Clydes breaks new ground in China with Chongqing joint venture

Clyde & Co has received regulatory approval to establish a joint venture in Chongqing with domestic firm West Link Partnership, making it the first international commercial firm to have a presence in south west China.

As part of the deal, Clyde & Co and West Link will be co-branded as Clyde & Co West Link in Chongqing, one of the largest cities in China with a population of 30 million and the size of Austria. The two firms will also share revenues according to the agreement.

Clydes’ Chongqing association, which has received approval from both the Ministry of Justice of China and the Bureau of Justice of Chongqing, is the firm’s latest expansion in China, following its recent opening in Beijing (7 May 2013). Through the joint venture, Clyde & Co is able to offer clients the full range of integrated legal services, with the PRC and contentious legal advice provided by the Chinese firm.

West Link is a sole-proprietary firm led by founder and managing partner Chen Yixin. Chen was qualified in China in 2000 and took part in the Lord Chancellor’s Training Scheme for Young Chinese Lawyers in 2005, during which she gained work experience in a magic circle firm’s London office. In 2007, she launched the firm, which currently has four associates and focuses primarily on corporate and foreign investment related matters and projects in Western China.

The initiative was led for Clydes by Shanghai-based corporate partner Michael Cripps, who will also oversee the operations of the joint venture. He is a veteran international lawyer in China, having been living and working in Shanghai since 1993.

“In terms of the economic growth rate and foreign investment, south west China is regarded as the biggest source of growth in the medium term for China. Therefore, we have elected Chongqing as the place for our latest expansion,” said Cripps. “We’re looking to grow the Chongqing team to two partners and eight associates fairly quickly.”

Clydes has already being servicing clients in Chongqing, including acting for a US healthcare company on corporate matters in the region.

“There are many challenges facing international firms in China. My personal view is that in the future we need to integrate far more closely with local firms. The joint venture model is a possible way and the best structure to do that,” said Cripps.

“We see working in partnership with local firms in different cities as key to our firm’s growth in China. We’re looking to replicate this model elsewhere, with Dalian being one possible location.”

China’s law and regulations bar foreign firms from entering into close association with Chinese firms. However, Clydes has achieved the deal through its Hong Kong arm under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).

The CEPA was first signed in 2003 and is essentially a free trade agreement allowing Hong Kong’s companies, services providers and residents enhanced access to the mainland Chinese market. Under the framework, Hong Kong law firms are able to enter into associations with their mainland counterparts, as long as they have at least three partners, who must all be Hong Kong qualified and have been in practice for at least 3 years. For mainland law firms to operate in association with Hong Kong law firms, CEPA requires that they be set up for 3 years. But there is no required number of full-time lawyers employed by the mainland law firms.

Bird & Bird was one of the first to take advantage of the CEPA framework. In 2009, its Hong Kong office established an association with Beijing-based firm Xiang Kun (31 August 2009).

In recent months, a number of UK firms have entered into strategic alliance with Chinese firms as an alternative to set up a representative office on the ground. Field Fisher Waterhouse, for instance, formed an association with Shanghai IP boutique Ryser & Associates in July 2013 setting up a Swiss Verein structure (8 July 2013).

The key difference is that the Clyde & Co West Link model allows the two firms closer integration, including co-branding, sharing resources, office premises and revenues in Chongqing. It is understood that a detailed business plan contains collaboration, revenue-sharing arrangements needs to be submitted to the country’s regulators as part of the application.

The firm currently has two offices in mainland China, ith bases in Shanghai and Beijing. The firm gained regulatory approval for a Beijing opening from China’s Ministry of Justice in May.