Jack Yu, international policy adviser, The Law Society
Opinion: Chinese firms are gearing up for new legal world order
Since China’s outbound investment, or ’go-global’ campaign, started 10 years ago we have witnessed Chinese enterprises flexing their muscles internationally.
Jack Yu
This trend is going to continue, especially in the post-global economic crisis era.
China’s legal sector has developed significantly over the past 30 years. There are now more than 14,000 firms and 150,000 practising lawyers. In 1979 the figures were 79 and 212 respectively. Chinese firms may still have some way to go in terms of developing as modern business practices, but there are three reasons why I believe Chinese firms will be competing globally with Western rivals in 10 years’ time.
First, the Chinese are acutely aware that the biggest assets that firms have are its lawyers, but the legal education system has struggled to produce the calibre and practical skills demanded by the market. Some leading law schools have started to work with practitioners to introduce skills-based subjects to their curricula. This is groundbreaking in a system full of professors with little practice experience.
To some extent legal education has to be reformed and there is huge pressure to get this right (law is one of the most difficult degrees from which to find graduate employment). If the next generation sees a large number of skilled and qualified lawyers in a saturated market, they will look outside China.
In fact, this is already happening in the UK, with hundreds of Chinese students pursuing their LLMs or GDLs.
While we assess the impact of the Legal Services Act, do the Chinese think about regulatory innovations? The legal profession in China has dual regulators: the Ministry of Justice (MoJ) serves as the administrative supervisor and the China Lawyers’ Association is the self-regulator - and the real power is with the former. The new Lawyers’ Law has permitted LLPs and unleashed a certain amount of energy.
Second is the empowerment of the lawyers’ associations by the MoJ. Decision-makers realise they have to enable the profession to shape its own future. This will bring about more innovations, capital and resources based on which firms will think bolder and act faster. The Chinese government may invest in firms, just like it does in banks and companies, and be active in providing capital and preferential policies to help its law firms compete internationally.
Third, we are proud that the English language and our legal system stand us in a position that is second to none. It contributes to the dominance of English law in cross-border transactions and to some degree the formation of our global firms. Would not the Chinese want to set their own legal services standards and influence other jurisdictions?
Admittedly, modern mediation standards trace back to ancient Chinese social principles. More recently the Chinese government has been reform-minded by promoting the renminbi as a settlement currency for trade, while its central banker called for a new global currency run by the International Monetary Fund to replace the US dollar. My evidence is anecdotal on the law front, but we have seen the Chinese scale of ambitions in restructuring world institutions and challenging the order and standards set by the West. There are indications of how economic (and political) power is going to shift from the West to East.
I suggest our firms take notice of these movements and start thinking about how best to deal with the China phenomenon now. To help in this matter the China Law Society is hosting a trade mission to the UK from 10-plus ambitious Chinese firms from Beijing, Shanghai and several second-tier markets from 22-24 March 2010.
Readers' comments (4)
Leslie SHEN | 24-Mar-2010 3:57 pm
A very impressive article!
Although we cannot deny that some not-so-good or sometimes very odd things are happening in China, the legal environment of China has become much better, especially in commercial cases. The State’s attitude of encouraging various forms of firms, enlarging lawyers’ service scope and introducing some efficient methods from other countries including UK have shown us its decision of administering the country by law. Having felt the drastic competition in the opened market, the government is also trying to put Chinese companies in better positions in their disputes with foreign rivals, the solutions of which include providing a more healthy litigation environment, making the local arbitration commissions accepted by foreign companies and making the enforcement of foreign arbitration awards easier. As a Chinese lawyer, I think we shall think more about how to provide professional service to local enterprises, especially in the litigations or arbitrations held abroad. In my opinion, the cooperation with foreign firms shall not be misunderstood as acting like a broker as some people think. I feel very pleased that the Law Society is creating an efficient, effective, sustainable and win-win communication channel for the firms in UK and China. I am fairly sure some successful results will be approached, with the efforts of us all.
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Anonymous | 26-Mar-2010 7:57 am
At what point do the Chinese get exposed for their protectionism on this. Foreign firms cannot practice in China and chinese citizens working in foreign firms have to give up their qualification even if the pass the PRC Bar. The Chinese ministry of Justice makes it difficult for foreign firms to send people here by imposing hideous difficulties in getting work permits, they clamp down from time to time and subject the foreign firms to annual inspections.
The world seems keen to deal with China, because of a perception that there is money to be made, but then forget that there are very few people out there who have any level of depth in their understanding of China.
The Chinese Government are not a very pleasant bunch of fellows. And I say fellows because there are very few woman.
Sure the PRC commercial firms will make it big in their own backyard, they are well protected, but when it comes to anyone other than mainland Chinese accepting PRC law or arbitration on a routine or comfortable basis, there is a very, very, very long way to go....just ask Stern Hu and Rio Tinto what they think of Chinese justice. Or ask any foreign firm who has arbitrated against an SOE.
The only way Chinese firms are the new frontier is if people are too stupid to look more deeply at what's coming.
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Anonymous | 29-Mar-2010 2:49 pm
Well, we have a brilliant record of diversity here! The number of women in politics, women partners in law firms and in this white male dominated legal profession??? The very pint about ‘fellows’ is quite double standards, dare I say?
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Anonymous | 6-Jul-2011 9:46 am
If the PRC firms are going to compete globally, then they will have to force the MoJ in China to allow foreign firms to compete in China as well. The only way the PRC firms can open offices outside China is because they're protected from real competition within China. The biggest PRC firms know this, but the MoJ has to keep too many shoddy PRC firms happy.
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