in , ,

Law Firms Facing The Chinese Challenge

Every other law firm with eyes on expansion wants to be in China.  But China is a highly competitive market and potentially a grave yard for failed firms.  As the WSJ reported, this past week has demonstrated that graphically being both the best and the worst of times for law firms in the country.

How come?

As the WSJ reports:

 On one end of the spectrum: New York law firm Fried, Frank, Harris, Shriver & Jacobson LLP, which said it plans to pack up its offices in Shanghai and Hong Kong in the coming months. Global law firm Dentons, on the other hand, announced plans to merge with mainland China’s largest law firm, Dacheng, and instantly gain approximately 4,000 lawyers in the region.

The moves underscore the pressure on law firms to succeed in China. Foreign lawyers looking for work there must compete not only with the 170 other international firms with offices there, but increasingly with the more than 19,000 Chinese firms, industry observers and lawyers in the region say. one end of the spectrum: New York law firm Fried, Frank, Harris, Shriver & Jacobson LLP, which said it plans to pack up its offices in Shanghai and Hong Kong in the coming months. Global law firm Dentons, on the other hand, announced plans to merge with mainland China’s largest law firm, Dacheng, and instantly gain approximately 4,000 lawyers in the region.

The problem in the massive Chinese market is that there is not only the understandable pressure to succeed, but also enormous competition from other law firms and local lawyers, of which there are over 19,000 such firms.

The moves underscore the pressure on law firms to succeed in China. Foreign lawyers looking for work there must compete not only with the 170 other international firms with offices there, but increasingly with the more than 19,000 Chinese firms, industry observers and lawyers in the region say.

Although foreign law firms have been in China since the 1990s they are unable to practice Chinese law or appear in Chinese courts. To succeed they need to generate close ties with local, Chinese law firms which can be difficult unless there are reciprocal benefits, existing ties or other business that will create a successful relationship in the competitive and burgeoning market.

There are also regulatory and cultural issues that need to be circumvented.

The Dentons Dacheng deal is the first such tie-up since Chinese firm King & Wood, the WSJ says.  King & Wood considered one of the most prestigious firms in the country, combined with Australian firm Mallesons Stephen Jaques in 2012. The deal was heralded as a bellwether, but copycats didn’t follow as quickly as some legal observers expected.

Fried Frank’s decision to effectively close its less-than-10-year-old operations in Hong Kong and Shanghai, meanwhile, underscores the difficulty foreign firms have in turning a profit in China.

Read more at the WSJ

Orrick Advises Johnson Controls - Hitachi Global Joint Venture 8

Orrick Advises Johnson Controls – Hitachi Global Joint Venture

Mrs Clooney's Court Date 9

Mrs Clooney’s Court Date