like Zhongcheng Lawyer Group, Jinyan Legal Group, Deheng (Shandong) Law Firm and DeHeng (Beijing) Law Office.
Yet the rest of the year sees little change, especially for those firms which have scored business on the back of someone else's brand name. It seems while the rules are there for law firms to follow, there has been little enforcement. We can expect to see the continued existence of 'legal groups' and to be confused by similar firm names - like Jin Mao PRC Lawyers and Jin Mao Partners.
FEBRUARY 2010
INTERNATIONAL FIRMS INUNDATE BEIJING
Opening an office in Beijing has become a rite of passage for many international firms wanting to seize Chinese market share. US firms Latham & Watkins and Steptoe & Johnson open in January and March respectively, and Singapore firm WongPartnership (which already has a Shanghai office) also launches in Beijing. The city, home to many Chinese SOEs, sees office openings from firms in places as far afield as Spain, Australia and Japan. Garrigues (Beijing's very first Spanish firm), Australian firm Minter Ellison and Japanese firm Nishimura & Asahi all open offices
MARCH 2010
CHANGING MARKET DYNAMIC PUSHES INTERNATIONAL LAWYERS TO GO LOCAL
International partner movements to address changing market conditions is one of the main themes in the legal industry. It starts in March when Robert Lewis, former managing partner of the Beijing office of Lovells, makes the announcement that he will be joining Shanghai AllBright's Beijing office as a senior international legal consultant, to head up the firm's international practice.
While such movements may be continuing on from the later months in 2009, 2010 sees bigger decisions made by the industry's leading rainmakers. March's movements spark a trend, and it spreads like rapid fire. Soon after Lewis' announcement, other key players follow. Rupert Li (formerly from Clifford Chance) and arbitration specialist Meg Utterback (formerly from Pilsbury) defect to King & Wood. Clifford Chance loses Wang Jian while Perkins Coie loses James Zhu and Zoe Wang, all to Jun He.
APRIL 2010
HU'S HEFTY SENTENCE FOCUSES ATTENTION ON CORRUPTION
An important lesson emerges from the trial of the highly-publicised High Court case involving four ex-employees of Rio Tinto: China will act swiftly and harshly against those it deems are threatening its economic interest.
This case raised the alarm for foreign companies operating in China and companies start putting greater efforts into FCPA compliance and anti-corruption policies. This is especially so since there is arguably no country in the world where the lines between business operations and cultural practices are as blurred. Following Stern Hu's case, FCPA compliance becomes more inherent in day-to-day business practices. Companies are learning that while it is important to look for outside training providers, it is also not to be seen as the sole source of FCPA training.
MAY 2010
HOGAN LOVELLS MERGER, THE TRANS-ATLANTIC TIDE
It is the talk of the town when the 2,500-lawyer, newly consummated Hogan Lovells firm finally appears on the world stage in May. Yet the aftermath of the new partnership only increases publicity for the merger. Not only does the firm start to bleed out key partners quickly - Robert Lewis (now at AllBright), Roger Peng (now at Paul Hastings) and Arthur Mok (now at Ropes & Gray) - it also triggers a wave of trans-Atlantic tie-ups (which means more sizeable competitors) in the market.
Following this merger, London-based Denton Wilde Sapte and Chicago-based Sonnenschein Nath & Rosenthal, and US firm Squire Sanders & Dempsey and UK firm Hammonds all launch their merger talks.
JUNE 2010
GOOD NEWS FOR CROSS-STRAIT PRACTICES
29 June sees the signing of the Economic Co-operation Framework Agreement (ECFA) in Chongqing. The agreement promotes more business and commercial exchanges across the Strait, and the level of interaction and cooperation between the legal industries is enhanced. With ECFA in line, the first mainland company - Yangzijiang Shipbuilding - will list in Taiwan in September.
PRC firms are actively seeking ties with their Taiwanese counterparts. Joining Dacheng and Zhongyin (which both have branch offices in Fujian, a key destination) on the new cross-Straits frontier is Llinks Law Firm. Back in April, the firm hires partner Chen Le to focus on cross-Straits work.
JULY 2010
SMALL FIRMS EMERGE AS NEW CONTENDERS
Even small firms in China have big ambitions - in July, Shanghai Zhongjian joins forces with Shanghai Zhonghui (Joinway) via a merger. With 105 lawyers including 33 partners, the new entity is a good example for those smaller firms that are considering upsizing their capabilities.
Soon after Zhonghui Zhongjian's merger, 2010 sees its very first four-firm merger - Qinghua, Dongxin, Huali and Guolian. Regional firms like Nanjing Jiangsu Hailang (merging with Gaopeng) and Guangzhou Liu & Partners (merging with Lifang Partners) also consolidate with larger firms based in Beijing and Shanghai, to scale up their practices.
AUGUST 2010
SUPREME COURT'S HEFTY WORKLOAD; LITIGIOUS CHINA
China's Supreme People's Court (SPC) issues a comprehensive report detailing the workload of its national courts. The SPC dealt with 13,318 cases and ruled on 11,749 cases in 2009, a 52% increase year-on-year. The workload report will be released annually and will serve to boost confidence in the PRC judicial system.
Aside from the obvious push towards transparency, the high numbers also point to the highly litigious nature of China's people. The litigation sector is already very healthy, especially post-GFC. Tiantong Law Firm reports 100% growth in work volumes in 2009 (90% of its total revenue came from high-end corporate litigation). But with the new transparency, litigators can definitely expecti more cases to come their way.
SEPTEMBER 2010
THE AMERICAS: A BUYER'S MARKET
China's outbound M&A appetite, especially for the energy & resources sector, ventures into new regions this year. Outbound acquisitions targeting Canada and the US are up 81% from the same period last year, reaching US$6.8bn collectively. The energy & resources sector alone accounts for 70% (US$4.8bn) of that activity.
Business interests in Latin America also bring work for many advisors in the region. State Grid pays US$1.7bn for seven Brazilian electricity transmission companies, and Sinochem pays US$3.1bn for a 40% stake in the Peregrino oil field. The Export-Import Bank of China and Bank of China also make a US$1.2bn shipping loan to Vale. Putting this into perspective, China's direct investment in Brazil now soars towards a projected US$12bn this year.
The focus on these regions sees many firms developing new game plans. For example, Norton Rose merges with South African firm Ogilvy Renault and Canadian firm Deneys Reitz simultaneously, all in its aim to seize a larger slice of the pie.
OCTOBER 2010
THE GREAT INTERNATIONAL EXPANSION
Dacheng officially launches its New York office in October (after Jun He and King & Wood), the latest in a trail of international office openings for 2010 and testament to the globalising dream of PRC firms. Driven by the staggering amount of outbound investments, overseas contracts and business ventures by Chinese companies, Zhong Lun (Hong Kong), Yishi Law Firm (Tokyo), Longan (Atlanta), Yingke (Hungary), Jun He (Silicon Valley) and Dacheng (New York) all open international offices this year.
The need to be close to their international clients' headquarters becomes critical and with the significant increase in cross-border mandates and international capacity, 2010 is now earmarked as one of the optimum periods for PRC firms to establish new footholds. From now on, global platforms are no longer the exclusive advantage of international firms.
NOVEMBER 2010
A YEAR IN: CHINEXT OFFERS NEW STREAM OF WORK
A year into ChiNext's debut, and the board is scoring extremely well (to say the least): capital markets lawyers benefit from the new work stream. But many of ChiNext's offerings are advised on by Beijing and Shanghai firms that have offices on the ground, like King & Wood, Jun He, Zhong Lun and Jingtian & Gongcheng, instead of local Shenzhen firms.
In statistics released in November, Grandall tops the charts as lead advisor for ChiNext listings, followed by Zhong Lun, King & Wood and Beijing Tianyin, respectively. All three firms advise on more than ten successful applications for ChiNext listings, and this triggers a stronger focus on the Shenzhen market. Back in May, Beijing-based Fangda Partners hires Victor Yu from Hogan & Hartson to drive its growth in Shenzhen. A previous focus on high-end blue-chip capital markets work also allows it to pay more attention to the lucrative ChiNext market.
DECEMBER 2010
PROTECTING LAWYERS' RIGHTS IN 2011
Li Zhuang, a criminal litigation lawyer with Beijing Kangda Law Firm, is arrested late in 2009 over the defence for suspected gang-leader Gong Gangmo. He is convicted of falsifying evidence and jeopardising testimony, after Gong reports that Li told him to lie about being tortured by police.
Li's arrest highlights a growing problem of lawyers' rights being infringed. In a national lawyers' work conference in Beijing, plans agetunderway to issue new rules to better protect lawyers' rights to meet and correspond with their clients in police custody. The new rules will also facilitate lawyers' rights to review relevant documents, conduct necessary investigations and collect evidence.
Minister of Justice Wu Aiying calls for more government support of lawyers' work, including paying for lawyers' services when it is in the public interest to do so. She also calls for more funding for training lawyers.
Chinese lawyers have much to look forward to in 2011! ALB