The adidas slogan “Impossible is Nothing” has become a way of life for Michael Shu, the company’s China general counsel.

Back in 2003, Shu had heard about adidas China’s potential partnership tie-up with the Beijing 2008 Olympic Games, and he set his heart on being involved. “It was my only opportunity to be part of an event so grand and proud,” he says. Shu’s wish was granted:  in 2004 he joined the adidas China legal team, which then comprised only himself and another lawyer. “Although it was a long-term goal – four years in the works – it was still very exciting for me. At that time, I focused on partnership agreements and contracts with the Beijing Organizing Committee for the Games of the XXIX Olympiad,” he says.

2008 stood out as a very special year not only for his country but also for Shu himself. “I scored a really good seat and had the luxury of watching the [opening] ceremony from beginning to end, it was spectacular,” he says.

Expanding workload
Since Shu joined, the legal department has grown to be a team of five (the three new lawyers focus on Marketing, Sales, Finance, Operations, and Human Resources,) – through sheer need. adidas’ US$3.8bn acquisition of Reebok International in 2006, as well as significant organic growth of operations in the Chinese consumer market, has meant the need for compliance in particular but also other types of legal advice have increased exponentially.

It is advice around the legal compliance of marketing strategies, Shu says, that takes up the biggest chunk of the legal team’s time and advice. “In a consumer market, especially for a sports brand, there is a lot of marketing involved. There are sponsorships to events, sports federations and endorsement to athletes. We get pulled in at the first point of negotiation and our role is to advise on the most effective contracts for the different parties,” he explains.

Unlike other rigid business contracts, Shu says the legal work involved in adidas contracts is far from mundane and that the most challenging facet is the timeline in which contracts are required to be signed. “Once our Sports Marketing team has its eye on a potential superstar, we need to act very quickly to issue a letter of intent and then to have them sign up with adidas,” he says. What makes it most pressing is the strong competition. “It is very competitive here: while an athlete is discussing the terms with us, we wouldn’t be surprised if they are also discussing the same with our competitors,” says Shu. “It is often very hard to draft a contract that is agreeable to both parties given the tight deadline, especially when contracts need to balance commissioner rights and penalties.”

Apart from the sponsorship and endorsements contractual work, the legal team also deals with a whole range of other business endeavours – such as finance-related advice. Aside from its major foothold on the sporting market in China, adidas also deals with finance loans and projects, due to its strong cash flow. “We advise the company on trust loan agreements – this is when the company lends money to other parties, including leading MNCs in China,” Shu says.

IP protection of course continues to be one of the top legal priorities at adidas, but the local PRC legal team does not manage infringement cases. That task is elevated to adidas Group’s global IP protection team in China, which typically lodges cases originating from China offshore. The IP team has headquarters in Amsterdam, but Shu’s role is to communicate with them, providing legal support on potential litigations.

Shu has been an in-house counsel for a decade: prior to joining adidas, the self-confessed consumer-brand specialist worked in-house at Gillette China, where he spent significant efforts on IP protection matters. But even after a decade of taking on in-house roles, Shu says that it doesn’t get easier. “Life as an in-house counsel is very challenging. Your legal opinions and decisions are heavily scrutinised from a business development perspective, and you need to constantly add value with the advice you give. It is unlike private practice, where the client can choose whether or not he wants to engage you,” says Shu.

External help
Having a panel of trusted external legal advisors does, says Shu, ease the difficulties that come with a senior in-house role, and he and his team enjoy a longstanding relationship with external counsels.

While completing some significant projects when adidas China did seek advice from some international law firms, yet Shu seems to favour local firms and he claims he is not alone. “I am not a fan of foreign law firms. An increasing number of MNCs are using local firms now, local law firms are moving closer to their international counterparts. Domestic lawyers just have a better understanding of the local legal implications here, they are globalising rapidly, the turnaround time is quicker and their lower fees also allow us to work with our budget more efficiently,” he says.

Shanghai-based Richard Wang & Co has been instructed by adidas China for the past 13 years and continues to enjoy mandates, due to its “deep understanding” of the company’s business needs. The firm deals mostly with adidas’ daily transactions and financial projects on retainer basis.

Boss & Young, meanwhile, are brought in to advise on commercial and corporate deals and have won mandates because of their “international experience and expertise”.

The legal team also uses a variety of other external counsel for regional work, but the common factor in Shu’s choice for external counsel is size. Besides the fact that the law firm should have local expertise, he also prefers medium-sized firms. “In my experience, medium-sized firms are eager to provide better legal services to MNCs,” he says. “And at such law firms you are more likely to get the partners’ direct involvement in your negotiations and not be shuffled through associates as you would in a larger firm.” ALB