In a stark contrast to international law firms, PRC law firms – even the giants amongst them – have traditionally been characterised as domestic players, dotting the vast internal market with offices and creating a self-sustaining ecosystem.
And given the mainland’s distinct legal system, market rules and cultural norms, these firms have always seemed to prefer holding the home advantage against foreign players trying to crack the China market. But that appears to have changed in recent years, with some of the biggest names in the PRC legal industry extending their reach overseas.
One of the notable cases is Han Kun Law Offices, which, in the span of a few months, has set up outposts in Singapore and New York to meet the needs of clients. Mike Chiang, a corporate partner versed in handling foreign direct investments and cross-border disputes in both countries, will be primarily responsible for the office operation and recruitment “based on client needs”, Han Kun tells ALB.
Han Kun’s New York office is the firm’s latest overseas foray and its first in the United States, which came at a time when the tense China-U.S. relations appeared to have slightly eased after the leaders of the world’s biggest economies met in November.
Perhaps catching the whiff of a potential détente enabled by Beijing’s bid to boost outbound investment, JunHe has also expanded its foothold across the Pacific. The Red Circle firm has launched an office in Seattle, its third U.S. outpost and the second on the West Coast.
“Our New York office is three time zones away, and our Silicon Valley office mainly focuses on intellectual property. Our Seattle offices focus more on corporate and compliance work for our West Coast clients, especially those from Asian communities, big or small. They would be served better because of its proximity to Asia,” says JunHe, adding that its Seattle office is more focused on “entrepreneurship.’
Partner Adam Li will be the only lawyer stationed in Seattle for the moment. Li is a corporate and commercial law specialist advising on cross-border joint ventures, distribution and licensing arrangements, amongst other areas, in sectors including automobile, bioscience, and manufacturing.
Peter Zeughauser, a legal consultant at Zeughauser Group, believes a significant U.S. presence for elite Chinese firms will become a key element – and a secret weapon - in crafting a successful global brand, which is something that more and more PRC law practices have started to contemplate on if not already act towards.
“Other Chinese firms may feel that having a modest representative office in the U.S. is integral to their strategy of being a leading Chinese firm,” says Zeughauser. “Either way, having astute boots on the ground in the U.S. will help Chinese firms gain insights into, and keep their finger on the pulse of, how geopolitical tensions and tightening regulatory scrutiny will impact their Chinese clients.”
But to penetrate the world’s most lucrative legal market is not an easy feat, with costs being one of the biggest stumbling blocks that have long bedevilled even the Magic Circle firms across the Atlantic, says Zeughauser. For PRC firms looking to tap into the U.S. domestic talent pool, they might be headed for a tough salary war.
“The biggest risk (for PRC firms in the U.S.) will be the inability to compete for local talent with the top U.S. firms. The failure to compete will eviscerate their ability to attract the most important work from the best clients - the clients who can afford to pay the top rates that generate profits high enough to compensate top talent,” says Zeugahuser.
At the moment, both Han Kun and JunHe are running lean teams in their new U.S. offices. Han Kun says the staffing of its New York office will be based on “client needs, skill requirement and the intensity of assignment.” JunHe states that the size of its Seattle office “will be determined by the market” and the office’s performance.
However, with foreign direct investment into China seeing a decline in the past year, and the U.S. government tightening scrutiny on outbound and inbound investment from China, particularly in strategic sectors – many of which Seattle is home to, there’s no doubt about the risks involved.
“That was exactly why we started this office with a very small operation, with one but seasoned and well-rounded lawyer with a lot of international experience,” responds JunHe. “That gives us flexibility to stay connected, and the opportunities to work with our friend firms in the U.S., national or local, to provide full-service support,” the firm adds.
“The cultural differences between Chinese and U.S. firms are significant,” says Zeugahuser. “I don’t think we have answers yet as to how those will play out, but the cloud they present will stifle the efforts of Chinese firms to attract the best clients and matters in the U.S.,” he adds.
