Orrick Herrington & Sutcliffe's struggle to secure operating licences for the Chinese offices it acquired from Coudert Brothers could become the catalyst to further liberalisation of the Chinese legal market.
A lawyer with close connections to the Chinese Ministry of Justice (MoJ) claimed that, if Orrick successfully petitioned the MoJ to grant licences for the Beijing and Shanghai offices simultaneously, it would set a precedent and potentially open up the market to further foreign firms.
"They can ask for a special favour to apply for two licences at once, but that would set a precedent that would open up the market and make China more flexible," said the lawyer.
However, other sources have warned that the MoJ could just as easily force Orrick to close either the Beijing or Shanghai office permanently, or force the closure of both offices while the firm applies for a new licence.
This is because, under existing Chinese regulations, law firms must hold a licence to operate in one location in China for three years before being able to apply for a second licence in another city.
It is understood that Orrick had been hoping to use a loophole in the rules to transfer Coudert's licences across by classifying the offices as going concerns. However, it has emerged that the MoJ is instead demanding Orrick apply outright for a new licence of its own.
A spokesman for Orrick declined to comment on the situation, other than to say that the firm was "following the procedures of government officials in China".