Orrick Reduces China Footprint

LawFuel Contributing editor Jacqui Coombe

Law firm retreats are normally restful and instructive, but the Big Law firms retreat from China continue in a different vein as Orrick, Herrington & Sutcliffe announced this week that it would reduce its footprint in China by centralizing its operation to Beijing when the Shanghai office lease expires in July.

Orrick’s move coincides with an ongoing trend among some U.S. and other gig law firms scaling back their activities in the Chinese market. This shift is driven by mounting pressures faced by foreign enterprises in China, coupled with increasingly complex economic and geopolitical circumstances.

San Francisco-based Orrick also cut its workforce by six percent last year in a sign of the slowdown of business.

The closure of Orrick’s Shanghai office will see the departure of eight employees, including one lawyer and one consultant, who will receive severance packages, as confirmed by a spokesperson for the firm. Five other legal professionals, including two partners and two associates, will transition to the Beijing office.

Additionally, Orrick has closed its Taiwan office, although there were no resident full-time lawyers there, according to the spokesperson. These Orrick moves are part of a broader realignment of Orrick’s Asia Pacific operations, which includes the establishment of its Singapore office in 2021, aimed at better meeting client demand.

The Beijing team at Orrick specializes in handling litigation matters in U.S. federal courts and the U.S. International Trade Commission, with a focus on matters concerning import regulations into the United States. They also manage cross-border transactions involving Chinese entities, as per the spokesperson.

Following the consolidation in Beijing, Orrick will maintain a presence with five partners, six associates, and of counsel professionals in China, the spokesperson added. Notably, Orrick also maintains an East Asian office in Tokyo.

Why Are Law Firms Reducing China Involvement?

The decision by Orrick reflects broader trends in the legal landscape, as major law firms operating in China have reduced their attorney headcount over the past decade.

Global law firm Dentons terminated its association with Chinese law firm Dacheng last year, citing regulatory challenges imposed by the Chinese government regarding data privacy and cybersecurity. Similarly, other firms have cited adverse market conditions in China as justification for downsizing or closing offices.

London-based Linklaters announced layoffs of 30 lawyers in China due to the country’s economic downturn, which has led to decreased transactional activity necessitating legal support.

Additionally, several U.S.-based firms including Akin Gump Strauss Hauer & Feld, Latham & Watkins, Perkins Coie, and Proskauer Rose have closed at least one of their China offices since June, according to media reports.

The China Problem For Big Law

A variety of reasons have lead to the law firms’ retreat from China including the following –

1. Regulatory Challenges: China has strict regulations governing the legal industry, including restrictions on foreign firms’ ability to practice law in the country, which can create significant barriers for Western firms seeking to establish or maintain a presence in China.
2. Ethical Concerns: Western firms may face ethical dilemmas when operating in China due to the country’s legal system, which is often criticized for lacking transparency and independence, including the lack of due process and human rights concerns.
3. Political Tensions: Tensions between Western countries and China can also impact the operations of Western law firms in China. Firms may face pressure from their home governments or concerns about the political risks associated with doing business in China.
4. Cybersecurity Concerns: There are growing concerns about cybersecurity risks associated with operating in China, including the potential for intellectual property theft and data breaches. Western firms may be hesitant to expose themselves to these risks, particularly given the sensitive nature of the information they handle for government and corporate clients.
5. Cost Considerations: Operating in China can be expensive for Western firms, particularly in major cities like Beijing and Shanghai where the cost of living and doing business is high. Firms may weigh the costs of maintaining a presence in China against the potential benefits and decide to scale back their operations accordingly.