Dragons on fire

Over the past 20 years, UK and US firms have benefited greatly from the growth of Chinese companies and their need to raise capital from foreign stock exchanges. Chinese e-commerce giant Alibaba’s proposed multibillion-dollar listing abroad is a good case in point.

Many have made cosy friends with the leading Chinese capital markets firms as foreign firms remain barred from practising local law. But the winds of change may be blowing.

As we exclusively reveal today, a pair of elite Chinese capital markets firms, Commerce & Finance and Jingtian & Gongcheng, are facing negligence and breach of duty claims filed by 11 international financial institutions, including Credit Suisse Securities and Banc of America Securities. The allegations arise from several fundraising transactions by the scandal-plagued Chinese forestry company Sino-Forest between 2007 and 2010, including both debt and equity offerings, that raised more than $2bn in all. The damages sought could run to hundreds of millions of dollars, even billions.

This lawsuit is one of the very first cases in which well-established Chinese law firms are being pursued by global clients in such a high-profile and big-ticket matter. It has dropped a bombshell among the country’s legal profession, as this week’s cover feature highlights.

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