China's entry to WTO opens up joint venture opportunities

China's accession to the World Trade Organisation (WTO) is expected to bring in a raft of changes to liberalise China's restricted domestic legal market.
Sino-EU and Sino-US agreements on China's entry to the WTO include some concessions to international firms in respect of geographical and numerical restrictions on the number of offices they are permitted to open. One year after accession, foreign firms will be able to open more than one office.
This initial measure to relax the Chinese government's protectionist stance towards domestic firms could be broadened to allow closer links between foreign and domestic firms. Linklaters & Alliance's managing partner in Shanghai Kevin Wong said: “If the Chinese government is willing to open up the legal sector, I think the form that it would take is joint ventures with Chinese law firms.”
At the moment, foreign law firms are only allowed to establish representative offices in China. Firms are limited to one office and so have been forced to choose between the main two financial centres, Beijing and Shanghai. Wong said: “All of the international law firms are here already, but we're not licensed to practise Chinese law.”
Initial agreements state that foreign firms will be able to offer services on Chinese law. Arrangements with local law firms are to be improved, to allow foreign firms to instruct individual Chinese lawyers directly, which may in practice be equivalent to full employment.
Wong said that this is effectively what takes place already. “The accession agreement does not allow international firms to practise Chinese law. It regularises what occurs at the moment,” he said.
John Kuzmik, a partner in the Hong Kong office of White & Case, agreed. He argued that allowing international firms to open additional offices will only be a realistic incentive if they can recruit Chinese-qualified lawyers.
If joining the WTO generates the anticipated increase in complex transactional and financial matters, international firms are likely to be the first port of call. Few of China's domestic firms have the experience to handle the expected work.
Wong said: “There are a handful of firms with high-calibre lawyers with good practices and client bases. Anyone with any interest in China is thinking out a suitable strategy and looking at its relations with Chinese firms.”