Shrinking Dentons Parts Ways with Chinese Branch Amidst National Security Clampdown

Shrinking Dentons Parts Ways with Chinese Branch Amidst National Security Clampdown

Dentons has long pronounced its size as the largest law firm in the world by headcount, but it has been shrinking lately including this week under pressure from the newly imposed Chinese national security regulations.

The firm has a worldwide network, although it is not on the LawFuel ‘Most Prestigious Law Firm list, and has informed clients that it was making the move due to the “evolving regulatory environment for Chinese law firms”, which referred to new Chinese government requirements “relating to data privacy, cyber security, capital control and governance”.

The firm will separate from its Chinese counterpart, Beijing Dacheng Law Offices, which Dentons merged with in 2015, creating an entity of 6,600 lawyers, of which Dacheng contributed 4000.

The merger was executed under Dentons’ Swiss verein business model, permitting its various international branches to function as relatively distinct legal entities while operating under a common banner.

Following this weekk’s announcement, Dacheng and Dentons will exist as independent entities. However, a “preferred firm” association will be upheld, as indicated in a memorandum to Dentons clients dated Monday. Dentons has also revealed its intention to eliminate the Chinese characters representing Dacheng from its branding and logo.

Dentons stated that the decision to separate is a reaction to the recent Chinese government directives, particularly those pertaining to cybersecurity and data protection for Chinese law firms.

The revised Counter-Espionage Law, enacted by Chinese legislators in April and effective since July 1, introduced prohibitions on the transmission of information linked to national security, alongside an expanded definition of espionage. The law refrains from precisely defining China’s national security or interests, allowing authorities involved in anti-espionage investigations to access data, electronic devices, details about personal property, and even the power to restrict border crossings.

Repercussions For Foreign Companies

In response, the United States cautioned that foreign businesses operating within China might face repercussions under this updated law for their routine business operations.

Several major U.S. and international law firms have maintained a presence in China, although some have scaled back due to increased challenges in the country’s economic and political environment.

This trend was amplified during the pandemic. The rationale for operating in China has, according to Bruce MacEwen of U.S. law firm consultancy Adam Smith Esq., become “increasingly tenuous.” MacEwen highlighted instances of the Chinese government’s actions against U.S. companies, such as the raids on the Chinese offices of Mintz Group and Bain & Company earlier in the year. He noted that for many firms, the potential reputational risk now outweighs any conceivable economic advantage.

The separation from Dacheng results in the departure of numerous lawyers and staff members from Dentons. In May, Dentons reported a global workforce of 21,000 employees; however, a spokesperson for the firm stated on Tuesday that Dentons currently employs over 12,550 individuals.

Despite this split, Dentons affirmed that its Hong Kong office will remain an integral part of the firm. A spokesperson for Dentons emphasized that the firm maintains its status as the world’s largest global law firm, boasting a presence in more locations than any other law firm. This claim was supported by their approximate tally of 6,000 lawyers. According to data compiled by The American Lawyer, Dentons remains smaller than Yingke, a Chinese domestic law firm that boasts a lawyer count exceeding 13,000.

On Dacheng’s English-language website, they list a roster of over 2,500 lawyers and consultants.

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