Cleary joins rush into China as Cepa II comes into force

Cleary Gottlieb Steen & Hamilton is gearing up to launch its first office on China’s mainland – the latest in a line of international law firms swooping to cash in on the country’s booming economy.

The US firm has applied to the Chinese Ministry of Justice (MOJ) to establish a new office in Beijing, which is expected 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 said. “We’ve assessed the market and type of work and it seemed that Beijing, in terms of location, was the best city for an office. We’ll be focusing on practice areas such as private equity investment and M&A.”

Since the MOJ unveiled the second phase of reforms in August last year, which saw the relaxation of tough restrictions on the legal market, more international firms have opened offices on the mainland. Almost 200 foreign law firms now have licences to practise in China, including firms as diverse as Soma Tatsuo of Japan, Wenger Vieli Belser of Switzerland and Jordan’s J Nassir & Partners.

Most recently, Deacons Hong Kong launched a third office in Shanghai focusing on corporate work and foreign direct investment.

As revealed in The Lawyer (12 September), DLA Piper Rudnick Gray Cary and Orrick Herrington & Sutcliffe are fighting over control of Coudert Brothers’ esteemed Beijing practice.

The Lawyer (2 August) also reported that Silicon Valley law firm Wilson Sonsini Goodrich & Rosati’s intentions to open an office in Shanghai – its first base outside the US.

Since January 2003, foreign law firms have been permitted to open second offices in China. Overseas firms that have been granted licences for a second office include Allen & Overy, Baker & McKenzie, Clifford Chance, DeRyook International Patent & Law Firm, Gide Loyrette Nouel, Herbert Smith, Jones Day, Khattar Wong & Partners, Kelley Drye & Warren, Linklaters, Lovells, Masons, O’Melveny & Myers, Rajah & Tann, Vinson & Elkins and Wikborg Rein & Co.

The Closer Economic Partnership Arrangement (Cepa II) between China and Hong Kong allowed Hong Kong firms to advise on mainland legal matters.

Rumours are now circulating that Chinese officials are planning to relax the restrictions on foreign-qualified lawyers so much so that firms could be permitted to practise Chinese law.

One partner said the rule changes have had little impact on large foreign firms. “The third stage of Cepa is being considered by Chinese officials now,” he said. “As it stands, Cepa has only really benefited smaller firms and it hasn’t been as useful for larger firms trying to establish a real presence in China. But it’s commonly felt that China’s MOJ needs to go a bit further.”

International firm Lovells has gone from strength to strength in China, increasing its numbers from just one lawyer based in its Beijing and Shanghai offices to 20 lawyers in Beijing and 11 in Shanghai.

Lovells Beijing managing partner Robert Lewis said more firms were being lured to China’s mainland as demand for foreign investment lawyers outstripped supply. “There’s a lot of opportunities in China for law firms at the moment,” he said. “Everything from foreign investment to cross-border M&A to private equity and venture capital. Something we’re very strong in is IP, and there’s a lot of demand for that sort of work at the moment.”

Lewis said that while law firms had traditionally established themselves in Beijing, there has been a recent wave of firms turning their attention to Shanghai as it competes with Hong Kong and Singapore to become Asia’s financial and commercial hub.

“Before China’s accession to the WTO [World Trade Organisation], the majority of firms were interested in Beijing, but the latest wave are moving into Shanghai,” said Lewis. “The local firms in Beijing are much further advanced.”

Deacons Hong Kong managing partner Lyndsay Esler said firms were putting more resources into China as economic growth continued to skyrocket. “Although there are, and certainly will be, plenty of opportunities for law firms in China, a lot of noise is being made about the legal market, but it’s a matter of waiting to see what’s behind the smoke and dust,” he said. “Obviously, a lot of investment is flowing into China that’s creating new industries, which will in turn have legal needs.

“Of the top 100 UK firms, 29 per cent already have an office in China and a further 46 per cent have offices in Hong Kong,” concluded Esler.

Foreign law firms that have announced plans to, or have, opened an office on China’s mainland during the past year

Foreign law firms that have announced plans to, or have, opened an office on China’s mainland during the past year
Firm Beijing Shanghai
DLA Piper x
Orrick x x
Wilson Sonsini x
Dewey Ballantine x
Wilmer Cutler x
Simmons x
Squire Sanders x
Latham x
Deacons Hong Kong x
Eversheds x
Hogan & Hartson x

  Source: The Lawyer