The Legal 500

China

Editorial

Overview

While international firms have benefited from a steady pipeline of inbound work from their global clients in recent years, it is on outbound mandates from state owned enterprises (SOEs) and private companies where the battle lines are being drawn. With aggregate China-outbound M&A values reaching record highs in 2013, and reaching the highest levels since 2009 in the first quarter of 2014, the ability to tap into this rich seam of activity has been crucial.

The energy sector is a key driver of outbound mandates, and Vinson & Elkins LLP’s closure of its Shanghai office to concentrate on the more energy-focused market of Beijing, where many SOEs are based, is indicative of the sector’s importance to foreign firms. Sidley Austin LLP, not traditionally associated with the energy space, secured four high-profile energy-related lateral hires in its Hong Kong, Singapore and Beijing offices, signalling its intention to break into the space.

Technology and intellectual property are two other key areas; the acquisitive nature of Chinese life sciences players is well known, while Lenovo’s $2.3bn acquisition of IBM’s server business (Hogan Lovells International LLP and Herbert Smith Freehills LLP representing the respective parties in that matter), and technology conglomerate Tsinghua Group’s acquisition of mobile chip manufacturer Spreadtrum Communications in an all-Chinese, $1.8bn deal (Morrison & Foerster leading the advice to the former) are further examples of the appetite for tech-sector deals.

On the IP front, firms such as Orrick, Herrington & Sutcliffe LLP have been involved in high-profile US-based patent and trade secrets court actions for both US and Chinese clients, while Bird & Bird, Jones Day and Hogan Lovells International LLP are among those assisting clients with protecting existing IP rights in the Chinese courts, which in the past year demonstrated a significant swing in favour of foreign companies with the granting of the first patent infringement preliminary injunction (PI) to Abbott Laboratories, followed closely by a PI for cross-label use in favour of Novartis. Allen & Overy LLP advised both companies on those matters.

Outbound work has yet to replace inbound mandates as the cornerstone of most practices. However, with the Chinese authorities less encouraging of foreign investment, particularly in real estate, and deals hampered by a punishing regulatory regime entailing lengthy competition reviews, it remains to be seen how long this will last.

Pillsbury Winthrop Shaw Pittman LLP opened its second mainland China office in Beijing, and Duane Morris & Selvam LLP entered the market with the opening of a Shanghai office.

While domestic firms take advantage of a regulatory regime which allows them, and not foreign firms, to advocate in Chinese courts and proffer official written opinions on Chinese law, in practice the restrictions do not hinder practising in China in any substantial way, and international firms are still the natural choice for handling big-ticket cross-border work. However rumours of the merger of some of the biggest local players and an increasing trend for the biggest Chinese firms to recruit foreign partners, may see this inherent advantage cut short in the years to come. Firms such as Junhe, Fangda Partners and Zhong Lun Law Firm all field foreign-qualified lawyers, and have expanded their operations into London and New York in recent years, as well as focusing on the Asia Pacific market with office openings in Hong Kong, Singapore and Tokyo. King & Wood Mallesons has gone the farthest in its expansionist strategy, entering into a groundbreaking tie-up with SJ Berwin LLP in 2014.

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Legal Developments in China

Legal Developments and updates from the leading lawyers in each jurisdiction. To contribute, send an email request to
  • Foreign Investment Opportunities in Medical Service Sectorin the Shanghai Free Trade Zone

    On November 13, 2013, the Shanghai Municipal Government issued the Tentative Measures on the Administration of Foreign Owned Medical Institutions in China (Shanghai) Pilot Free Trade Zone [Hu-Fu-Ban-Fa [2013] No.63] (" Measures "). According to the Measures, a foreign investor, who has engaged in medical institution investment or management for 5 years or more, may, upon the approval by the relevant local government authorities, set up a wholly foreign owned medical institution (" Medical WOFE ") in the Shanghai Pilot Free Trade Zone (" Shanghai FTZ "). Also, the Measures might open up an investment opportunity for foreign capital to enter the nursing home market in China.
  • China Customs Further Reforms Import & Export Clearance Procedures

    The General Administration of Customs (" GAC ") issued Announcement [2013] No. 58 (" Announcement ") on October 30, 2013, announcing its decision to further reform the customs clearance procedures for importation and exportation, whereby as from November 1, 2013, an AA Category enterprise in China Customs' AEO (Authorized Economic Operator) program, after filing application and signing an MOU with the customs, may choose to file import/export declarations and have the goods cleared at the local customs office of the place where such enterprise is located rather than where the port of entry or exit is located (" Privileged Model ").
  • Multinationals urged to watch out for customs duty risks in royalty payments

    Chinese customs authorities have recently stepped up price investigations focusing on cross-border payments of intellectual property ("IP") royalties or license fees. More and more multinational companies ("MNC") have been chosen by the customs as principal audit/investigation targets for their royalty arrangements between Chinese subsidiaries and foreign parent companies or other associated parties. HaoLiWen customs practice lawyers have been approached by some of MNCs to advise on dutiability of such royalty payments and any risk exposure to customs law violation or even smuggling.
  • The hot season of apricots and almonds in China

    On August, 2013, a consumer filed a complaint for misleading advertising with Dong Xin AIC (Zhejiang province) against Hangzhou-based roasted nut and dry-food producer Yaotaitai.
    - HFG
  • China (Shanghai) Pilot Free Trade Area:Foreign Investors’ Investment Opportunities

    The State Council has approved establishment of China (Shanghai) Pilot Free Trade Area ("SHFTA") and more flexible, efficient and open economic administration will be carried out within SHFTA. In summary, two aspects of breakthroughs are relevant to foreign direct investment in SHFTA.
  • Shanghai Special Customs Supervision Zones Upgraded as National Pilot Free Trade Area

    On August 22, 2013, MOFCOM announced that the State Council of China approved the establishment of Shanghai Pilot Free Trade Area ("SHFTA") to cover four customs supervision zones (Shanghai Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Zone), with a total area of 28.78 square kilometers. It was reported that SHFTA will be formally established by the end of September, 2013. Early in September, the NPC StandingCommittee will determine adjusting some administrative examination and approval measures under some laws to be applied to SHFTA.
  • Small Labels, Big Matters-- Product Labeling under P.R.C. Law

    Normally perceived as a very small piece in the whole picture of production and distribution, product labeling is seldom taken seriously by distributors. However, the consequences of improper label are exceptionally severe in serious cases, including but not limited to:
  • Novel food, new regualtion

    China's regulation of so called " Novel food " is changing.
    - HFG
  • CHINA gossIP - Intellectual Property Journal - July/August 2013

    In this issue:
    - HFG
  • Dilemma and options for the Intellectual Property protection of product design

    Product design is playing an increasingly important role in commercial competition nowadays. Other than product quality, it is the design of a product that draws consumer's attention. A well designed product is more likely to impress consumers with its fashion appearance.
    - HFG

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