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.
Firms in the spotlight
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