WHAT JUST HAPPENED?
To comply with Chinese government regulations, foreign law firms are prohibited from merging with Chinese law firms that employ Chinese lawyers (KWM) and mergers with KWM are called strategic alliances and are formal occasions for two firms to merge offices in Hong Kong. The large number of foreign offices of Yingke was symbolic and real, as the firm was the only Chinese law firm with a global network of services for its lawyers and clients in the first years of their expansion.[1]
WHAT DOES THIS MEAN?
The most controversial issue surrounding the KWM merger is whether it violates China's government regulation on foreign law firms, which prohibits mergers with Chinese law firms or the employment of licensed Chinese lawyers. In the meantime, foreign law firms must cooperate with their Chinese counterparts to provide foreign lawyers the foreign clients and services they expect in their home countries. The "red circle" is a term used by eight leading Chinese law firms - including King Wood Malleson, Jun He Law Office, Fangda Zhonglun, Haiwen Partners - Commerce Finance Global Law Office and Jingtian Gongcheng - in this mature market.[2]
The rapid growth of China's three largest law firms (Dacheng, Yingke and King's Wood) over the past decade has disrupted the Chinese legal market globally, and many of their competitors have adapted their different methods to the brave new world of big law in China. The typical procedure is that foreign law firms establish joint law firms in China, often with a Chinese law firm. However, owing to the massive growth of foreign firms in the country, lawyers have become increasingly mobile between the two groups, and social boundaries between foreign and Chinese lawyers have become blurred as global market forces have produced a large number of lawyers with global expertise and locals who understand complex corporate transactions.[3]
HOW DOES THIS IMPACT THE LEGAL SECTOR?
Given that 68% of the native attorneys in foreign offices of Chinese law firms are qualified to practice local law and jurisdiction in third countries, Chinese legal competence does not appear to be the most important service that these firms want to sell. The recent birth of Dacheng Denton, the world's largest law firm by number of lawyers [6], illustrates how ambitious Chinese lawyers are in responding to the growing demand for corporate and corporate legal services.
Overall, the services provided by Chinese law firms in foreign offices are tailored to the legal needs of corporate clients with a few exceptions, such as immigration, asset planning and tax advice, which are attractive to potentially wealthy Chinese immigrants (Velinov, 2018 ). Given China's growing weight and deepening engagement in the global economy, the globalization of China's legal professions involves not only the creative destruction of national barriers and the restructuring of domestic legal professions, but also the expansion of local law firms and their clients on the global stage.[4] The reputational risks associated with the choice of partners of inconsistent quality worry foreign firms, which is one reason why many firms choose to work on a case-by-case basis with a large number of Chinese firms.
Written by LawMiracle Holdings
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REFERENCES
[1] https://thepractice.law.harvard.edu/article/rise-big-law-china/
[2] https://blog.specialcounsel.com/ediscovery/restrictions-on-international-law-firms-china/ and https://thepractice.law.harvard.edu/article/rise-big-law-china/
[3] https://academic.oup.com/jpo/article/6/2/156/5525294, https://thepractice.law.harvard.edu/article/rise-big-law-china/ and https://www.tandfonline.com/doi/full/10.1080/09695958.2018.1491853
[4] https://academic.oup.com/jpo/article/6/2/156/5525294 and https://www.tandfonline.com/doi/full/10.1080/09695958.2018.1491853
[5] https://blog.specialcounsel.com/ediscovery/restrictions-on-international-law-firms-china/ and https://thepractice.law.harvard.edu/article/rise-big-law-china/
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.