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ALL ROADS LEAD TO ROME: INTERNATIONALIZATION STRATEGIES OF CHINESE LAW FIRMS

Jing Li*

ABSTRACT Based on a hand-collected sample of 123 Chinese law firms, this paper offers the very first empirical examination into the globalization of Chinese law firms. It finds that the majority of the firms have made efforts to expand overseas than not. The most frequently used strategies are international offices and formal cross-border referral networks. In general, law firms are very enthusiastic to echo and tag along the government-led “Going Out” initiatives so as to claim legitimacy for their internationalization activities, which conforms to China’s long-standing image as an interventionist state. Overall, Chinese law firms are still at the initial stage of their internationalization process, and the ways that they set their steps abroad in practice are very down to earth and have shown considerable creativity. Such pragmatism becomes most evident when examining the staffing of the international offices. Many of the offices are not directlyinvested but are associated or merged, or have no resident lawyers but just a partner acting as a regional contact. For these Chinese law firms, internationalization thus carries more symbolic than substantive value. This being said, a small group of law firms have nevertheless demonstrated a more balanced combination of Chinese and local foreign professionals, as well as a more mixed pool of expertise on both high-end and routine legal work in their foreign offices. These can be seen as primitive signs of a more integrative model of organizing a global law firm. Owing to such enhanced professional proficiency, and the force of the homophily, it might be argued that these Chinese law firms can grow into an interesting choice for the SMEs for their legal needs in China-related international transactions.

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Electronic copy available at: https://ssrn.com/abstract=3289037

INTRODUCTION Along with the rise of multinational companies as well as transnational product and financial markets in the 1970s, law firms also started to set their steps cross borders to explore new potential business opportunities in the foreign markets of their clients.1 In this respect, American law firms are seen as the torchbearers and a global template in internationalization.2 Overall, it can be said that the American law firms have adopted an “export” strategy for internationalization – they tend to retain strong links with the US legal system and seek to reproduce it overseas, and thus become a power force in exporting the US law and capitalism.3 The engagement with the local law system was maintained on a limited scale, and the primary focus was on providing advice on US (especially New York) law to large multinational companies, rather than on serving small-and-medium-sized firms on local legal issues.4 This being said, global law firms have gradually realized that it is strategically important for them to operate as an integrated community of lawyers, rather than as a set of isolated offices.5 To that end, the emergence of large corporate-like law firms took place much earlier in common law jurisdictions than in their civil law counterparts.6 In this sense, US law firms are important actors in the diffusion of their domestic legal model to other countries.7 The American legal profession is known for its entrepreneurialism,8 meaning that the law firms tend to proactively seek to exploit new market opportunities for legal services, and thus are more internationally oriented and focused on developing corporate contacts.9 Comparatively,

* Jing Li is an assistant professor of the Business Law Department at Tilburg University, the Netherlands. 1 Sigrid Quack, Recombining national variety: internationalisation strategies of American and European law firms, 5 JOURNAL OF STRATEGY AND MANAGEMENT 154, 160 (2012). 2 Id. at 158. 3 Glenn Morgan & Sigrid Quack, Global Networks or Global Firms? The Organizational Implications of the Internationalization of Law Firms, in Anthony Ferner, Javier Quintanilla & Carlos Sánchez-Runde (eds.) MULTINATIONALS, INSTITUTIONS AND THE CONSTRUCTION OF TRANSNATIONAL PRACTICES (London: Palgrave Macmillan 2006), at 227. 4 Quack, supra note 1, at 163. 5 James R. Faulconbridge, Jonathan V. Beaverstock, Daniel Muzio & Peter J. Taylor, Global Law Firms: Globalization and Organizational Spaces of Cross-Border Legal Work, 28 NORTHWESTERN JOURNAL OF INTERNATIONAL LAW & BUSINESS 455, 468 (2008). 6 Id. at 471. 7 Quack, supra note 1, at 159. 8 David M. Trubek, Yves Dezalay, Ruth Buchanan & John R. Davis, Global restructuring and the law: studies of the internationalization of legal fields and the creation of transnational arenas, 44 CASE WESTERN RESERVE LAW REVIEW 407, 425 (1994). 9 Quack, supra note 1, at 159.

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German lawyers have long lived in the stereotype of being technical specialists and advisors within the constraints of a predominantly state-regulated profession.10 English and German law firms followed different routes in heading towards growth and internationalization, and it is submitted that such process is a result of combined forces of both institutional legacies and path modification.11 In particular, business law firms have played a unique role in both countries, where the entrepreneurial and commercial orientations and international reach were stronger than the differences in the overall legal and institutional systems.12 When compared to American law firms, large European law firms appear to offer more generalist and polycentric range of legal services.13 Their expansion strategy is rather integrative, as evidenced by serving a broader clientele from both the home and host countries of their foreign offices, combining varied locally-based expertise and experience, and emphasizing on stronger horizontal cooperation and firm steering.14 Thanks to its exponential economic growth, China is now the world’s second largest outward investor as measured by the value of outflowing foreign direct investments.15 As more and more Chinese companies go outside China to do business, they also demand advice about the laws of different jurisdictions. This is particularly true after the 2008 financial crisis, when Chinese corporate clients have become an increasingly important source of business for both elite Chinese law firms and their international counterparts, owing to the aggressive outbound investments of Chinese companies, especially state-owned enterprises (“SOEs”).16 As a matter of fact, the balance of power in the Chinese corporate legal market is already shifting towards the increasing dominance of elite big Chinese law firms.17 Moreover, as law firms open more domestic offices across China in recent years, they have gained geographical access to a wider pool of clients, which also helps to improve their ability of understanding and guiding the

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Glenn Morgan & Sigrid Quack, Institutional Legacies and Firm Dynamics: The Growth and Internationalization of UK and German Law Firms, 26 ORGANIZATION STUDIES 1765, 1767 (2005). 11 Id. at 1780. 12 Id. 13 Quack, supra note 1, at 163. 14 Id. 15 UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT, WORLD INVESTMENT REPORT 2018: INVESTMENT AND NEW INDUSTRIAL POLICIES, at 5, U.N. Sales No. E.18.II.D (2018). 16 Xueyao Li & Sida Liu, The Learning Process of Globalization: How Chinese Law Firms Survived the Financial Crisis, 80 FORDHAM L. REV. 2847, 2855 (2012). 17 Sida Liu, David M. Trubek, & David B. Wilkins, Mapping the Ecology of China's Corporate Legal Sector: Globalization and Its Impact on Lawyers and Society, 3 ASIAN JOURNAL OF LAW AND SOCIETY 273, 282 (2016).

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clients’ outbound investment needs.18 As such, the necessity to serve the demand for legal services of these Chinese corporations as they go abroad is thus the endogenous reason propelling the internationalization of Chinese law firms.19 This being said, except for the headlines about the mega law firm mergers like those between King & Wood and Mallesons as well as between Dacheng and Dentons, little is known about what the other law firms have been doing. How many of them have also made an effort to expand to foreign markets? Besides chasing their clients, are there any other reasons motivating them to go abroad? For law firms, internationalization strategies range from informal ad hoc referral relationships, to more tightly coordinated formal networks of medium-sized law firms, and bilateral or closely-knit law firm alliances, and to organic internalization through establishing own overseas offices. In this light, which strategies are most / least adopted by Chinese law firms to expand and why is this so? If the firms have overseas presence, how are the offices staffed in terms of the proportion of Chinese and foreign lawyers, and what areas of law do they practice? Given China’s increasing significance in the global economy, and the contrasting difference of its legal profession and the surrounding institutional systems than those from most of the Western countries, the answers to these questions will add important new knowledge onto our existing understanding of how law firms carry out their internationalization strategies and operate outside their home countries. Using a sample of 123 law firms that are hand-collected on the basis of the Chambers Chinese law firms ranking, this paper offers the very first empirical insight into the globalization efforts of Chinese law firms. Overall, it is found that more firms have endeavored to expand overseas than not. Among the four specific internationalization strategies, international offices (including Hong Kong offices) and formal cross-border referral networks are the most adopted ones among Chinese law firms. While the majority of the firms only make use of one internationalization strategy, a considerable number of firms have also adopted multiple strategies simultaneously. Interestingly, the law firms have used a rather pragmatic approach to

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Asen Velinov, Globalization of Legal Services: Navigating New Opportunities in China and Beyond, AMERICAN BAR ASSOCIATION, Nov. 19, 2018, https://www.americanbar.org/groups/international_law/publications/international_law_news/2018/fall/globalizationof-legal-services--navigating-new-opportunities-in/?from=singlemessage&isappinstalled=0 (last visited Nov. 20, 2018). 19 王卫东 [Weidong Wang], 中国律师如何走出去 [How Can Chinese Lawyers Implement the “Going Out” Strategy?], 5 北京律师 [BEIJING LAWYERS] 01 (2014). It is worth noting that Wang is the chair of the foreign relations commission of Beijing Bar Association.

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implement these strategies. For example, although Chinese law firms seem more keen in recent years to set up their own formal international referral networks than joining existing ones, these networks are mostly dominated by second-tier domestic law firms, with limited coverage of foreign jurisdictions. More specifically, firms are very enthusiastic to echo and tag along the government-led “Going Out” policy so as to claim legitimacy for their internationalization activities; while the ways they set their steps abroad are much more down to earth and show considerable creativity than the roadmap painted by government officials. The pragmatism becomes most evident when examining the staffing of the international offices. Many of the offices are not directly-invested but are just based in the associated local law firms in the host countries, or have no resident lawyers but just a partner acting as a regional contact when potential business arises. In this light, it can be argued that for many Chinese law firms, internationalization is still at its infancy stage, and only carries the symbolic value of “flying the flags overseas”. It works for now more as “cosmetics” that law firms can use to enhance their professional image in front of their clients; but one can also argue that it carries potential option value for future expansions in case deal flow picks up in the foreign markets. This said, a small group of law firms have nevertheless shown a more balanced combination of Chinese and local foreign professionals among the resident lawyers, as well as a more mixed pool of expertise on both high-end transactional work and more routine, trade-route related work in their foreign offices. Arguably, unlike their big Anglo-American counterparts that target specifically at the high-end of the global legal services market, these Chinese law firms may be an interesting choice for those small-and-medium-sized enterprises (“SMEs”) with a China-related ambition. This paper is organized as follows. Section I lays down a framework of the forms of internationalization used by law firms. Section II presents and discusses the data on the four internationalization strategies adopted by Chinese law firms. Section III analyzes the motivations and characteristics of the strategies, and also offers a close-up examination on how the foreign offices of Chinese law firms operate from the perspectives of the ratio of Chinese and foreign lawyers and key areas of practice. Section IV concludes.

I.

A FRAMEWORK OF LAW FIRM INTERNATIONALIZATION

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Traditionally, when clients need legal services in another country, it is done through referrals – a law firm in one country refers the client to a law firm in another country.20 Generally speaking, such referrals can be broken into two different kinds: on the one hand, they could be done rather informally, for example out of historical connections and business dealings; on the other, we also observe in practice formal referrals, which is deliberately established among law firms. Gradually in this process, however, law firms begin to realize that clients often not only ask for advice about the laws of different jurisdictions, but also demand on an increasing scale the “international capability”.21 This means, in addition to providing (a) crossborder referrals, law firms may also be expected to have the capability of (b) lawyering in a coordinated and simultaneous manner in multiple jurisdictions; (c) arbitraging different legal systems; and even (d) building new transnational legal systems. These capabilities are ranked in the order of growing complexity, cost, and coordination.22 This is echoed by Faulconbridge & Muzio (2017) in their theory on the three-stage organizational strategies of global professional service firms, namely, client follower, market seeker, and market maker. This order is not only chronological, but also demonstrating a deepening involvement the institutionalization and transitional regimes.23 When it comes to the forms of internationalization, Morgan & Quack (2006) distinguish between the “global networks” and “global firms”.24 The former model refers to a set of varied networks where law firms retain their independence but rather form relationships with firms on a transnational level;25 while the latter model denotes that law firms internationalize by having their own overseas offices.26 In the same vein, Faulconbridge et al. (2008) identify a three-pillar typology of law firm globalization, namely: (a) independent organic growth by establishing an international network of offices; (b) participating in formal networks and cooperating with local firms through strategic alliances; and (c) ad hoc membership in a loose transient affiliation or network, which can take the form of both best friend relationships between large law firms, and

20

Morgan & Quack, supra note 3, at 218. Id. at 219. 22 Id. at 218-19. 23 JR. Faulconbridge & D. Muzio, Global professional service firms and institutionalization, in PROFESSIONAL NETWORKS IN TRANSNATIONAL GOVERNANCE (L. Seabrooke & LF. Henriksen eds.), 219-232 (2017). 24 Morgan & Quack, supra note 3. 25 Id. at 220. 26 Id. at 225. 21

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also information joint-force associations among medium or boutique firms.27 From a more technical perspective, a law firm wishing to expand business outside its home country may also choose between greenfield investment and mergers and acquisitions (“M&As”) with a foreign firm.28 Although law firms with own offices in another jurisdictions are a rather recent phenomenon when compared to the network based strategies,29 an important advantage for a law firm to adopt the greenfield strategy is that it generates an economy of scale, which helps to reduce the information costs of repeatedly learning the deals and selecting other law firms across jurisdictions.30 It is worth mentioning that although the term of “merger” is often used to conveniently denote the association of two or more law firms, the connection between two merged law firms is usually much looser than in real corporate mergers. Officially, the mega law firms such as Hogan Lovells, Baker & McKenzie, DLA Piper, Squire Sanders and Norton Rose Fulbright take the business form of Swiss verein,31 under which each of the members remains only responsible for the commercial and professional liability of itself, and there is typically no sharing of revenues and pooling of profits.32 This is also the same with the two mega Chinese law firm mergers, namely, King & Wood with Mallesons,33 as well as Dacheng with Dentons.34 Instead, they only share marketing strategy, common branding, and information technology, and thus are often criticized for lacking a common culture and standardized practices.35 II.

INTERNATIONALIZATION STRATEGIES OF CHINESE LAW FIRMS

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Faulconbridge, Beaverstock, Muzio & Taylor, supra note 5, at 465-66. D. Daniel Sokol, Globalization of Law Firms: A Survey of the Literature and a Research Agenda for Further Study, 14 INDIANA JOURNAL OF GLOBAL LEGAL STUDIES 1, 12 (2007). 29 Morgan & Quack, supra note 3, at 220 (submitting that “[i]n the past, much international legal work was in effect conducted through such informal, friendship networks…”). 30 Sokol, supra note 28. 31 Edwin B. Reeser & Martin J. Foley, Are verein-style law firms ignoring fee-splitting ethics rules?, Oct. 1, 2013, http://www.abajournal.com/legalrebels/article/are_verein-style_law_firms_ignoring_fee-splitting_ethics_rules/ (last visited Nov. 20, 2018). 32 Nick Jarret-Kerr & Ed Wesemann, Enter the Swiss-Verein: 21-century global platform or just the latest fad?, 5 EDGE INTERNATIONAL REVIEW 26, 28 (2014), available at http://www.edge.ai/wpcontent/uploads/2014/05/enterswissverein_2012.pdf. 33 Term of Use and Legal Notices, KWM, https://www.kwm.com/en/legal-notices (last visited Nov. 20, 2018). 34 Legal Notices, DENTONS, https://www.dentons.com/en/legal-notices (last visited Nov. 20, 2018). 35 Id. at 29. 28

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2.1

Data Collection and Description

For the purposes of compiling a list of Chinese law firms, I start with the Chambers & Partners law firm ranking 2018.36 This choice is mainly motivated from the following three concerns. First off, Chambers ranks law firms based on different practice areas. In doing so, the ranking is able to benefit both small boutique law firms and all-service big corporate law firms, as long as they have demonstrated outstanding performance in their respective practice areas.37 This is a point of particular importance in China, because for many domestic Chinese law firms, the size and scale often do not have the same level of correlation to the quality and scope of their business as it would be the case in other legal markets.38 Comparatively, a comprehensive ranking might run the risk of biasing towards the biggest law firms and thus leaving boutique and specialized law firms out of consideration. This is not ideal for the research of internationalization, as big law firms generally tend to have the resources to internationalize than smaller firms, and in doing so, they may be more likely to choose more formal, expensive routes (such as overseas offices) than informal, cost-saving ones (such as referral networks). Secondly, the Chambers ranking classifies law firms into maximum six different bands, where Band 1 represents the highest recognition and Band 6 the lowest, but the inclusion into any of the bands already exhibits an achievement.39 Additionally, Chambers also maintains a separate “Other Noted Practitioner” group, which is intended to cover those law firms that have handled notable matters and/or has received some recommendation, but yet not achieved such high level as to be included in a band.40 Again, such methodology ensures that the list not only includes the highly reputable top-tier firms, but also those good quality ones. Thirdly, in its China rankings, Chambers differentiates law firms of the People’s Republic of China (the “PRC”, thus excluding Hong Kong, Macau, and Taiwan) from the international firms. This not only saves time for

36

See https://www.chambersandpartners.com/guide/asia/8/60/1 (last accessed Nov. 20, 2018). Different rankings are available by selecting different practice areas. 37 Methodology and Chambers Rankings, CHAMBERS AND PARTNERS, https://www.chambers.com/research/methodology (last accessed Nov. 20, 2018). 38 Robert Lewis, A Systematic Approach to Ranking Domestic and Foreign Law Firms in China, THELAWYER.COM BLOG (July 12, 2013), available at https://www.ilntoday.com/files/2013/09/Ranking-the-Top-Domestic-andForeign-Firms-in-China-%E2%80%93-A-Snapshot-of-the-Present-as-a-Basis-for-a-Projection-of-Future-MarketTrends-.pdf. 39 Chambers Rankings Explained, CHAMBERS AND PARTNERS, https://www.chambers.com/research/the-rankingsexplained (last accessed Nov. 20, 2018). To the extent of my sample, a maximum of four bands have appeared. 40 Id.

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research, but also makes sense in that domestic and international law firms in China tend to take up different market segments.41 Therefore, ranking PRC firms and international firms separately avoids the risk of comparing apples to pears. For this paper, I have examined the Chambers 2018 China rankings (including the regional rankings) in all of the practice areas where they rank the PRC law firms. To avoid selection bias, I count in all of the firms that are mentioned in each of the rankings, thus including all the bands as well as the “other noted group” (if applicable). This results in a list of 133 firms, among which 10 are not pure law firms but intellectual property (“IP”) agencies that offer IP related legal services (either through the built-in IP lawyer team, or through a separate law firm subsidiary). These 10 firms are excluded from my sample. This is because their internationalization strategy is directly shaped by the mandatory requirements in China’s patent law, which had long demanded the foreign-related patent matters to be handled exclusively through governmentapproved IP agencies.42 As such, the fact that these IP agency firms tend to have foreign offices is most likely necessitated by their historical monopoly in the business, rather than motivated by a prudently contemplated internationalization strategy. After removing them, the final sample consists of a total of 123 Chinese law firms.

2.2

Internationalization Strategies

Based on the existing research summarized in Section I, law firms may expand internationally by developing their referral networks and/or setting up overseas offices. As such, this type of information is also what I typically look for when checking the official websites of the Chinese law firms, which is further supplemented by anecdotal reports in case the official

41

Lewis, supra note 38. Patent Law of the People’s Republic of China (Amended and promulgated by the 6th Session of Standing Committee of the 11th National People’s Congress of the People’s Republic of China, Dec. 27, 2008), available at http://www.wipo.int/wipolex/en/details.jsp?id=5484 (last visited Nov. 20, 2018). The amended art. 19 revoked the original “government-approved patent agency” requirement, and changed it into “legally-established patent agency”. So it reads: “[i]f a foreigner, foreign enterprise, or other foreign organization without a regular residence or business site in China intends to apply for a patent or handle other patent-related matters in China, he or it shall entrust a legally established patent agency with the application and such matters”. 42

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descriptions are too general. For the 123 law firms in my sample, four main lines of internationalization strategies can be identified:   



Setting up offices in foreign jurisdictions (for this purpose, Hong Kong is treated as “foreign” given its English colonial history and the common law system); Joining or initiating formal, multilateral international referral networks; Establishing ad hoc, loose cooperative relationships with foreign law firms, which are not based on formal agreements but rather on best friend like reciprocal favors; and Setting up long-term bilateral alliances or joint ventures with one or a few particular foreign law firms.

TABLE 2.2: OVERVIEW OF INTERNATIONALIZATION STRATEGIES OF CHINESE LAW FIRMS (N=123) Internationalization Strategy

Number of Law Firms Adopting it

International (including HK) offices

43

Formal multilateral referral networks

43

Ad hoc informal referral relationships

27

Bilateral alliances

17

Number of Internationalization Strategies

Number of Law Firms

4 adopted

2

3 adopted

9

2 adopted

22

1 adopted

42

0 adopted

48

2.2.1 Hong Kong Offices Overall, there are three strategies to operate in the Hong Kong legal market: namely, as a foreign law firm, to form an association with a HK law firm, and finally, to become a fully

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localized HK law firm.43 Whereas a foreign law firm may only offer legal services regarding the law of the foreign jurisdiction, a localized HK law firm is able to practice Hong Kong Law.44 In researching the law firms in my sample, I am interested in knowing the following: (a) in case they have a HK office, where exactly does it belong in the spectrum, namely, is it a foreign, associated, or localized law firm; and (b) how big and how substantive their HK operation is, in terms of the number of staff in the office, and the proportion of designated vs. resident staff. To find out the answers to these questions, the information from the firms’ official websites is checked against the record from the Hong Kong Law Society, which is the professional association and law society for solicitors in Hong Kong. The following Table 2.2.1 presents the findings about the HK offices. TABLE 2.2.1: HK OFFICES OF CHINESE LAW FIRMS (AS OF SEPTEMBER 30, 2018) Number of Lawyers (Official Law Society Record)

Number of Lawyers (Record on Firm Website)

Number of Resident Lawyers (Record on Firm Website)

Foreign, Associated, or Localized?

Law Firm

Law Firm (in Chinese)

1

AllBright

锦天城

8

3

1

Associated

2

AnJie

安杰

1

0

0

Associated

3

Broad & Bright

世泽

2

0

0

Associated

4

Chang Tsi & Partners

铸成

No record

1

0

No record

5

Deheng Law Firm

德衡

4

1

0

Associated

6

Dacheng (Dentons China)

大成

18

18

18

Localized

7

Duan & Duan

段和段

4

1**

1

Foreign

8

Fangda

方达

14

20***

20

Associated

9

Grandall

国浩

5

5

1

Associated

43

See Heidi Chu, From the Secretariat, 3 HONG KONG LAWYER 10 (2013), available at http://www.hklawyer.org/content/secretariat-septemeber-2013. Note that, Heidi Chu was the then Secretariat-General of the Hong Kong Law Society. See also Thomas So, President’s Message: An Open Regulatory Regime for Foreign Lawyers, 3 HONG KONG LAWYER 6 (2018), available at http://www.hk-lawyer.org/content/open-regulatory-regime-foreignlawyers. Note that, Thomas So is the president of the Hong Kong Law Society. 44 See Chu, supra note 43.

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10

Grandway

国枫

11

Guantao

观韬中茂

12

Haiwen

13

2

2

0

Associated

19

5**

5

Localized

海问

1

6***

5

Associated

Han Kun

汉坤

3

5***

5

Associated

14

Hylands

浩天信和

1

2

0

Associated

15

Jia Yuan

嘉源

6

0

0

Associated

16

Jin Mao PRC Lawyers

金茂

1

0

0

Associated

17

Jingtian & Gongcheng

竞天公诚

1

1

0

Associated

18

Jun He

君合

23

11**

11

Localized

19

JunZeJun

君泽君

3

0**

0

Associated

20

King &Wood Mallesons (“KWM”)

金杜

190

49**

46

Localized

21

Llinks

通力

2

0

0

Associated

22

Tahota

泰和泰

4

0

0

Associated

23

Tian Yuan

天元

2

0

0

Associated

24

TransAsia

权亚

No record

0

0

Associated

25

Watson & Band

华诚

1

0

0

Associated

26

Zhonghao Law Firm

中豪

2

1

1

Foreign

27

Zhonglun

中伦

53

16**

16

Localized

28

Zhonglun W&D

中伦文德

No record

0

0

Associated

** ***

Firm’s website only contains information about partners and senior counsel. Number also includes the staff from the associated law firm.

The direct finding from above is that out of the 28 firms that claim to have a HK office, the vast majority of them have set it up through an association with a local HK partner law firm. Relative to operating as a foreign firm, forming an association apparently shows a higher level of commitment to the Hong Kong market, which can be explained on both substantive and practical 12


grounds. Thanks to Hong Kong’s strategic position as an easy gateway to the vast Mainland Chinese market, foreign businesses have long been taking advantage of its “super connector” role by setting up local offices or even regional headquarters there.45 But given the ambitions of many Chinese companies to go out and conquer new markets, which are unprecedentedly boosted by the Belt & Road initiative led the Chinese government, the importance of the city as a base for Chinese business to go global is also rapidly on the rise.46 As such, merely being able to advice on China law issues is often not enough to meet the needs of the Chinese corporate clients. On a practical note, an association offers a quick and cost-saving route for a Chinese law firm enter this strategic market, by allowing it to share with the local HK partner firm fees, profits, premises, management and employees.47 This enables both firms to efficiently join forces and leverage their respective expertise, and offer clients a one-stop shop for legal services. If a foreign law firm further wishes to convert into a complete local HK law firm, it should demonstrate a substantial connection between the proposed Hong Kong firm and its parent office. Among other things, this means that it must have practiced in Hong Kong as a foreign firm under the same name for three years before the conversion.48 Given such requirement, forming an association offers a precious opportunity for the foreign law firm to learn and adapt to the Hong Kong legal market before it can start off fully on its own. A direct example from my sample is Guantao. Its development history in Hong Kong is described on its official website as follows: “Our Hong Kong Office was established in December 2008. It is located in Central, Hong Kong. Approved by the Law Society of Hong Kong, our Hong Kong Office was localized as a Hong Kong solicitors firm with effect from 1 February 2016 under the name of Guantao & Chow. On the same day we were also merged with Peter C.

45

Phila Siu, Hong Kong still the gateway to mainland China for foreign companies, commerce chief says, SOUTH CHINA MORNING POST, Oct. 29, 2017, available at https://www.scmp.com/news/hongkong/economy/article/2117499/hong-kong-still-gateway-mainland-china-foreign-companies. 46 Cannix Yau, Hong Kong’s future lies in helping Chinese firms go global, official investment adviser says, SOUTH CHINA MORNING POST, Nov. 26, 2017, available at https://www.scmp.com/news/hongkong/economy/article/2121607/hong-kongs-future-lies-helping-chinese-firms-go-global. 47 See Chu, supra note 43. 48 Id.

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Wong, Chow & Chow, which we have been in association with since September 2012.”49 A more extreme example comes from a reputable boutique firm named Haiwen, which has long specialized in high-end capital market related legal services, especially IPO. Haiwen is known for consistently pursuing a conservative growth strategy for the purposes of the maintaining its collegial culture and keeping the profit per partner high.50 Being a firm incepted as early as 1992, it has so far only two domestic branch offices in addition to its Beijing headquarters, and the HK office is the one and only internationalization effort it has thus made.51 Same as most of the other peer Chinese law firms, Haiwen has also chosen to tap into the HK market by associating with a local firm. Differently, however, the local HK law firm was actually created by a Haiwen partner solely for the purpose of the association and later full integration.52 Despite being theoretically independent from each other, in fact all lawyers from both of the two firms work in the same office.53 The second important finding from Table 2.2.1 is that the majority of the Hong Kong offices of the PRC law firms are thinly staffed. Except for six firms, five of which are already fully localized, staff numbers in the other HK offices are all less than ten when we look at the official registration records of the HK Law Society, which include not only partners and senior counsel, but also associates and foreign lawyers. The numbers become even smaller if we examine the records on firm’s website, and it is quite a common phenomenon that a HK office does not have any resident lawyer. In these cases, it is usually one or two managing or senior partners that are officially assigned to be in charge of the HK office. This may or may not be disclosed on their biography or CV on the firm’s website. But if so, their contact phone number typically still remains the one from their main domestic office, suggesting that they tend not to

49

Hong Kong Office, GUANTAO, http://en.guantao.com/contact.aspx?TypeId=203&FId=t7:203:7 (last visited Oct. 10, 2018). 50 Sida Liu & Hongqi Wu, The Ecology of Organizational Growth: Chinese Law Firms in the Age of Globalization, 122 AMERICAN JOURNAL OF SOCIOLOGY 798, 830 (2016). 51 About Haiwen, HAIWEN, http://www.haiwen-law.com/en/class/view?id=27 (last visited Oct. 10, 2018). 52 Haiwen Opens an Office in Hong Kong, HAIWEN, http://www.haiwen-law.com/en/article/content/view?id=29 (last visited Oct. 10, 2018). See also 海问成立香港办公室 [Haiwen Establishes a Hong Kong Office], VINTAGE ASIA, June 29, 2017, https://www.vantageasia.com/zhhans/%E6%B5%B7%E9%97%AE%E6%88%90%E7%AB%8B%E9%A6%99%E6%B8%AF%E5%8A%9E%E5% 85%AC%E5%AE%A4/ (last visited Oct. 10, 2018). 53 海问成立香港办公室 [Haiwen Establishes a Hong Kong Office], supra note 52.

14


reside and practice in Hong Kong on a regular basis, but rather stand available in case any potential business opportunities arise related to the Hong Kong office.

2.2.2 International Offices Based on the information from their official websites, 43 law firms out of my sample claim to have international offices. Since the HK offices are already separately analyzed above, I exclude those law firms that only have offices in Hong Kong. The situation about the remaining 30 law firms is presented in Table 2.2.2. In particular, I am interested to know about the following: (a) how are they set up, e.g., whether they are directly-invested, merged, or based in a local associated firm, etc.; (b) what kind of office they are, a real practicing office that offer legal services, or merely a liaison office; (c) similar as the research on HK offices, how are they staffed, e.g., how many lawyers work there, and how many of those are resident, etc. The information comes primarily from the firms’ official websites; but to the extent possible, I also supplement, double-check or refine it with the records at the local business registration authorities as well as the relevant Google searches.

15


TABLE 2.2.2: INTERNATIONAL OFFICES OF CHINESE LAW FIRMS (AS OF SEPTEMBER 30, 2018)

Law Firm


Number of Overseas Offices (Excluding HK)

Where? (Could Be More than One Office in a Country)

Number of Lawyers (Based on Firm Website)*

Number of Resident Lawyers (Based on Firm Website)*

1

AllBright

锦天城

1

UK (both a direct and associated office)

1 (partner, Chinese)

0

2

Broad & Bright

世泽

1

Japan (associated office)

0

0

3


铸成

1

US

2 (partners, Chinese)

0

4

China Commercial Law Firm

华商

1

Australia

1 (partner, Chinese)

0

6

Japan Germany (associated office) France Italy Singapore Switzerland

Japan: 3 (2 Chinese partners, 1 Japanese senior counsel) Germany: 1 (non-partner, German) France: 1 (partner, French) Italy: 0 Singapore: 0 Switzerland: 0

Japan: 2 (1 Chinese partner, 1 Japanese senior counsel) Germany: 1 France: 1 Italy: 0 Singapore: 0 Switzerland: 0

10

US Russia (2) Australia Canada Japan Korea (liaison office) Singapore (associated office) Germany (associated office)

US: 13 (all Chinese, 5 are partners) Russia (Moscow): 13 (3 Chinese partners) Russia (St. Petersburg): 3 (1 Chinese partner) Australia: 1 (Chinese partner) Canada: 1 (Chinese partner) Japan: 1 (Chinese partner) Korea: 2 (Chinese partners) Singapore: 1 (Chinese partner)

US: 9 (1 Chinese partner) Russia (Moscow): 9 (1 Chinese partner, local lawyers include both Chinese and Russians) Russia (St. Petersburg): 3 (local lawyers include both Chinese and Russians) Australia: 0 Canada: 0 Japan: 0 Korea: 0

5

6

Co-Effort Law Firm

Deheng Law Firm

协力

德衡律师集团

16


Law Firm


7

DeHeng Law Offices

德恒律师事务所

8

Dacheng (Dentons China)

大成

9

Duan & Duan

段和段

ETR Law Firm

广信君达

10

11

Grandall

12

Guangdong Guanghe

国浩

广和


5

116




Chinese Taipei (associated office)

Germany: 1 (German) Chinese Taipei: 1 (Chinese)

Singapore: 1 Germany: 1 Chinese Taipei: 0

Belgium (associated office) Netherlands France (merged office) UAE Kazakhstan

Belgium: 1 (Belgian, senior foreign counsel) Netherlands: 0 France: 1 (Chinese partner) UAE: 0 Kazakhstan: 0**

Belgium: 1 Netherlands: 0 France: 1 UAE: 0 Kazakhstan: 0

All over the world

2

US (associated office)

1 (American, senior foreign counsel)

1

3

Japan US (liaison office) Thailand (liaison office)

No further information about any of them


4

France (associated office) Spain (merged office) Sweden US

France: 1 (partner, Chinese) Spain: 17 (all Spanish except for 2 Chinese lawyers) Sweden: 1 (partner, Chinese) US: 0

France: 1 Spain: 17 Sweden: 1 US: 0

5

US Canada Uruguay Chinese Taipei



17


Law Firm






Europe (liaison office) 13

Guantao

观韬中茂

1

Australia (merged office)

2 (both Chinese partners)**

1 (Chinese partner)

14

Inner Mongolia Jian Zhong

建中

4

Mongolia Netherlands US (2)



US

New York: 4 (all Chinese, 3 are partners) Silicon Valley: 2 (both are Chinese partners)**

4 (New York) 1 (Silicon Valley)

15

Jun He

君合

2

16

KWM

金杜

16

17

Liaoning Fada

辽宁法大

1

Australia

0

0

18

Lifang

立方

1

Korea

1 (Chinese partner)**

0

19

Llinks

通力

1

UK

0**

0

20

River Delta Law Firm

江三角

1

US (liaison office)

0

0

21

Tahota

泰和泰

3

Korea (2) US (merged office)

Korea: 0 (both two offices) US: 1 (Chinese partner)

Korea: 0 (both two offices) US: 1

2

Japan (associated office) Chinese Taipei (associated office)

Japan: 8 (0 Chinese) Chinese Taipei: 2 (0 Chinese)

Japan: 0 Chinese Taipei: 0

22

TransAsia

权亚

All over the world

18


Law Firm


23

W&H Law Firm

北京炜衡

24

Wang Jing & Co.

25




3

Japan US Australia

Japan: 0 US: 1 (Chinese partner) Australia: 4 (all Chinese partners)

Japan: 0 US: 0 Australia: 0

敬海

1

US (merged office)

1 (Chinese partner)

1

Wincon

文康

1

Korea (associated liaison office)

0

0

26

Yunnan Baqian Law Group

八谦

1

Laos

1 (Chinese partner)

1

27

Zhengjiang L&H

六和

3

US (2, liaison offices) Canada (liaison office)



28

Zhonghao Law Firm

中豪

1

US

0

0

5

US (3) UK Japan

New York: 7 (3 are Chinese partners and counsels, 4 are US partners and counsels) Los Angeles: 1 (US partner) San Francisco: 1 (Taiwanese partner) UK: 5 (all Chinese partners) Japan: 1 (Chinese partner)**

7

Germany (2, associated offices) UK (both a direct and associated office) Saudi Arabia France

Germany: 0 UK: 0 Saudi Arabia: 0 France: 0

29

30

Zhonglun

Zhonglun W&D

中伦

中伦文德


19


NY: 7 LA: 1 SF: 1 UK: 5 Japan: 1

Germany: 0 UK: 0 Saudi Arabia: 0 France: 0

Law Firm

* **






Netherlands Belgium

Netherlands: 0 Belgium: 0

Netherlands: 0 Belgium: 0

The “Chinese” or “foreign” used in this Table means ethnicity, not the license to practice Chinese or foreign law, which will instead by covered in Table 3.3.1. A Chinese is a person that comes from the PRC (excluding Taiwan, Hong Kong, or Macau). Firm’s website only contains information about partners and senior counsel.

20


The numbers of overseas offices are based on the information from the law firms’ official website. For King & Wood and Dacheng, both of which are top-tier big corporate law firms in China, I did not look into their foreign offices because their internationalization strategy was not to directly go abroad and invest in offices in foreign jurisdictions, but to merge with established reputable international law firms. As such, their foreign offices are to a great extent built upon the existing ones from their foreign predecessors, namely Mallesons Stephen Jaques and SJ Berwin (for King & Wood), and Dentons (for Dacheng). Similar to the HK offices, the lawyers designated to the other overseas offices often do not really work there either, but are just available as main contact persons. From this perspective, it can be said that many of these foreign offices are in fact just liaison offices. Only a few firms out of Table 2.2.2, such as Deheng Law Firm, Grandall, Jun He, and Zhonglun, seem to have overseas offices to a substantive scale in a sense that they have practicing lawyers that are resident in the foreign jurisdiction. For Zhonglun, this is consistent with its development policy: for all of its 16 offices, “[a]n integrated management mechanism has been put in place … to ensure a close team cooperation.”54 As to the composition of staff, the offices have both seconded Chinese lawyers as well as local foreign lawyers, implying that local hiring could have taken place. This being said, the size of these offices tends to be rather small and thus far from comparable to their practices in major Chinese cities.55 It is also a reoccurring phenomenon that the many of overseas offices are not directly invested, but the law firms tend not to be explicit on their website about how they have set them up. In addition to direct investment,56 two alternatives have been identified. The first is an associated office, meaning that a Chinese law firm has a foreign alliance firm and the foreign office is actually based in that alliance firm. The Berlin office of Co-Effort Law Firm LLP is an example of such an associated office. It shares the address of the local German alliance firm named Legal Skills Rechtsanwälte. According to the website of Co-Effort, Per Theobalt, the

54

Offices, ZHONGLUN, http://www.zhonglun.com/en/bgs.html (last visited Oct. 10, 2018). For example, as of September 30, 2018, Jun He’s Beijing headquarters office has 114 partners and senior counsels, Shanghai has 63, and Shenzhen has 13; and for Zhonglun, the numbers are 157 partners and senior counsels in Beijing, 94 in Shanghai, and 49 in Shenzhen. The same also holds for Deheng Law Firm, although it does not really belong to the top-tier club as the other two. 56 For example, Deheng Law Firm claims that its Moscow office is “directly invested and managed by its Beijing headquarters”. See 机构简介 [Office Introduction], DEHENG.COM.CN, http://www.deheng.com.cn/city/info/19 (last visited Oct. 10, 2018). 55

21


managing director of Legal Skills,57 is also a Co-Effort lawyer58 and representative of the firm’s Berlin office.59 Similarly, on Zhonglun W&D’s website, a click on its German offices will bring one directly to Lemmer, an association of cooperating family-owned consultancy companies in Hamburg and Berlin;60 and Lemmer’s website also include Zhonglun W&D’s Chinese offices within its international network.61 In Asia, the Tokyo Offices of Broad & Bright62 and TransAsia63 are also based in their Japanese alliance partners. The other alternative is a merged office, which is created as a result of a Chinese law firm acquiring and taking over the staff of the foreign law firm. An example is the New York office of the Chinese law firm Wang Jing & Co., which was created in 2016 after merging with the Law Office of Ren Rong Pan,64 a local boutique firm, and Ren Rong Pan Esq. joined Wang Jing & Co. as a senior international partner to run the office.65 The same is also true for the Paris office of DeHeng Law Offices,66 the Sydney office of Guantao,67 and the Washington office of Tahota.68 Each of these foreign offices was created by merging with a local law firm, which was originally founded and run by an overseas Chinese lawyer that is licensed to practice the law of the foreign jurisdiction. After the merger, the local firm typically adds the name of the Chinese law firm into its name, and its founder then joins the Chinese law firm as an international partner

57

About Us, LEGAL SKILLS, http://www.legalskills.info/about%20legal%20skills (last visited Oct. 10, 2018). Per Theobolt, CO-EFFORT, http://www.coeffort.com/index.php?m=content&c=index&a=show&catid=127&id=143 (last visited Oct. 10, 2018). 59 LEGAL SKILLS Rechtsanwälte & Co-Effort Law Firm LLP, LEGAL SKILLS, http://www.legalskills.info/offices/germany/berlin-rechtsanwalt (last visited Oct. 10, 2018). 60 Our Business, LEMMER, http://www.lemmer-law.com/ (last visited Oct. 10, 2018). 61 Our Offices, LEMMER, http://www.lemmer-law.com/our-offices.html (last visited Oct. 10, 2018). 62 Offices, BROAD & BRIGHT, http://www.broadbright.com/en/bgjg.htm (last visited Oct. 10, 2018). 63 Welcome, TA LAWYERS GKJ, http://talaw.jp/en/index.php (last visited Oct. 10, 2018). 64 Wang Jing & Co. Merged with Law Office of Ren Rong Pan – New York Office is Now Open!, WANG JING & CO., Mar. 11, 2016, http://www.wjnco.com/eng/news_show.asp?news_id=895 (last visited Oct. 10, 2018). 65 Pan Renrong, WANG JING & CO., http://www.wjnco.com/eng/peopleview.asp?peoples_id=185 (last visited Oct. 10, 2018). 66 After the merger, the local firm is renamed into Deheng Shi & Chen Associes, see http://shi-chendeheng.pagesperso-orange.fr/ (last visited Oct. 10, 2018). The founder of Shi & Chen Associes, Mr. Renlin Shi, joined DeHeng Law Offices as a global partner to run its France office. See Renlin SHI, DHL.COM.CN, http://www.dhl.com.cn/EN/Team_show/0005/011124.aspx?AID=00000000000000010279 (last visited Oct. 10, 2018). 67 Inauguration of Guantao & CS Lawyers (Sydney), CS LAWYERS, Aug. 31, 2017, http://www.cslawyers.com.au/inauguration-of-guantao-cs-lawyers-sydney/ (last visited Oct. 10, 2018). The founder of CS Lawyers, Mr. Shun Cheng, joined Guantao as the managing partner of its Sydney office. See Shun Cheng, GUANTAO, http://en.guantao.com/prod_view.aspx?TypeId=82&Id=548&FId=t3:82:3 (last visited Oct. 10, 2018). 68 After the merger, the local firm is renamed into Tahota Washington Law Firm PLLC, see https://tahotauslaw.com/. Its principal attorney, Shaoming Cheng Esq. is also a partner of Tahota. 58

22


to run the local office. To the extent that the relevant information is available, the only exception in my sample is Grandall, which reorganized a local Spanish boutique firm called Colon de Carvajal Abogados in 2016 and brought it under the integrated management of Grandall Madrid office.69 Different from all the local foreign law firms in the other mergers, Colon de Carvajal Abogados is a Spanish firm with a professional team consisting mostly of Spanish lawyers,70 while it does still have a strong Chinese connection by having “China desk” dedicated specifically to the services for Chinese clients and investment in China.71 To the extent possible, I have also tried to search for the official business registration information about the foreign offices of the Chinese law firms. Although the findings are too limited to be conclusive on a general level, there are still an interesting discovery. The London offices of AllBright and Zhonglun W&D actually both exist as an independent business entity according to the registrations at the UK Companies House.72 This being so, AllBright’s presence in London is based in the office of the UK law firm Bird & Bird, which is one of the terms they agreed on in their cooperation agreement signed in November 2017.73 Similarly, on the official website of Zhonglun W&D’s, the link to its London office redirects to a local English law firm named DKLM Solicitors, which formed a strategic association with Zhonglun W&D in 2012.74 Speaking about the motivation behind registering a formal business on paper while maintaining the operation on the level of a collaborative association in practice, a reasonable guess might be that doing so helps the firms to create a real option. At first, they want to test the waters by sharing physical resources with and learning about intangible and tacit knowhow from their local partners, and maybe scale up the investment and commit to a fully-owned office at a later stage

69

Spanish Colon de Carvajal Abogados Successfully Joined Grandall Madrid Office, GRANDALL, May 29, 2016, http://www.grandall.com.cn/news_article.aspx?alias=160701143808 (last visited Oct. 10, 2018). 70 The Team, COLON DE CARVAJAL ABOGADOS / SPAIN GRANDALL LAW FIRM, https://colondecarvajal.com/en/theteam/ (last visited Oct. 10, 2018). 71 Spanish Colon de Carvajal Abogados Successfully Joined Grandall Madrid Office, supra note 69. 72 Search the register, COMPANIES HOUSE, https://beta.companieshouse.gov.uk/ (last visited Oct. 10, 2018). 73 International law firm Bird & Bird LLP today announces a major co-operation agreement with AllBright Law Offices, one of China's top five domestic law firms, BIRD & BIRD, Nov. 2, 2017, https://www.twobirds.com/en/news/press-releases/2017/china/bird-and-bird-enters-into-co-operation-agreementwith-top-5-chinese-law-firm-allbright (last visited Oct. 10, 2018). 74 About us, DKLM SOLICITORS, http://www.dklm.co.uk/site/about/ (last visited Oct. 10, 2018).

23


when they become savvier in the foreign market. Actually, this is confirmed by one of AllBright’s senior partner in an interview:75 “In the beginning, [our London office] will not provide any local legal services. Its main function is to coordinate the relevant issues regarding the strategic alliance between AllBright and Bird & Bird, which may include setting mutual standards for our services and pricing, tracking and managing business referrals, and joint marketing and brand building, so as to enhance the collaboration competence for us to provide high quality legal services to our clients.”

2.2.3 Formal Networks An aggregate of 43 firms in my sample are a member of certain formal referral network(s). In addition to participating in existing formal referral networks, Chinese law firms have been increasingly keen to initiate their own ones.76 The most eye-catching example is the Sino-Global Legal Alliance (“SGLA”), which was originally set up in 2007 as “China’s first cross-border law firm alliance”77 and so far the only such network recognized by the Chamber’s ranking.78 13 firms in my sample are members of this network, and many of them, such as AllBright, China Commercial Law firm, were even among the original founders. A speech by the alliance’s president at the tenth year anniversary of SGLA in 2017 provides a quick overview of it:79 “In the past ten years, … the number of our domestic members has increased from 9 to 23, covering 21 major provinces in China. The alliance boosts 3000 practicing lawyers, 800 partners, and has grossed more than RMB2 billion in 2016. … The average revenue of our member firms reached almost RMB100 million, which is 30 times of the national average;

锦天城联手鸿鹄加强全球拓展 [AllBright Joins Forces with Bird & Bird for Global Expansion], CHINA BUSINESS LAW JOURNAL, Dec. 11, 2017, https://www.vantageasia.com/zhhans/%E9%94%A6%E5%A4%A9%E5%9F%8E%E5%92%8C%E9%B8%BF%E9%B9%84%E8%BE%BE%E6%8 8%90%E5%90%88%E4%BD%9C%E5%8D%8F%E8%AE%AE/ (last visited Oct. 10, 2018). 76 Jing Li, Legal Profession of China in a Globalized World: Innovations and New Challenges, INTERNATIONAL JOURNAL OF THE LEGAL PROFESSION (2018). 77 About us, SGLA, http://www.sglalaw.com/about/ (last visited Oct. 10, 2018). 78 韩德云主席在中世律所联盟十周年庆典上的致辞 [Alliance President’s Speech at SGLA’s 10th Year Anniversary Celebration], SGLA, Nov. 13, 2017, http://www.sglalaw.com/dynamic/412/ (last visited Oct. 10, 2018). 79 Id. 75

24


and the average revenue per lawyer is RMB800,000, which is 3.5 times of the national average.” Despite its already established success and expanding coverage, SGLA is still very domestically oriented, reaching only to Hong Kong beyond Mainland China.80 As a matter of fact, the majority of the Chinese-firm-initiated networks are similar to SGLA in this respect: they are either completely domestic, or cross-border only to a very limited scale, thus is more appropriately labelled as “regional” than “international|”. An outstanding example for the domestic law firm network is Legal Boutique League, which was created in 2012 by eight leading Chinese law firms, all of which are "Chambers recommended firms” in their respective field.81 As to cross-border networks, a notable finding is that many of them tend to revolve around the government-initiated “One Belt One Road” or “OBOR” strategy. As a pioneer, Shanghai-based law firm Boss & Young started already in 2015 a specific OBOR initiative by leveraging the resources of the IR Global Network, of which it is a member, for the purposes of collaborating with the leading foreign law firms along the Belt & Road on a project-by-project basis.82 More recently, similar efforts are also made by Co-Effort Law Firm, which has entered into a strategic collaboration framework agreement with eight law firms in the Belt & Road countries in 2016,83 and Grandall Law Firm, which, together with law firms from Hong Kong, Singapore, Australia, and Sweden, launched the Belt & Road Legal Services Cooperative Partnership in 2017.84 Two important questions arise with regards to these tightly-coordinated quasi-firm networks, namely, what characteristics do the law firms have in common, and why are they

80

About us, supra note 77. Legal Boutique League (LBL) started in Beijing, LIFANG & PARTNERS, Dec. 27, 2012, http://www.lifanglaw.com/jp/plus/view.php?aid=949 (last visited Oct. 10, 2018). All of these eight law firms are captured in my sample. 82 Boss & Young, Boss & Young launches OBOR alliance to target Chinese development strategy, IR GLOBAL, June 18, 2015, https://www.irglobal.com/article/boss-young-launches-obor-alliance-to-target-chinese-developmentstrategy-5779 (last visited Oct. 10, 2018). 83 “一带一路逐梦全球” 海外投资与法律服务论坛成功举办 [“One Belt One Road, Dream of the World” Overseas Investment and Legal Service Conference Successfully Concluded], CO-EFFORT LAW FIRM LLP, Nov. 21, 2016, http://www.co-effort.com/index.php?m=content&c=index&a=show&catid=244&id=1060 (last visited Oct. 10, 2018). 84 共建“一带一路”法律服务平台共享包容开放律师合作成果 [Joining Hands to Build a Legal Services Platform for OBOR, Benefiting from an Inclusive and Open Cooperation of Lawyers], GRANDALL LAW FIRM, Aug. 16, 2017, http://www.grandall.com.cn/guoji/glxzjl/170816113257.htm (last visited Oct. 10, 2018). 81

25


motivated to initiate these networks in the first place. Echoing the findings from Morgan & Quack (2006), the law firms are typically large on the provincial level and can be best described as “second-tier” in their national setting.85 Faced with the competition from the top-tier corporate law firms, they run the risk of gradually losing their major clients if they cannot deliver international services. As such, the networks allow them to share and leverage their expertise while retaining their independence.86 For SGLA, the member firms have reached a wide consensus on these issues:87 “We have realized that … on the one hand, China’s legal services market is undergoing significant changes, with the high-end business rapidly concentrating to the end of top-tier big firms, and it is now a general trend for law firms to compete on a national level. On the other hand, the primary sector of China’s legal services market is still provincial. For most of our member firms, in order to maintain their leading position in the regional or specialized market and fortify their existing competitive edge, it is important to not only broaden the horizons for comprehensive development, but also deploy a national network which is ready for potential extensions on the global scale. … Today, we are pleased to see that there is an increasing consensus among our member firms about the goal of building a “semi-integrative” alliance. For the past ten years, it is our greatest achievement that more and more of our member firms have found a high correspondence between the development strategy of their own and that of the Alliance.”

2.2.4 Informal Ad Hoc Referral Relationships Next to formal referral networks, Chinese law firms have also developed informal, loose cooperative relationships with foreign law firms, which are not labelled with a specific name or governed by a dedicated charter or agreement. Rather than contractual obligations, the crossreferrals are made out of reciprocal favors or historical business dealings. The following excerpt from AnJie, a Beijing-based boutique law firm, vividly describes the nature of such informal referral relationships and how they contribute to broaden a law firm’s international reach:

85

Morgan & Quack, supra note 3, at 223. Id. 87 Alliance President’s Speech at SGLA’s 10th Year Anniversary Celebration, supra note 78. 86

26


“As a result of our long-term experience working on cross-border transactions between Chinese and foreign clients, we have built up an extensive cooperative network with firstclass law firms in the U.S., UK, Germany, France, Australia, Japan, South Korea, and other major states or regions. AnJie can help clients reach top legal services in almost every jurisdiction in the world. With substantial local and international experience, as well as a solid professional network around the world, we are well positioned to provide effective first-hand global solutions to Chinese enterprises that are to execute “going out” strategies.”88

2.2.5 Bilateral Alliances For this part, I exclude the cases where the alliances or associations with foreign law firms are set up solely for the purpose of having a local office in the foreign jurisdiction, because they are already discussed in Sections 2.2.1 and 2.2.2 above. After such exclusions, there are still 17 law firms in my sample that have formed long-term bilateral alliances with overseas law firms, and I present them below. TABLE 2.2.5: SPECIFIC ALLIANCES WITH FOREIGN LAW FIRMS Law Firm


Jurisdiction of Partner Firm(s)

Content of Collaboration

1

AllBright

锦天城

UK HK

UK: A close mutual collaborative relationship HK: A joint operation law office in Shenzhen

2

Fen Xun

奋迅

US

A joint operation law office in Shanghai Free Trade Zone (“FTZ”)

3


华商

HK

A joint operation law office in Shenzhen

4

Deheng Law Firm

德衡律师集团

HK


5

Guantao

观韬

Australia

A close mutual collaborative relationship

6

Jia Yuan

嘉源

HK

A joint operation law office in Guangzhou

88

International Network, ANJIE LAW FIRM, http://www.anjielaw.com/en/about/index.html (last visited Oct. 10, 2018).

27


7

Jin Mao PRC Lawyers

金茂

Japan


8

Lawjay

罗杰

UK

Lawjay dedicates a specific team to serve the clients from the UK firm

MWE China Law Offices Shanghai Runyi Law

元达

US


润一

Chinese Taipei


Each is a stable local cooperative partner of TransAsia

9 10

11

TransAsia

权亚

China (Bohe Law Firm) US Canada Indonesia Chinese Taipei

12

Wang Jing & Co.

敬海

HK


13

Wintell & Co.

瀛泰

UK

A joint operation law office in Shanghai FTZ

14

Zhong Yin Law Firm

中银

HK (Fongs Lawyers) Macau (Rato, Ling, Lei & Cortes) HK (LT Lawyers)

A joint operation law office in Zhuhai (with Fongs Lawyers and Rato, Ling, Lei & Cortes) A close mutual collaborative relationship (with LT Lawyers)

15

16 17

Zhonghao Law Firm

中豪律师集团

US (Honigman) US (Nexen Pruet) China (Grandall) HK

US (Honigman): A close mutual collaborative relationship especially focused on advisory legal work in auto and manufacturing business US (Nexen Pruet): A close mutual collaborative relationship China: a close mutual collaborative relationship in securities and capital market business HK: A close mutual collaborative relationship

Zhonglun W&D Zhongzi Law Office

中伦文德

HK


中咨

Japan


Overall, it can be seen that these alliances are mutually beneficial – by forming a collaborative relationship with a foreign partner, the Chinese law firm not only gains access to the foreign firm’s resources, the foreign firm also gets the ticket to enter the Chinese legal market. A typical way of doing so is that the foreign law firm sets up a joint operated law office in China together with the Chinese law firm. A technical matter worth mentioning here is that such Sino-foreign joint-operated law offices are only allowed to a rather limited extent under Chinese law. To be more specific, this possibility is open only to a law firm from Hong Kong or

28


Macau;89 or to a foreign law firm from any other jurisdiction, but the joint operation office should only be located in the Shanghai FTZ.90 In a joint operation law office, each of the cooperative partners may only provide legal services pertaining to its own jurisdiction, and shall maintain independent on matters related to finance and civil liabilities.91 In this light, although the strategic alliance between the Chicago-based US law firm McDermott Will & Emery and Shanghai Yuan Da resulted in the English name of the Chinese law firm being changed into MWE China Law Offices for marketing purposes, the two firms are in fact still two independent entities. An article in the Wall Street Journal in 2007, when the strategic alliance was set up as the first one of such a kind in China, revealed important details of the terms of the tie-up as summarized in Figure 2.2.5:92 FIGURE 2.2.5: TERMS OF MWE AND YUAN DA STRATEGIC ALLIANCE Independent

Shared MWE name: licensed to Yuan Da for a fee

Finance

Computer and other technical facilities: integrated into the MWE global network

Profits

Knowledge: co-hosted seminars Staff and office space: periodical secondments across offices Clients

香港特别行政区和澳门特别行政区律师事务所与内地律师事务所联营管理办法 [Measures for the Administration of Associations Formed by Law Firms of the Hong Kong Special Administrative Region or the Macao Special Administrative Region and Mainland Law Firms] (amended and promulgated by the Ministry of Justice, Nov. 21, 2012), LAWINFOCHINA, available at http://www.lawinfochina.com. 90 上海市人民政府办公厅关于转发市司法局制订的《中国（上海）自由贸易试验区中外律师事务所互派律师担任法律顾问的实施办法》《中国（上海）自由贸易试验区中外律师事务所联营的实施办法》的通知 [Notice of the General Office of the Shanghai Municipal People’s Government on Forwarding the Implementation Measures for Mutual Assignment of Lawyers to Serve as Legal Consultants by Chinese and Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone and the Implementation Measures for Economic Association between Chinese and Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone Developed by the Shanghai Municipal Bureau of Justice] (promulgated by Shanghai Municipal People's Government, Nov. 18, 2014), LAWINFOCHINA, available at: http://www.lawinfochina.com. 91 See Measures for the Administration of Associations Formed by Law Firms of the Hong Kong Special Administrative Region or the Macao Special Administrative Region and Mainland Law Firms, supra note 89, arts. 2 & 3; and Implementation Measures for Economic Association between Chinese and Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone, supra note 90, art. 2. 92 Nathan Koppel & Andrew Batson, A U.S. Law Firm Takes a New Route into China, THE WALL STREET JOURNAL, Jan. 30, 2007, available at https://www.wsj.com/articles/SB117010599044391556 (last visited Nov. 20, 2018). 89

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Benefits: Team up to provide a one-stop shopping venue for clients

III.

DISCUSSION AND ANALYSIS

3.1

Motivations for Internationalization

3.1.1 Chasing Clients To offer a more systematic understanding of the motivations behind internationalization strategies, John Dunning proposes an eclectic approach that looks into the relationship among ownership, location and internationalization (thus the “OLI” framework).93 According to Dunning, a firm’s multinational business activities may be motivated by the need to seek market, resource, efficiency, and strategic asset.94 Client relationship is clearly an essential strategic asset to a law firm, as the ability of developing, maintaining, and managing client relationships not only directly affects a firm’s survival and performance, but also reflects its overall competitive strategy.95 Client relationships can be classified as relational and transactional. The former is long-term and based on trust and commitment, while the latter is short-lived and based on arm’s length business dealings.96 Conventionally, client relationships in the realm of legal services provision have been labelled as “personal interactive”.97 This is because, when the great deal of information asymmetry prevents a client from precisely define the legal problem and monitor the

93

See John H. Dunning, Trade, Location of Economic Activity and the MNE: A Search for an Eclectic Approach, in Bertil Ohlin, Per-ove Hesselborn & Per Magnus Wijkman (eds.) THE INTERNATIONAL ALLOCATION OF ECONOMIC ACTIVITY: PROCEEDINGS OF A NOBEL SYMPOSIUM HELD AT STOCKHOLM (London: Macmillan, 1977). See also John H. Dunning, The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions, 19 JOURNAL OF INTERNATIONAL BUSINESS STUDIES 1 (1988). 94 Id. 95 Joseph Broschak, Client Relationships in Professional Service Firms, in Robert Hinings, Daniel Muzio, Joseph Broschak & Laura Empson (eds.) THE OXFORD HANDBOOK OF PROFESSIONAL SERVICE FIRMS (Oxford: Oxford University Press 2015), at 304. 96 Id. at 307. 97 Id. at 309.

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legal services,98 long-term trust-based business dealings with one or a few law firms may pay off by saving the client considerable costs of shopping around and testing other firms.99 As such, a direct motivation for law firms to embark on an internationalization journey is to chase their clients, especially their big, multinational corporate clients.100 This being said, it is also found that the relationship between investment banks and their clients has been shifting from relational to more transactional, in a sense that besides the relational business relationships with one or a few investment banks, corporate clients also use others on a transactional basis and distribute their business among many competitors.101 Given the need of the clients for increased efficiency, predictability, and cost effectiveness in the services they purchase from law firms, similar trend has also emerged in the legal service market. As a result, the dynamics of supply and demand have already undergone profound long-term changes, indicating that the legal profession now lives in a buyer’s market.102 This holds true especially for big corporate clients, which, unlike individual non-professional consumers, employ their own in-house corporate counsel and thus are informed and repeating buyers of legal services. Following the line of reasoning above, two important questions arise. The first is how much a law firm needs to be present locally in a host country. This is because, unlike tangible goods, services cannot be stored and transported for later consumption. As a result, this means that international providers of services would have to be present in the locations in which they want to do business.103 In the same vein, making the investment of matching the clients’ geographic diversification may facilitate convenient and efficient attorney-client communication when the two sides can easily meet up,104 and also signal the law firm’s commitment to the long-

98

Frank H. Stephen, James H. Love & Neil Rickman, Regulation of the Legal Profession, in Roger J. Van den Bergh & Allessio M. Pacces (eds.) REGULATION AND ECONOMICS (Cheltenham, Edward Edgar Publishing, 2012), at 649. 99 Broschak, supra note 95, at 309. 100 Michael A. Hitt, Leonard Bierman, Klaus Uhlenbruck, & Katsuhiko Shimizu, The Importance of Resources in the Internationalization of Professional Service Firms: The Good, the Bad, and the Ugly, 49 ACADEMY OF MANAGEMENT JOURNAL 1137 (2006). 101 Wayne E. Baker, Market Networks and Corporate Behavior, 96 AMERICAN JOURNAL OF SOCIOLOGY 589 (1990). 102 Georgetown Law Center for Study of the Legal Profession & Peer Monitor, 2015 Report on the State of the Legal Market, available at https://www.law.georgetown.edu/news/press-releases/georgetown-law-and-peer-monitorrelease-2015-report-on-the-state-of-the-legal-market.cfm, at 15. 103 See Glenn Morgan & Mehdi Bousebaa, Internationalization of Professional Service Firms: Drivers, Forms, and Outcomes, in Robert Hinings, Daniel Muzio, Joseph Broschak & Laura Empson (eds.) THE OXFORD HANDBOOK OF PROFESSIONAL SERVICE FIRMS (Oxford: Oxford University Press 2015), at 74. 104 Broschak, supra note 95, at 318.

31


term relationship with the clients.105 A typical example in this regard is that, although most of the China offices do not make money and constitute only a tiny fraction of their global revenue, many foreign law firms nevertheless still open and operate a small outpost office in China, hoping to show commitment to the huge potential legal market.106 Above being said, however, it is also argued that the need for physical presence in the foreign jurisdiction has been reduced because of advances in communications technology.107 The second questions is, even if law firms do have directly-invested foreign offices, how much are their clients really inclined to make use of them, when there are also local law firms and/or offices of other prominent international law firms ready at their disposal. On the affirmative side, a widely accepted notion is the so-called “homophily principle”, which means that similarity breeds and structures personal networks and social connections, and contact

between similar people occurs at a higher rate than among dissimilar people.108 This holds true also for the formation of client-attorney relationship. For example, it is observed that law firms take the effort to create some resemblance with their clients because clients prefer dealing with law firms where the lawyers have similar profiles.109 Similarly, clients of knowledge-

intensive firms have historically tended to retain those companies with which they have experience, in order to reduce uncertainty and anxiety.110 On a more general note, in analyzing the legal profession’s historical development, Hanlon (2004) points out that the similarities between clients and lawyers help to build reputational capital, firm status and trust.111 On the flip side, despite the cultural and sociodemographic similarities and historical business dealings, clients may still choose a foreign law firm for a number of reasons. It is Joseph P. Broschak, Will They Miss You When You’re Gone? The Effect of Managers’ Career Mobility on the Dissolution of Market Ties, 49 ADMINISTRATIVE SCIENCE QUARTERLY 608 (2004). 106 Rachel Stern & Su Li, The Outpost Office: How International Law Firms Approach the China Market, 41 LAW & SOCIAL INQUIRY 184 (2016). 107 Carole Silver, Local Matters: Internationalizing Strategies for U.S. Law Firms, 14 INDIANA JOURNAL OF GLOBAL LEGAL STUDIES 67, 76 (2007). 108 Miller McPherson, Lynn Smith-Lovin, & James M Cook, Birds of a Feather: Homophily in Social Networks, 27 ANNU. REV. SOCIOL. 475 (2001). 109 Louise Ashley & Laura Empson, Differentiation and discrimination: Understanding social class and social exclusion in leading law firms, 66 HUMAN RELATIONS 219, 236 (2013). 110 Mats Alvesson, Knowledge Work: Ambiguity, Image and Identity, 54 HUMAN RELATIONS 863, 874 (2001). 111 Gerard Hanlon, Institutional forms and organizational structures: Homology, trust and reputational capital in professional service firms, 11 ORGANIZATION 187, 202-3 (2004). 105

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submitted that one important reason for US law firms to lead the global legal services market is their abundant experience. Thanks to the informational advantage acquired from previous international deals and litigations, they are often able to triumph the law firms that are only occasional players in complex legal work involving multiple jurisdictions.112 While as found in

Section II, the overseas presence of many Chinese law firms are rather limited in both scale and expertise, which may not live up to the standards demanded by big deals that involve complex transactional engineering across multiple jurisdictions. Moreover, the nature of past experience also affects a client’s choice of legal counsel. As a matter of fact, after their privatization from the state apparatus, Chinese law firms got first exposed to foreign-related legal work through their cooperation with foreign law firms.113 In this respect, although a Chinese

law firm may already have been repeatedly involved in transnational legal work, it is likely that its role therein was only limited to ancillary and supportive work, while the sophisticated, high-end part of work was still retained by the deal counsel, which was usually assumed by a large international law firm.114 As such, it remains to be seen which of the two forces prevails: the homophily between client and attorney (thus Chinese clients would first consider retaining a Chinese law firm), or the comparative shortage of experience in leading sophisticated transactional legal services (thus a reputable local or international firm is more likely to win the contest). How would this change if other key factors are taken into account, for example, when the outbound Chinese investor is a state-owned firm and thus is perhaps more likely to retain Chinese law firms for the sake of nationalism? Even if a Chinese law firm is not retained as the deal counsel, what roles can it play in international transactions? Although these question are beyond the scope of this article, they definitely deserve a closer examination in future research. But internationalization is not only about following the steps of existing clients. As law firms start business abroad, new opportunities also arise for them to attract new clients. This what Faulconbridge & Muzio (2017) call as “market seeking”.115 As found in Section 2.2, many 112

Sokol, supra note 28, at 26. Sida Liu, Client Influence and the Contingency of Professionalism: The Work of Elite Corporate Lawyers in China, 40 LAW & SOC’Y REV. 751, 758-59 (2006). 114 Sida Liu, Globalization as Boundary-Blurring: International and Local Law Firms in China’s Corporate Law Market, 42 LAW & SOCIETY REVIEW 771, 781-83 (2008). 115 Faulconbridge & Muzio, supra note 23. 113

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Chinese law firms have expanded internationally through different types of referral networks, varying from bigger and tightly-coordinated ones, to less formal and ad hoc ones, and to dedicated bilateral alliances. In addition, quite some so-claimed foreign offices of Chinese law firms are actually based in the offices of their overseas associated law firms. Thanks to their flexibility and diversity, international referral networks and alliances can be particularly useful in serving the legal needs for SMEs, whose international business is still on the development and thus the transactions are not yet demanding for highly complex international coordination.116 In this sense, besides the existing large multinational Chinese corporations, the potential new clients of the internationalizing Chinese law firms could most likely emerge from the SMEs world, which may include both the Chinese SMEs enthusiastic about expanding to new foreign markets, and foreign SMEs wishing to enter China. A concrete example is the Nextlaw Global Referral Network initiated by Dacheng-Dentons, which smartly focuses on the mid-range market that has been long ignored by the elite law firms. By taking boutique, specialty and small and mid-sized law firms under its umbrella, the firm can leverage the existing power of the two big players in the international legal services market, and effectively enter and compete in the SMEs sector.117

3.1.2 Echoing Government-Led Internationalization Initiatives In summary, there are three broad types of explanations for the regulative bargain between the state and the profession, namely, from the economic, sociological, and political perspectives.118 In particular, scholars taking the political view argue that different types of regulative bargains are a result of the evolution of historical struggles between professions, state actors, and clients in different countries.119 According to them, a state has its own fiscal, electoral, and legitimacy-based motives for striking a bargain with the professions.120 In this note, China can certainly be characterized as a strong and interventionist nation-state, where the 116

Morgan & Quack, supra note 3, at 224. Li, supra note 76. 118 Sigrid Quack & Elke Schüßler, Dynamics of Regulation of Professional Service Firms: National and Transnational Developments, in Robert Hinings, Daniel Muzio, Joseph Broschak & Laura Empson (eds.) THE OXFORD HANDBOOK OF PROFESSIONAL SERVICE FIRMS (Oxford: Oxford University Press 2015), at 52. 119 See the findings in MICHAEL BURRAGE & ROLF TORSTENDAHL (EDS.) PROFESSIONS IN THEORY AND HISTORY: RETHINKING THE STUDY OF THE PROFESSIONS (LONDON: SAGE PUBLICATIONS, 1990); and ROLF TORSTENDAHL & MICHAEL BURRAGE (EDS.) THE FORMATION OF PROFESSIONS: KNOWLEDGE, STATE AND STRATEGY (LONDON: SAGE PUBLICATIONS, 1990)). 120 Quack & Schüßler, supra note 118. 117

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state authorities play a key role in shaping trajectories of professionalization, and whose relationship with the legal profession involves more than a universal form of compromise.121 Relative to the laissez-faire history of the legal profession in the Anglo-American world, which is organized in a rather uniform matter and distinguished by the professional autonomy from the state and self-regulation as the founding features of professionalization,122 the legal profession of China shows deep political embeddedness in the state bureaucracy, which is a result of both its unique historical development path123 and institutional context.124 To be more specific, the Chinese government plays an overarching role in terms of directing resources in the whole economy, while the Ministry of Justice, the direct regulator of China’s legal profession, occupies only a weak, if not marginalized, structural position in the country’s political regime.125 As such, it is no surprise to see that when China has decided to carry out its ambitious “Going Out” strategy, which was announced at the beginning of the 21st century to encourage Chinese businesses to venture and operate abroad,126 the Chinese legal service providers are also officially assigned a role by the central government to take part in it and support the other (key) players. More recently, this national policy has been concretized to the prominent “One Belt One Road” initiative, which was unveiled by President Xi Jinping shortly after he assumed office,127 and has received heavy promotion by the government since then. In an official policy paper jointly issued by four ministries at the end of 2016,128 the government has coined four major areas where Chinese lawyers can compete with foreign lawyers in a global context. The top item

121

Li, supra note 76. See James R Faulconbridge & Daniel Muzio, Professions in a globalizing world: Towards a transnational sociology of the professions, 27 INTERNATIONAL SOCIOLOGY 136, 139 (2012). 123 Ethan Michelson, Lawyers, Political Embeddedness, and Institutional Continuity in China’s Transition from Socialism, 113 AMERICAN JOURNAL OF SOCIOLOGY 352, 365(2007). 124 See Sida Liu, Lawyers, State Officials and Significant Others: Symbiotic Exchange in the Chinese Legal Services Market, 206 THE CHINA QUARTERLY 276, 281-85 (2011) (finding that many professional groups co-exist and compete in China’s legal service market, which are regulated by multiple state agencies with distinct interests and power). 125 Sida Liu, Palace Wars over Professional Regulation: In-house Counsel in Chinese State-owned Enterprises, WISCONSIN LAW REVIEW 549, 570 (2012). 126 Hongying Huang, A Deep Look at China’s “Going Out” Policy, CENTRE FOR INTERNATIONAL GOVERNANCE INNOVATION COMMENTARY, Mar. 2016, https://www.cigionline.org/sites/default/files/hongying_wang_mar2016_web.pdf (last visited Oct. 10, 2018). 127 Chronology of China’s Belt and Road Initiative, XINHUANET, available at http://www.xinhuanet.com/english/2015-03/28/c_134105435.htm (last visited Oct. 10, 2018). 128 关于发展涉外法律服务业的意见 [Opinions on Developing the Foreign-Related Legal Service Industry] (jointly promulgated by the Ministry of Justice, the Ministry of Foreign Affairs, the Ministry of Commerce and the Legislative Affairs Office of the State Council, Dec. 30, 2016), LAWINFOCHINA, available at http://www.lawinfochina.com. 122

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on this list is to provide legal services to support the significant development strategies of the state, such as the Belt & Road imitative.129 When it comes to implementation, the government also takes a highly vigorous, if not paternal, approach in setting forth a roadmap for Chinese law firms to embark on the internationalization route. Among other things, such a roadmap involves the relevant work under the following three themes:130 

Going out: This includes, for example, selecting and recommending qualified talents to join international economic, trade and dispute resolution agencies as experts, so as to have a leading voice in these supra-national institutions; supporting Chinese law firms to build in three years’ time at least 30 representative offices in countries along the Belt & Road; supporting and encouraging alliances and business networks between Chinese and foreign law firms; and fostering cooperation and business alliances between Chinese and foreign law firms through the help of bar associations;



Building brands: This includes, for example, introducing a certification program to recognize and publish a list of model law firms with outstanding competence in providing foreign-related legal services; holding China-focused legal services forums; and establishing Belt & Road-themed lawyer alliances;



Talent education: This includes, for example, creating and refining a database of lawyers for foreign-related legal work; building (continuing) education bases for foreign-related legal talents within universities; and setting up dedicated company lawyer teams in foreign-oriented SOEs.

Such high-profiled governmental support is certainly echoed with great deal of enthusiasm among Chinese law firms. In addition to the formal networks specifically committed to the “Belt & Road” and “Going Out” initiatives as discussed in Section 2.2.3, such enthusiasm is also evidenced by the effort of tagging their internationalization strategies with the two hot buzz

129

Id. art. 4. 熊选国 [Xuanguo Xiong], 大力发展涉外法律服务业开创涉外法律服务工作新局面 ——在学习贯彻《关于发展涉外法律服务业的意见》座谈会上的讲话 [Vigorously Develop Foreign-Related Legal Services to Start a New Era of Foreign-Related Legal Work – A Speech at the Seminar for the “Opinions on Developing the ForeignRelated Legal Service Industry”], 3 中国律师 [CHINESE LAWYER] 07, 10-11 (2017). It is worth noting that Xiong is the vice minister of the MOJ. 130

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words. A vivid example is found in the announcement of the merger of Grandall and the Spanish law firm Colon de Carvajal Abogados, which reads as follows:131 “With this reorganization, Grandall and Colon de Carvajal Abogados can achieve complementary advantages and form powerful alliances, making Grandall more competitive in Spain and Europe, better serving strategies of “The Belt and Road” and Chinese enterprises’ "going out", and at the same time taking a solid step toward Grandall’s internationalization strategy.” And a similar message is conveyed by a senior partner of Tahota in an interview talking about why the firm has opened new foreign offices recently and more generally, about why it decides to pursue an internationalization strategy:132 “We first opened an office in DC, and at the beginning of this year the opening of our offices in Seoul and Busan was approved by the Korean Ministry of Justice – we are in the initial stages of exploring internationalization. In accordance with China becoming a more integrated part of the global economy and especially in the time of the Belt and Road strategy, an increasing number of Chinese enterprises “goes global”. As a result, they need a more international vision, and need experienced legal teams to help plan their international strategy - the law firms themselves also seek to internationalize, in order to strengthen the quality of their services.”

3.2

A Practical Approach of Internationalization

Despite the exposed keenness of the law firms to echo and participate in the governmentled internationalization ambitions from the outset, many of them have adopted rather pragmatic ways to make it happen in practice. On an increasing level of commitment, they have managed to venture into foreign markets by having loose local good friends firms; more formal and

131

Spanish Colon de Carvajal Abogados Successfully Joined Grandall Madrid Office, supra note 69. Asen Velinov, Chinese Law Firms Going Global – Lessons from the Internationalization of Chinese Law Firms – Highlights from Interviews, AMERICAN BAR ASSOCIATION, https://www.americanbar.org/groups/international_law/membership/chinese-law-firms-going-global/ (last visited Oct. 10, 2018). 132

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dedicated one-on-one alliance firms; initiating or participating in closely-coordinated formal referral networks; and finally investing and running their own offices in foreign markets. Going back to one of the questions raised in Section 3.1.1, i.e., how much a law firm has to be present in a foreign jurisdiction in order to provide legal services, a short quick answer to it would be: there are many ways to internationalize and having an overseas office is certainly not the only option out there. To be sure, firms tend to package the information to the fancier end when marketing their internationalization strategies to clients. This is most obvious in how they present their overseas offices on their website. As found in Sections 2.2.21 and 2.2.2, many so-called international offices of Chinse law firms are not directly invested, but are just created by merging or sharing office with a local alliance law firm. Such information, however, is usually played down or completely left out in the law firm’s pitch, and the word “office” can be used to denote quite different types of overseas presence. This is likely to leave the readers with the impression that all of the firm’s foreign offices are self-invested and wholly-owned, while in fact it might not be the case. The same also holds for the staffing of these offices. The fact that many of them are very thinly staffed (or are not yet staffed at all except for a designated regional contact person) is also not readily visible – one often needs to dig into the website to find more information about that. But such information packaging techniques are certainly understandable. Given the lack of tangible qualities for a client to inspect and judge on the services of professionals, it is of vital importance for a knowledge-intensive professional service firm to nurture an image of being so.133 In this respect, boasting many overseas offices not only helps to create an elite image in the eyes of the clients, but also is a valuable investment to a long-term client-attorney relationship, which contributes to the mitigation of information asymmetry problem in legal services shopping.134 Knowing that a law firm also has expertise and local presence in a foreign market will save the client the time and energy of looking for and testing a new counsel, thus increasing the chance that the client stays with the firm. Furthermore, an integrative global law firm is able to offer not only a uniform managerial style, which enables easy client referrals across the firm,

133 134

Alvesson, supra note 110, at 870. Sokol, supra note 28.

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but also the added value of practice groups.135 These practice groups help to the end of organizing the large teams of lawyers needed to complete sophisticated corporate transactions, and also assisting clients to identify the firm’s specializations.136 As a result, a client would be better able to rely on the consistent quality in cross-jurisdiction services. However, it is also admitted that there are not so many such integrative law firms globally,137 and thus cultivating transnational practice-group communities should be an important item in the development agenda of all law firms with a global ambition.138 Although it remains questionable how many Chinese law firms (if at all) can qualify as an integrative law firm, having a uniform portfolio of offices both domestically and internationally could be the first step to begin with. In this sense, it is plausible that law firms market this image deliberately. After all, like firm size, overseas offices also carry a symbolic value in the eyes of clients, which may likely to associate it with good firm quality. This is especially true for Chinese clients, especially private companies and provincial-level state-owned enterprises, which tend not to have strong in-house counsel to help them shop and select outside lawyers.139 There may be another perspective to examine such pragmatism in Chinese law firms’ internationalization strategies. The law firms seem to be not only echoing, but also taking the advantage to piggyback on the government-led initiatives. On the one hand, they actively and deliberately make use the buzz words in their public relation materials to tag along the hot trend, so that their internationalization activities fit into the directions set forth by the overarching state policy. On the other hand, the ways they set their steps abroad in practice are much more down to earth and show considerable creativity relative to the roadmap painted by the government officials. Consistent with previous research findings, it can be argued the globalization bears symbolic value to Chinese law firms, and there is a decoupling of formal structure and actual practice in their internationalization trajectories.140 In particular, there is high level of dynamism and diversity among Chinese law firms, some of which are identified to have granted considerable freedom to certain entrepreneurial offices / individuals.141 As discussed in Section 135

Morgan & Quack, supra note 3, at 228. See also Quack, supra note 1, at 163. Faulconbridge, Beaverstock, Muzio & Taylor, supra note 5, at 481. 137 Morgan & Quack, supra note 3, at 233. 138 Faulconbridge, Beaverstock, Muzio & Taylor, supra note 5, at 481. 139 Liu & Wu, supra note 50, at 829. 140 Id. at 833. 141 Stern & Li, supra note 106, at 202. 136

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2.2 above, this is most typically evidenced by those overseas offices created from merger or alliance, many of which have operated and will likely continue to operate as small independent businesses from the headquarters. In general, the overseas offices of Chinese law firms are very thinly staffed and thus do not have the capability of handling sophisticated legal work, but they do serve the purpose of “flying the flags overseas” and thus allow a Chinese law firm to be able to label itself as “international”.142 In addition to such symbolic value, they also hold important option value to the law firms as a form of investment to bet on possible future gains in the foreign market.143

3.3

A Closer Look

Although the number of observations is still small, the existing data in this paper do enable a closer look at the overseas operations of Chinese law firms. Here, I attach special focus onto the foreign offices, especially those with resident lawyers in them. I am particularly interested in the following three issues: (a) the ratio of the Chinese and foreign (resident) lawyers in the offices; (b) why are these Chinese144 / foreign lawyers145 seconded / hired into the foreign offices of the Chinese firms, by examining the ties that they have with the foreign jurisdiction / China; and (c) what are the key practice areas of these offices, by looking at the specialty or expertise of the senior lawyers (partners and senior counsel) that are actually resident there. Summed up, the answers to these questions can help to enhance the understanding of how these offices operate and what their target client groups are likely to be.

3.3.1 Balance of Chinese and Foreign Lawyer

142

Silver, supra note 107, at 78. Stern & Li, supra note 106, at 205. 144 In general, a Chinese lawyer generally is also ethnically Chinese. But for the purpose of this Section 3.3, a Chinese lawyer must have the education on Chinese law and thus is able to practice it. As such, if a lawyer is ethnically Chinese and speaks the language, but is not licensed to practice Chinese law, then he/she is treated as a foreign lawyer. Taiwanese and Hong Kong lawyers are counted as foreign lawyers as well. 145 In my sample, many of the resident Chinese lawyers in the foreign offices are also licensed to practice the local foreign law; but they are not double-counted again as foreign lawyers in Table 3.3.1. 143

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TABLE 3.3.1: CHINESE VS. FOREIGN LAWYERS IN OVERSEAS OFFICES OF CHINESE LAW FIRMS

Law Firm


Office Location

Number of Chinese Lawyer / Resident Lawyer

Number of Foreign Lawyer / Resident Lawyer

Balance?

AllBright

锦天城

UK

1 (partner) / 0

0

No resident lawyer


铸成

US

2 (partners) / 0

0

No resident lawyer


华商

Australia

1 (partner) / 0

0

No resident lawyer

Japan: 2 (partners) / 1

Japan: 1 (senior counsel) / 1

协力

Japan Germany France Italy Singapore Switzerland

Co-Effort Law Firm

Germany: 0

Germany: 1 / 1

France: 0

France: 1 (partner) / 1

US: 13 (5 partners) / 9 (1 partner)

Deheng Law Firm

德衡律师集团

US Russia (2) Australia Canada Japan Korea Singapore Germany Chinese Taipei

Russia (Moscow): 3 (partners) / 1 (partner) Russia (St. Petersburg): 1 (partner) / 1 Australia: 1 (partner) / 0 Canada: 1 (partner) / 0 Japan: 1 (partner) / 0 Korea: 2 (partners) / 0 Singapore: 1 (partner) / 1

Chinese Taipei: 1 / 0

DeHeng Law Offices

德恒律师事务所

Belgium, Netherlands France UAE Kazakhstan

Duan & Duan

段和段

US

Belgium: 0 France: 1 (partner) / 1

0

Germany: Only foreign lawyer France: Only foreign lawyer

US: 0 Russia (Moscow): 10 / 10 Russia (St. Petersburg): 2 / 2 Australia: 0 Canada: 0 Japan: 0 Korea: 0 Singapore: 0 Germany: 1 / 1

Germany: 0

Japan: Chinese > Foreign

US, Australia, Canada, Japan, Korea, Chinese Taipei: No resident lawyer Russia: Foreign > Chinese, but Chinese leading Singapore: No foreign resident lawyer Germany: Only foreign lawyer

Chinese Taipei: 0

Belgium: 1 (senior foreign counsel) / 1

Belgium: Only foreign lawyer

France: 0

France: No foreign resident lawyer

1 (senior foreign counsel) / 1

Only foreign lawyer

41


Law Firm

Grandall


国浩

Office Location

Number of Chinese Lawyer / Resident Lawyer

France Spain Sweden US

France: 1 (partner) / 1

Guantao

观韬中茂

Australia

Jun He

君合

US (2)

Number of Foreign Lawyer / Resident Lawyer

Balance?

France: 0

France and Sweden: No foreign resident lawyer

Spain: 15 (6 partners) / 15

Spain: 2 / 2

Sweden: 0

Spain: Foreign > Chinese but foreign leading

2 (partners) / 1

0

No foreign resident lawyer

New York: 1 (partner) / 1

NY: 3 (2 partners, 1 senior counsel) / 3

Sweden: 1 (partner) / 1

Silicon Valley: 1 (partner) / 1

Balanced

SV: 1 (partner) / 1

Lifang

立方

Korea

1 (partner) / 0

0

No resident lawyer

Tahota

泰和泰

Korea (2) US

US: 1 (partner) / 1

0


TransAsia

权亚

Japan Chinese Taipei

Japan: 0

Japan: 8 / 8

Chinese Taipei: 0

Chinese Taipei: 2 / 2

W&H Law Firm

北京炜衡

Japan US Australia

US: 1 (partner) / 0

Wang Jing & Co.

敬海

US

Yunnan Baqian Law Group

八谦

Laos

0

No resident lawyer

1 (partner) / 1

0


1 (partner) / 1

0


Australia: 4 (partners) / 0

New York: 1 (senior counsel) /1 Zhonglun

中伦

US (3) UK Japan

Only foreign lawyers

New York: 6 (5 partners and 1 counsel) / 6 Los Angeles: 1 (partner) / 1

Los Angeles: 0 San Francisco: 0 UK: 2 (partners) / 2

San Francisco: 1 (partner) / 1

Japan: 1 (partner) / 1

UK: 3 (partners) / 3 Japan: 0

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NY and UK: Balanced LA and SF: Only foreign lawyers Japan: No foreign resident lawyer

For the first question, the balance between Chinese vs. foreign lawyers is different in different offices, which can be roughly divided into the following types: 

No resident lawyer at all: The only staff of these offices are the Chinese partner(s) that are assigned to them, but none of the partners resides in the foreign offices. In my sample, there are 11 offices out of 6 firms that belong to this category.



No foreign resident lawyer: In this type, there are resident Chinese lawyers but no foreign lawyers. There are 9 offices out of 8 firms that fall under this category. Typically, these offices are created by merging or associating with a local foreign law firm, which, as discussed in Section 2.2.2, is set up by an overseas Chinese that have studied foreign law and later been licensed in the local foreign jurisdiction. Examples of such offices in my sample are the Singapore office of Deheng Law Firm, the Paris office of DeHeng Law Offices, the Paris office of Grandall, the Sydney office of Guantao, the Washington office of Tahota, and the New York office of Wang Jing & Co..



Only foreign lawyer: Contrasting to the type above, there are no Chinese lawyers in these offices. In my sample, 9 offices out of 6 firms belong to this category. Most of these offices are originally independent local boutique law firms, which were included in the global map of a Chinese law firm as a result of a mutual cooperative relationship with the latter. Examples include the Berlin office of Co-Effort, the Brussels office of DeHeng Law Offices,146 the Seattle office of Duan & Duan,147 and the Tokyo and Taipei offices of TransAsia, etc.. There are of course exceptions. The most prominent example is Zhonglun, whose US offices are established in 2013 and expanded in 2016, mainly through hirings.148 This will be discussed in further under the type “Balanced”.



Chinese > foreign: The only example in my sample is the Osaka office of CoEffort. It has both Chinese and Japanese lawyers in it, but the former outnumber the

Frank Fine Joins DeHeng Law Offices’ Competition and Antitrust Team: DeHeng is Now the First Chinese Law Firm in Brussels, BRUSSELS LEGAL, Sep. 28, 2012, available at https://www.brusselslegal.com/article/display/3125/News_28092012_Frank_Fine_Joins_DeHeng_Law_Offices_Co mpetition_and_Antitrust_Team_DeHeng_is_Now_the_First_Chinese_Law_Firm_in_Brussels (last visited Nov. 6, 2018). 147 Williams Kastner and Duan & Duan on Chinese Investment in the US, WILLIAM KASTNER, Aug. 30, 2010, http://www.williamskastner.com/williams-kastner-and-duan-duan-on-chinese-investment-in-the-us/ (last visited Nov. 6, 2018) The US law firm William Kastner has a strategic alliance with Duan & Duan, and its former partner Randy Aliment, who has already left William Kastner to join the Seattle office of another US law firm, is also a foreign legal counsel at Duan & Duan. See also Randy J. Aliment, DUAN & DUAN, http://www.duanduan.com/en/index.php/default/content/10627.html (last visited Nov. 6, 2018). 148 Shangjing Li, Zhong Lun opens 2 U.S. offices with ex-Dentons partners, ASIAN LEGAL BUSINESS, May 12, 2016, https://www.legalbusinessonline.com/news/zhong-lun-opens-2-us-offices-ex-dentons-partners/72310 (last visited Nov. 6, 2018). 146

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latter because the office is directly invested by a founding partner of Co-Effort who has years of experience of studying and working in Japan.149 

Foreign > Chinese: There are three offices of this type in my sample, namely, the two Russian offices of Deheng Law Firm, and the Madrid office of Grandall. The ways that they are managed are however different. Deheng’s Russian offices are directly invested by the headquarters,150 and led by two Chinese partners. There are no Russian lawyers at the management level. Comparatively, Grandall’s Madrid office is created by merging a local boutique firm. Its former partners (all Spanish) joined Grandall and continue to act as partners, and there are no Chinese lawyers at the management level.



Balanced: Only three foreign offices of two firms, namely, Jun He and Zhonglun, can qualify as “balanced”; while the patterns of such balance are still different. For Jun He, it is worth noting that actually all of the lawyers in these two US offices are ethnically Chinese – but some of them only have the US bar admissions and are not licensed to practice Chinese law. The same is also true for the London office of Zhonglun. In contrast, the New York office of Zhonglun demonstrates better diversity, in which three partners are ethnically non-Chinese. Such diversity has much to thank the 2016 hirings happened in the US, where two of these three partners left Dentons to join Zhonglun’s New York office.151 Zhonglun also took the chance to recruit two other partners, one Taiwanese and one American, to take charge of its offices in San Francisco and Los Angeles, respectively.152

3.3.2 Ties with Local Jurisdiction / China In order to find out about how Chinese lawyers are connected to the foreign jurisdiction and how foreign lawyers are connected to China, I mainly examine the resumes of those resident lawyers as published on the official websites of the firms. The results are largely self-evident. For the Chinese lawyers, the reasons for them to be assigned into a foreign office typically includes some of all of the following:    

Local legal education or training experience; Local law degree; Local bar admission(s); Competence in the local language or at least in English;

代表者寄语 [About Us], CHINAJAPANLAW.COM, http://www.chinajapanlaw.com/index.php?m=index&a=aboutus (last visited Nov. 6, 2018). 150 See Office Introduction, supra note 56. 151 Li, supra note 148. 152 Id. 149

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  

Experience of practicing the law of the foreign jurisdiction; Experience in cases and deals related to China and the local jurisdiction; and Experience in teaching and researching the relevant business and legal issues concerning the bilateral relationships between China and the local jurisdiction.

For foreign lawyers, their ties with China seem less obvious. A notable difference is, while it is almost a rule for a Chinese lawyer in a foreign office to have knowledge and/or experience in the local foreign law, which is typically evident through the local university-level legal education and/or practicing experience, this does not hold the same level of validity for the foreign lawyers. This is to say, except for those foreign lawyers that are ethnically Chinese themselves, the resumes of the rest foreign lawyers in the foreign offices of Chinese law firms typically do not show the same level of competence in the Chinese language and in Chinese law. As such, the most common ties with China among these foreign lawyers are the following two:  

Experience in cases and deals related to China and the local jurisdiction;153 and Experience in teaching and researching the relevant business and legal issues concerning the bilateral relationships between China and the local jurisdiction.154

While the relative lack of ties with China has certainly to do with the fact that the Chinese legal profession has a short history155 and has been and is still rather closed from foreigner’s participation,156 a reasonable explanation for this might be that the knowledge on Chinese law per se is not the top priority for these foreign offices. Given that law is country specific, a decision to sell legal services internationally involves offering advice on a multi-jurisdictional

153

An example is Mr. Randy Aliment, the foreign consultant to Duan & Duan. A short excerpt from his biography: “Randy Aliment is a partner in the Seattle office of Lewis Brisbois and […] also a Foreign Consultant to Duan & Duan […] He has extensive experience representing foreign clients in US litigation and overseeing foreign litigation for US clients (for example, China, Japan, Canada, Italy, Germany, Scotland, Egypt). He has also represented clients in commercial transactions in the US, Europe, the Middle East, China, and Japan.” See Randy J. Aliment, LEWIS BRISBOIS, https://lewisbrisbois.com/attorneys/aliment-randy-j (last visited Nov. 6, 2018). 154 An example is Mr. Frank Fine, who is in charge of the Brussels office of DeHeng Law Offices. A short excerpt from his biography: “Frank Fine has been practicing EU competition law in Brussels since 1986. […] He is also Executive Director of the China Institute of International Antitrust and Investment, which was formed in March 2012 under the auspices of the China University of Political Science and Law, where he is Visiting Professor of Competition Law.” See Frank Fine, DEHENG LAW OFFICES, http://www.dhl.com.cn/EN/Team_show/0005/011126.aspx (last visited Nov. 6, 2018). 155 Liu, supra note 124, at 281-85 (briefly reviewing the history of China’s legal reform and the birth and growth of lawyers and other alternative legal service providers). 156 A foreigner is not allowed to practice Chinese law. Such prohibition is already enforced by the requirement that the National Uniform Legal Profession Qualification Examination, or the Chinese bar exam, is only open to a person with the Chinese nationality. See Implementation Measures for the National Uniform Legal Profession Qualification Examination (promulgated by the Ministry of Justice, Apr. 28, 2018), LAWINFOCHINA, available at http://www.lawinfochina.com, art. 9.

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level. This would involve not only Chinese law and the law of the local foreign jurisdiction, but sometimes also the law of some other jurisdictions when a complex international transaction is question. Based on previous research, large Anglo-American law firms are able to proliferate their way of lawyering on a global scale, thanks to the dominance of New York State and English law in commercial transactions,157 as well as their expertise and experience in high-end practice areas.158 Comparatively, the market niche for the law firms from other jurisdictions is largely still limited to handling the legal work from their own country or region.159 As such, we can plausibly imagine that the main clients for the foreign offices of a Chinese law firm would be from two directions: the Chinese companies investing abroad; or foreign companies hoping to enter the Chinese market. For these clients, the support on the Chinese law part can be satisfied by the Chinese lawyers residing in these foreign offices and/or in the headquarters of the Chinese parent law firm. The foreign lawyers, in contrast, contribute their knowledge on local substantive law as well as the understanding of the political and cultural landscape in the foreign country, so that an inbound Chinese client does not have to go out and search for another local firm for the foreign law advice. In the opposite direction, the foreign lawyers can also add value by their experience and connections with the Chinese lawyers. This may benefit a local outbound company that wants to do business in China and know about potential legal issues, which may turn out to retain the Chinese law firm as its counsel. In both directions, given the fact these foreign offices are typically very thinly staffed, it is unlikely that they can handle the deals on their own without the support of the headquarters or other major offices of the Chinese parent law firm.

3.3.3 Key Areas of Practice In total, there are 12 law firms that have foreign offices with resident lawyers. Same as above, I check the resumes of these lawyers to see what areas of legal services they offer. As shown in Table 3.3.3, the most frequent practice areas are the high-end corporate transactional work, which are followed by the so-called trade-route related work that underpins a circuit of

157

Faulconbridge, Beaverstock, Muzio & Taylor, supra note 5, at 487. Stern & Li, supra note 106, at 192. 159 Id. 158

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capital flows between China and the local foreign country.160 Dispute resolution, general corporate legal counseling, and IP related services are also recurrent. On the whole, it can be said that the services available in the foreign offices of Chinese law firms are largely tailored to match the legal needs of corporate clients, but there are also a few exceptions such as the advice on immigration law and wealth planning, which might be particularly attractive to potential rich Chinese immigrants.161 TABLE 3.3.3: KEY PRACTICE AREAS OF FOREIGN OFFICES OF CHINESE LAW FIRMS (N=12)

Type of Practice

Total Frequency

Frequency among Chinese Lawyers

Frequency among Foreign Lawyers

Note

Banking & finance (2); bankruptcy & business reorganizations (2); capital markets & securities (3); M&As & joint ventures (6); private equity & investment funds (2); real estate (2)

Transactional work

17

8

9

International investment & trade

11

7

4

Dispute resolution & litigation

8

5

3

General corporate counseling

8

6

2

Intellectual property

4

2

2

Labor law

3

1

2

Tax law

3

1

2

Includes tax & wealth planning (1)

Other

3

1

2

Administrative law (1); maritime law (1); sports law (1)

Competition law

2

0

2

Immigration

2

2

0

Compliance

1

0

1

160

Id. Velinov, supra note 18 (point out that wealth management business is becoming a new driver of growth as Chinese law firms are paying increasing attention to high-net-worth individuals). 161

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The balance between Chinese and foreign lawyers is different in different practice areas. For transactional work and IP-related advice, Chinese and lawyers have almost equal expertise; while for certain other areas, a much bigger discrepancy exists among the two groups of professionals. For example, general corporate legal counseling is a typical Chinese-dominated expertise. This makes sense, as it is not a sector where a foreign office of a Chinese law firm can easily compete and excel a local law firm, unless a client is tied with or looking for the ties with China. As such, it is a good example of “trade-route” legal work. On the contrary, competition law is a rather foreign law expertise because of its high level of technicality and specificity to the local jurisdiction. The same logic also holds true for some other less common practice areas such as administrative law, labor law, and tax law. A recount of the internationalization route of the US law firms reveals a change of practice specialties in their overseas offices. Started out as small outposts run by generalist lawyers trained in the US, more and more of the offices expanded their operations by hiring local lawyers and attaching greater importance to the strategic deployment of certain areas of substantive specialties.162 By doing so, they can effectively focus on certain practices in particular locations, without trying to be all things to all clients from each office.163 Comparatively, due to the unique history of being created through mergers between British-German firms,164 large European law firms have made the commitment to an integrative development strategy already since their emergence. This involves combining different locally based capabilities and expertise to back up the knowledge and experience of a wider firm, to the end of serving clients from both their home jurisdictions and the host countries of their foreign offices.165 As such, international law firms from the developed legal markets arguably converge in the trend of integration despite their distinctive historical paths. Being the new entrants in the global legal market, Chinese law firms have demonstrated considerable creativity and pragmatism in making use of existing local resources to expand their presence overseas. A closer examination of their foreign offices discloses some primitive signs of heading to similar directions as their Anglo-American and European predecessors. Although most offices are still very thinly staffed, some of them have already shown a more balanced combination of Chinese and local foreign professionals, as well 162

Silver, supra note 107, at 80. Id. 164 Morgan & Quack, supra note 3, at 229. 165 Quack, supra note 1, at 163. 163

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as a more mixed pool of expertise on both high-end transactional work and more routine, traderoute underpinned work. For these Chinese law firms, one may argue that they are targeting not only at serving the big multinational Chinese corporate clients, but also at the small-andmedium-sized local companies, who might find the Chinese law firms particularly useful in relation to their China business or ambitions. IV.

CONCLUSION When it comes to internationalization, law firms have made use of a spectrum of strategies

to expand their business overseas, ranging from primitive ad hoc referral relationships, to more formal and closely-coordinated bilateral alliance and multilateral networks, and finally to setting up foreign branch offices. Existing research has largely focused on how big Anglo-American and European law firms have embarked on the globalization route, while little is known about the internationalization efforts of legal practitioners from the developing world. In this light, and thanks to the aggressive outbound investments from China, the international growth of Chinese law firms has gradually come under the spotlight in recent years when they chase their corporate clients to new foreign markets. Based on a hand-collected sample of 123 Chinese law firms, this paper is the very first to empirically look into the globalization of Chinese law firms. Overall, it finds that 75 out of the 123 firms have tried to expand overseas by adopting at least one of the four internationalization strategies, and a considerable number of them have even adopted multiple strategies simultaneously. The most frequently used strategies are international offices (including Hong Kong offices) and formal cross-border referral networks. In general, it is interesting to note that law firms are very enthusiastic to echo and tag along the government-led Belt & Road initiative so as to claim legitimacy for their internationalization activities, which corresponds to China’s long-standing image as an interventionist state. Arguably, Chinese law firms are still in the initial stage of their internationalization process, and the ways that they set their steps abroad in practice are very down to earth and have shown considerable creativity. Such pragmatism becomes most evident when examining the staffing of the international offices, many of which are not directly-invested but are associated or merged offices. There are often no resident lawyers in them except a partner acting as a regional contact. As such, internationalization carries more symbolic than substantive value, and often works as “cosmetics” for a law firm to 49


enhance its professional image in front of the clients. This being said, a small group of law firms have nevertheless demonstrated a more balanced combination of Chinese and local foreign professionals, as well as a more mixed pool of expertise on both lucrative transactional work and routine trade-route work in their foreign offices. These can be seen as primitive signs of a more integrative model of organizing a global law firm. Owing to such enhanced professional proficiency, and also to the force of the homophily, it might be argued that these Chinese law firms can grow into an interesting choice for the SMEs with legal needs in China-related international transactions. As such, they can gain a market niche relative to the big AngloAmerican law firms that target specifically at the high-end of the global legal services market.

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