During Asian Legal Business’ visit to Chengdu and Chongqing, the heads of legal of a number of companies - privately owned, state-owned and multinational - from various industries, including finance, securities, real estate, mining and manufacturing - were invited to share with our readers their relationship with external law firms. In response, the invited counsel recalled their experiences and expressed their opinion on how these law firms could improve their services and modes of operation.
ALB: What service(s) do you avail of from external law firms to assist your in-house team?
Lv Qing, Southwest Securities: We have a nine-member in-house legal team. Our team is growing fast, but our business is growing faster. As a result, current legal manpower headcount find it difficult meeting the business’ needs. Since there is very strong demand for legal services, especially for expertise in innovations with regard to asset management, we have to reach out to external lawyers for help.
Ren Dongchuan, BRC Group: The BRC is currently expanding across the nation, and has operations in more than 20 provinces. As business grows, we will need to draw support from national-sized law firms, mainly on standardisation and compliance processes like pre-project risk checking, as well as other non-contentious areas such as intellectual properties. This is because the real estate industry in China is highly dependent on national and local policies.
We have availed of the services of law firms that have both local and national experience. For instance, before entering a new city, we need an investigation report and analysis of the local legal and policy environment to support our decision making. Also, we work with external lawyers to develop various kinds of standardised templates and tools for different businesses, so that the in-house team can reuse them on similar future occasions.
Sheng Jie, GE (Chongqing): Chongqing does not have a big number of multinational companies, and normally, it is not a place where the headquarters of multinationals are usually located. Therefore, a large part of the multinationals’ local legal issues are handled by the in-house teams at their headquarters. If we hire a local law firm in Chongqing, it is usually for localised cases such as litigations or labour disputes. Daily corporate governance and big M&A projects are more likely to be entrusted to law firms in Beijing or Shanghai.
Yang Qian, Hongda Group: My company is expanding overseas in a significant manner. What we need is firstly services on cross-border M&As and capital market financings, and secondly, regular operational services to our overseas branches. Our foreign businesses not only need one-off services in acquiring foreign assets, but also need advice on how to run these foreign enterprises in the long term. Since jurisdictions vary, we have three issues to address.
The first is that we need to understand the legal systems of each of the investment target countries and identify potential risks. The second are the complicated labour relations, risks and disputes, which are the most frequently occurring legal problems for Chinese companies’ overseas operations, both state- and privately owned. The third is that in some countries, case laws that are completely different from China’s statute law system are applied.
As a result, we are very keen to see law firms provide such services, without which we, a Chinese company, will never become truly international.
Wang Xianjun, Three Gorges Bank: Our in-house team focuses mostly on internal management and compliance jobs. Rarely are we involved in disputes. However, when we have inextricable problems, we seek support from external counsel since we have a much narrower range of expertise and lesser resources than them. For instance, when developing new financing products, we would typically examine and discuss relevant legal problems with lawyer teams.
Tang Chunyu, Hutchison Whampoa (Chongqing): Mainly on difficult and complicated issues, as well as lawsuits. Also at sales deals where external lawyers represent buyers. We also look at law firms establishing and maintaining a communication channel with the government for us.
ALB: In your opinion, what is good service from a law firm like?
Yang Qian, Hongda Group: We have been trying out to outsource our legal affairs in their entirety to a large law firm that offers all-round services. We buy an entire package of service products that are customised for us, which we then develop together. Our mode of action is that we choose a partner as the chief lawyer of our company, and the law firm in turn deploys a team fit to meet our needs at our office. This team consists of lawyers from different practice areas. We provide work stations, work facilities, running costs, and a fixed annually fee, plus separate charges for particular projects. While we pay for the cost of the lawyers’ services, we do not pay them a salary. This is because we only manage them, and do not employ them. We have been trying out this mode of working for a few years now, and we feel it works very well for a corporation such as ours. This way, all of the company’s needs for legal services are covered.
Tang Chunyu, Hutchison Whampoa (Chongqing): Over the past decade, Chongqing lawyers have grown increasingly professional. The legal environment too has improved. There are many more firms capable of servicing multinationals than before, thanks to the improvement of local law firms and the arrival of the national firms in this region.
Wang Xianjun, Three Gorges Bank: The model we like to work with is the firm dispatching a lawyer to work in our office for a couple of days in a week. This arrangement makes it convenient for us to access instant legal assistance for our daily work. I think this is probably what a law firm’s service should be like because in this way, the firm can better understand the client’s needs and solve difficulties in a timely manner. If a law firm delivers services as all-encompassing as this, with a standby team providing support and a representative directly handling routine minor issues, it would be enough to satisfy the client.
ALB: Based on what criteria do you choose a law firm?
Tang Chunyu, Hutchison Whampoa (Chongqing): We want the law firm to be firstly, highly professional and to be able to advise on complicated cases; secondly, to be capable of delivering service quality of the highest order, with an attentive team to provide timely response to our requests; and thirdly, to have good connections with local government and judiciary bodies.
Ren Dongchuan, BRC: We have worked with almost every large domestic firm in the country. In China, while the firm brand is important, what we care more about is who the actual partner-in-charge is.
Sheng Jie, GE (Chongqing): The level of specialisation is what we consider first when choosing a law firm. For historical reasons, in West China, lawyers do not have a clear divide of practice area and are not specialised enough.
ALB: What aspects would you want law firms to improve on?
Sheng Jie, GE (Chongqing): My current company has high requirements on compliance, such as those related to FCPA, but very few local firms in Chongqing have had any sort of experience about such things. As a result, they have hardly been able to support us in this regard. I think this is a possible growth area for local legal businesses.
Yang Qian, Hongda: Chinese law firms should make their services more internationally oriented. Over half of China’s economic activities are internationally bound, whereas Chinese law firms have probably less than 10 percent international practices. I hope to see that our strategic legal partner is not only strong in China, but is equally at ease abroad. I believe Chinese enterprises and Chinese legal businesses are interdependent and synergistic.
Tang Chunyu, Hutchison Whampoa (Chongqing): I wish law firms would become more specialised in the real estate area, and would stay closer to their clients’ businesses.
