Multinational law firm Dentons and China's biggest legal practice Dacheng Law Offices said on Tuesday they had signed off on their merger, a move that will create the world's biggest law firm.

The new firm, which will be only the second time a Chinese firm and a global firm have combined, will count more than 6,500 lawyers in 50 countries.

The merger, which follows six months of negotiations, uses a Swiss verein structure, which allows for separate regional profit pools and accounting while sharing strategy, branding, and other core functions. Dacheng will also remain a separate entity within the combined firm's verein.

The structure is necessary because China forbids foreign law firms and lawyers from practising law, and instead relegates them to advisory roles.

However, many foreign firms with offices in China, including Dentons, have for decades taken advantage of a loophole that allows them to advise multinational clients on "the Chinese legal environment," meaning they can handle a wide variety of domestic matters short of appearing in court or signing official documents. But in recent years, stung by intense price competition for such "inbound" work, such firms have increasingly sought to advise Chinese companies investing overseas.

According to the agreement, the merged firm will have 19 board directors, five of which will be named by Dacheng.

Dacheng's Peng will serve as the chairman of the new firm’s global board. Joseph Andrew, the current global chairman of Dentons, will serve as chairman while Elliot Portnoy, the current chief executive of Dentons will have the same role at the new firm. The merged firm will not assign any office as its headquarters.

Following the merger, Dacheng will retain its name within China. Outside China, the combined entity will be called Dentons. The firm's logo will include the Chinese characters for Dacheng, followed by the Dentons name.

The new firm will not share client databases unless it's necessary in specific cases, where a global client operates in multiple regions, according to John Koski, the global chief legal officer of Dentons.