China > Legal market overview
Although China's oil and gas sector experienced fewer of the state-owned enterprises’ (SOEs) big-ticket deals of recent years, as SOEs dealt with internal reform and restructurings, Chinese companies expanded overseas through investments into new sectors, such as hi-tech, agribusiness and food, real estate and manufacturing. Moreover, China’s One Belt, One Road initiative, linking China with Europe and every country in between, means that outbound investment from China will continue to develop.
On the inbound side, a landmark change in China’s foreign investment regime is eagerly awaited by lawyers; China is pushing ahead with an economic reform that aims to attract private investment in its SOEs by 2020. Its Ministry of Commerce recently released the Foreign Investment Law draft, which is intended to replace existing Chinese laws and regulations on foreign investments; this is expected to have a significant impact on how foreign capital enters China and generate lucrative inbound instructions.
FIRMS IN THE SPOTLIGHT
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The real estate sector remains one of the most active industries for private equity deal-making in China, but the Chinese private equity/venture capital market has changed in nature, with run-of-the-mill Series A venture capital financings increasingly dominated by domestic firms and smaller international players. Consequently, some foreign law practices have largely exited the venture capital market and now focus on handling more complex, latter-stage deals.
Many international law firms are actively developing their dispute resolution practices, particularly in relation to anti-corruption and investigations. International arbitration is also buoyant, with Chinese parties increasingly involved in arbitrations seated outside China; consequently, the Hong Kong International Arbitration Centre (HKIAC) and Singapore International Arbitration Centre (SIAC) have been marketing heavily into China.
Nevertheless, several foreign law firms are reportedly struggling to turn a healthy profit from China’s aggressively competitive legal market as a result of extremely competitive pricing wars; resultantly, several US and UK head offices have reduced their mainland China presences, and Fried, Frank, Harris, Shriver & Jacobson LLP closed both its offices in Hong Kong and Shanghai in 2015 because fees had dropped dramatically in recent years.
Others remain keen to expand in mainland China; multinational law firm Dentons and China’s largest legal practice Dacheng Law Offices, LLP merged to create the world’s biggest law firm. The combined firm utilised a Swiss verein structure, allowing for distinctive regional profit pools and accounting, while sharing strategy and branding. Dacheng Law Offices, LLP remains a separate practice within the united entity’s verein, because China prohibits foreign law firms and lawyers from practising Chinese law.
On the PRC firm front, Fangda Partners, King & Wood Mallesons, Jun He and Zhong Lun Law Firm held their dominant positions in the domestic legal market, although other local firms are also notable for their size and expertise: AllBright Law Offices, Han Kun Law Offices, Llinks Law Offices and Global Law Office are all key players. Significant personnel moves saw King & Wood Mallesons enhance its dispute resolution team through the arrival of numerous well-regarded practitioners with High Court and The Supreme People’s Court experience; and Han Kun Law Offices expand its Shanghai practice by recruiting eight partners from AllBright Law Offices. In addition, Fangda Partners’ hired antitrust specialist Michael Han, from Freshfields Bruckhaus Deringer.