China Resources becomes latest state company to pioneer legal panel
28 June 2013 | By Yun Kriegler
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Chinese state-owned conglomerate China Resources is in the process of creating an international panel following the launch of a domestic panel in September 2012.
The legal department of China Resources’ group headquarters in Hong Kong is leading the process, with senior group legal counsel Anthony Poon being the key contact point for the submissions. A large number of international, Hong Kong and offshore firms were invited to submit their applications three months ago and the application deadline was earlier this month. The panel appointments are expected to be made in the coming months.
It is understood that the panel will cover over 10 different practice areas and each sub-panel will have up to 10 firms.
Quality control and risk management as well as cost-cutting are said to be the main reasons to set up a formal procedure for external legal advisor instructions, according to the group’s invitation to tender letter.
The process of establishing an international panel comes three months after the group finalised its first Chinese panel in September 2012, a process it started in March that year. A large number of Chinese firms across the country has been included in the Chinese panel. Firms appointed include large Beijing-headquartered national firms such as Dacheng and Zhong Lun and regional and boutique firms such as Shanghai-based Barry law firm, Jiangsu-based Dong Sheng, Dalian based East Asia Law Office, and Shenzhen based Guang He.
According to the confirmation letter sent to the Chinese panel firms, in principle, only the firms on the panel are qualified to bid for contentious and non-contentious legal work of companies across the whole group. The panel firms are also required to submit a review of all work done for the group at the end of each year to the group’s legal department.
Panel firms will be formally reviewed every two years, however, the group has the right to add or delete panel firms at any point according to internal feedbacks.
The Hong Kong-headquartered group has over 1,200 subsidiaries across 21 key business units and its total turnover in 2012 reached HK$404.6bn. Among its key subsidiaries, five are Hong Kong-listed companies, including China Resources Enterprises, China Resources Power, and China Resources Land.
China Resources is the latest large Chinese state-owned companies to set up a formal panel. China Guangdong Nuclear Power Group, Sinopharm Group, China National Agricultural Development Group and China Energy Conservation and Environmental Protection Group have all recently established formal procedures or a panel mechanism to appoint external legal advisors.
”There is a trend that more and more Hong Kong-listed red-chip companies are adopting a formal panel to appoint their external advisors, an approach similar to their multinational counterparts,” said a Hong Kong-based corporate partner of an international firm. “It’s a positive move, as it’s increasingly time-consuming and difficult to putting together pitching documents and secure mandates from clients. With more Hong Kong and Chinese companies now have a formal and transparent procedure, there is a more level-playing field for firms.”
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