China opens gates
The gates to China’s legal market have creaked open a little wider during the past month following the Chinese government’s introduction of bar liberalisation reforms.
As reported in The Lawyer (24 October), Chinese government officials announced the third phase of the Closer Economic Partnership Arrangement (Cepa III), which will permit some Hong Kong lawyers to practise in mainland China as well as Hong Kong.
Whereas Cepa II reforms insisted that Hong Kong lawyers had to give up their Hong Kong practise rights in order to practise on China’s mainland, Cepa III allows Hong Kong lawyers who pass the Chinese bar exam the right to practise in both jurisdictions.
The new regulations also allow Hong Kong practices to form relationships with practices in different Chinese regions. Under Cepa II, Hong Kong practices were only able to link up with offices in the same city.
Cepa III is yet another move by the Chinese Ministry of Justice (MOJ) to relax the tough restrictions on its legal market, as international law firms wait to swoop on the country’s booming economy.
But industry insiders say the recent changes have only raised expectations for the fourth Cepa wave and the extent to which the framework agreement will open China’s economy to foreign businesses.
One partner told The Lawyer (3 October) that rumours had been circulating that the Chinese authorities were planning to relax the restrictions on foreign-qualified lawyers to the extent that firms could be permitted to practise local Chinese law.
“So far Cepa III is much ado about nothing for foreign law firms looking to get into China,” comments one lawyer. “It’s a step in the right direction of course, but most people in the industry expected these reforms to go a lot further and so now we’re all waiting for Cepa IV.”
Cleary to launch in China
Just weeks prior to the Chinese MOJ’s decision, Cleary Gottlieb Steen & Hamilton announced plans to launch its first office on China’s mainland, as first reported by The Lawyer (3 October).
The US firm has applied to the Chinese MOJ to establish a new office in Beijing, which is set to open early next year.
“We’re not the type of firm that goes around opening offices just to stake our flag,” Cleary partner Richard Lincer tells The Lawyer. “We’ve assessed the market and the type of work and it seemed that Beijing, in terms of location, was the best city for an office.”
Earlier in November, Cleary poached Cravath Swaine & Moore partner Clayton Johnson for the new Beijing office.
The US-qualified securities and capital markets partner will divide his time between the New York firm’s Beijing office and its existing Hong Kong arm.
DLA Piper boasts of being the biggest
Nigel Knowles, joint chief executive officer of DLA Piper Rudnick Gray Cary, claims his firm was the biggest in both Singapore and China, as first reported in The Lawyer (17 October), following the firm’s feud with Orrick Herrington & Sutcliffe.
DLA Piper took all of Coudert Brothers’ lawyers in Singapore and Tokyo last month, a move that saw the firm more than double in size in Singapore and launch its first office in Tokyo.
“When you add up all of the hires we’ve made, we’re certainly the largest international law firm in Singapore and the largest international law firm in China,” he says. “There’s been enormous interest from the international and US firms in Coudert’s offices in Asia, and we’re delighted to gain the Tokyo and Singapore offices.”
The DLA Piper coup followed a bitter row with Orrick for control of Couderts’ Beijing office. So far, DLA Piper has signed Coudert’s China head Jingzhou Tao and at least 20 lawyers, as well as a further 20 support staff in Beijing.
Orrick scooped nine of Coudert’s 11 equity partners in China, including the remaining employees in Beijing and the entirety of Coudert’s offices in Hong Kong and Shanghai.
M&A boom lures firms into fold
More firms are being lured to China with M&A activity on a high and demand for foreign investment lawyers outstripping supply.
Linklaters was one of the many firms to benefit from the frenzied M&A market following reports of a pending partnership between oil giant BP and China’s largest producer of refined oil products Sinopec Corp, as reported in The Lawyer (24 October).
It is understood that Linklaters has been at the forefront of partnership talks between BP and Sinopec.
While BP has refused to comment on its involvement in the negotiations, the magic circle firm has a longstanding relationship with BP as its principal corporate adviser, so the smart money is on Linklaters.
China’s legal market is so active that a number of European firms have been queuing up to get their slice of the work.
Last month Italian firm Lega Colucci Morri & Associati became the first Italian firm to launch in China. Spanish giant Garrigues is also in the process of launching a local office.
IPOs reach all-time high
Chinese IPO activity has reached an all-time high, as the $8bn (£4.6m) IPO of the China Construction Bank drew to a close last month, as reported in The Lawyer (7 November).
Freshfields Bruckhaus Deringer and Herbert Smith successfully advised on the landmark IPO and listing of the bank on the Hong Kong Stock Exchange (HKSE).
The IPO is the largest ever for a Chinese issuer; it is also the world’s largest IPO this year, the largest Asian IPO since 1998 and the biggest-ever listing on the HKSE.
China Construction Bank is the first of the big four state-owned banks to undertake an IPO.
There are no signs of China’s IPO market slowing down, with industry experts predicting that China Construction Bank’s IPO will be followed by the Bank of China next year and the Industrial and Commercial Bank of China in 2007.
Linklaters Asia corporate head Simon Davies says the volume of complex IPO work in China and Hong Kong recently had been “extraordinary”.
“China’s economy has been growing at such a rate that economists are predicting it will be bigger than the US by 2030,” he said. “I’ve been in Asia for 10 years and I’ve never seen it this busy before; and it’s not just the volume of work, but the complexity of the work, that’s so exciting.”