ISSUE 6.1 CHINA www.legalbusinessonline.com n DEALS ROUNDUP n LATERAL MOVES n IN-HOUSE VIEW n REGULATORY UPDATES n UK, US REPORTS Outbound M&A: from crisis comes opportunity 海外并购:律所从危难中寻找机遇 ALB China Watchlist: 10 firms to keep your eye on this year 新起之秀:十家值得关注的律师事务所 International firms: commitment to China amid downturn 国际律所:尽管经济增长放缓中国市场仍被看好 2009 Chinese New Year Messages 业界人士为读者送去新春祝福 PLUS: EXCLUSIVE! ICBC HEAD OF LEGAL, ZHANG WEI One of China’s biggest legal buyers on firms, fees and facing the challenge 独家专访: 中国工行银行总行法务部总经理张炜
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ISS
UE
6.1
CHINA
www.legalbusinessonline.comn DEALS ROUNDUP n LATERAL MOVES n IN-HOUSE VIEW n REgULATORy UPDATES n UK, US REPORTS
Outbound M&A: from crisis comes opportunity海外并购:律所从危难中寻找机遇
ALB China Watchlist: 10 firms to keep your eye on this year新起之秀:十家值得关注的律师事务所
International firms: commitment to China amid downturn国际律所:尽管经济增长放缓中国市场仍被看好
2009 Chinese New year Messages 业界人士为读者送去新春祝福
PLUS:
ExcLUSivE!ICBC head of legal, Zhang WeIOne of China’s biggest legal buyers on firms, fees and facing the challenge
独家专访:中国工行银行总行法务部总经理张炜
The 6th annual ALB China Law Awards will be held on 24th April 2009 in Shanghai. This extravagant, black-tie gala event is the most highly regarded platform for recognizing success and achievement in the legal industry. The awards will deliver the most comprehensive view of players in Chinese legal services. And submissions for Deal of the Year, Firm of the Year and in-house legal categories are now open.
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Editorial >>
iSSUE 6.122
IN THE FIRST PERSON
Uncertainty cuts both ways
It’s that time of the year again, when we reflect on the past year and plan for the one ahead.
For the most part, 2008 will be remembered as the year of unexpected events.Those familiar with the ways of the legal industry would have seen the
warning signs coming more than a year ago. “What credit crunch?” asked firms innocently as the M&A wheels began to wobble. Next came talk about the strength of the diversified legal practice and how insolvency and restructuring work would save the day. But ever since then, a roll-call of bad news: major corporate collapses accompanied by the closure of 118-year-old firm Heller Ehrman. After a period of denial came an acceptance that tougher times were here. Firms such as clifford chance announced multiple lay-offs, while others such as DLA Piper turned to partner contributions as a way of minimising bank debt.
While our economy is not decoupled from the global recession, domestic law firms haven’t been affected to the same degree as their international counterparts. But a drop in demand for legal services in cross-border transactions and slower revenue growth are inevitable for most local players.
it’s time for a little perspective. The latest forecasts are predicting 5.5% growth for our country, down from earlier predictions of 7.5%. Such a dip, if it does materialise, is certainly not a trivial matter. it is well documented that even a small decline in growth will have a far-reaching impact on unemployment. Yes, we may be heading for hard times. But when we consider other jurisdictions are already in recession or on the brink of it, 5.5% does not look so bad.
Let us also not forget that predictions are just that and some of the best economic commentators have been confounded by the events of 2008. As we all anxiously scan the markets, trying to find a clue as to where we are headed, uncertainty becomes the theme of the day.
it has been an especially challenging task for our panel of leading lawyers to provide outlooks for the ALB china 2009 Predictions (see page 34). For each practice, there may be unpleasant surprises ahead, but there may be pleasant ones, too. The global financial crisis is likely to continue to weigh on the legal market for the most part of 2009, but we all know that opportunity can come from crisis.
As we celebrate the start of the Year of the Ox, ALB China would like to wish all our readers a happy, successful and prosperous year ahead. Thank you for your continued support.
“Legal departments undeniably play an important role in helping keep banks afloat amid a crisis”Zhang Wei, general manager, legal department, Industrial and Commercial Bank of China, on the demise of Lehman’s (p32)
“In such dynamic times, it’s impossible to predict precisely what the year will hold”Peter Charlton, Asia managing partner, Clifford Chance, on strengthening the firm against market conditions (p14)
“The capital market reforms are a paradigmatic change in the way of thinking in Korea”Wonhyo Han, partner at Lee & Ko, on the new outlook that the FISCMA legislation brings (p52)
“What credit crunch?” asked firms innocently as the M&A wheels began to wobble. Next came talk about the strength of the diversified legal practice and how insolvency and restructuring work would save the day CHINA
10 Outbound M&A: From crisis comes opportunityThe current economic climate spells opportunities for domestic acquirers, but lawyers tell ALB China that there are also some pitfalls to watch out for
13 International firms: commitment to China amid downturnInternational players in the region are facing hardships due to the global financial crisis, but many say that the fundamentals of the market remain strong
FEATURES
30 In-house interview Zhang Wei, general manager of the legal department of the Industrial and Commercial Bank of China, discusses the evolving role of in-house counsel in a globally expanding Chinese company such as his own
42 ALB China Watchlist ALB China puts the spotlight on the 10 firms that you need to keep your eyes on in 2009
46 Chinese New Year Messages Season’s greetings for the Year of the Ox from law firms, in-house legal departments, service providers and educators
50 ALB Special Report: Korea 09In the midst of undeniably gloomy economic indicators, lawyers in Korea have plenty of cause for optimism. Business opportunities arising from this side of the Yellow Sea are key
REgULARS
6 NEWS• Shanghaibarlaunchesnew
international initiative• GrandallopensNingbooffice• HerbertSmithaddstwoAsia
law firms• M&Afinancingcarvesoutnewturfforlawyers• Legaleducationturnsanewpage• Allen&OveryrestructuresHongKongoffice• GrandfieldbolstersIPpractice• RunMinghirescorporatelawyersfrom
international firms
17 UK report
19 US report
27 M&A deals update
56 Sign off
COMMENTARy
20 ShanghaiLlinks Law Offices
21 InsuranceGrandall
22 International taxAzure Tax
23 SingaporeLoos&Partners
24 RegulatoryPaul,Weiss
25 ArbitrationSIAC
PROFILES
15 Lifang & Partners
29 Blancpain
ALB cHiNA iSSUE 6.1
30
COVER STORy34 2009 Predictions
Ten of the country’s leading lawyers have come together to help ALB China predict trends in different practice areas and provide a map of the opportunities and challenges ahead
• HongKong-listedShanghaiElectricGrouplauncheditsIPOintheA-share market through merger by absorption with A-share listed ShanghaiPower
• EachShanghaiPowersharehasbeen swapped for 7.32 new ShanghaiElectricGroupshares
• ShanghaiPowerwasthenderegistered and delisted from the A-share market and Shanghai Electric, as the parent company which owns 83.752% of Shanghai Power,hasofficiallyreturnedtotheA-sharefromtheH-sharemarketthrough issuing 616 million A-shares
Christophe Han, Llinks
| CHINA/HONG KONG |
creDIT SUISSe – FoUnDer ►SecUrITIeS Jv
Firm: Herbert SmithLead lawyers: John Moore,SimonMengclient: Credit Suisse
• CreditSuisseand Founder Securities has received the business permit from the China Securities RegulatoryCommission (CSRC)toforma joint venture providing investment banking services in mainland China
• TheJV,CreditSuisseFounderSecurities Limited, is 33.3% owned by Credit Suisse, with the remainder held by its partner Founder Securities
• ThiswasthefirstapprovalgrantedbytheCSRCsincethenew regulations relating to the establishment of Sino-foreign securities companies were announced in December 2007
John Moore, Herbert Smith
Simon Meng, Herbert Smith
| CHINA |
DeUTSche banK – ShanxI ►SecUrITIeS Jv
Firm: FreshfieldsLead lawyer: MelissaThomasclient: Deutsche Bank
Firm: Lei JieLead lawyer:HeJieclient: Shanxi Securities
• DeutscheBankand Shanxi Securities announced they received approval to form a securities joint venture
• TheJV,ZhongDeSecurities
He Jie, Lei Jie
Melissa Thomas, Freshfields
Benita yu, Slaughter and May
Liu Wei, DLA Piper
• KaiNargolwala,CreditSuisseCEO inAsia-Pacific,said:“China’sdomestic investment banking services market has long been a coveted crown jewel for many global banks looking to expand their footprint and reach growing emerging markets. The investment case for China hasn’t changed for us despite current market sentiment”
Company, is expected to commence by Q3 because it does not yet have a business permit from Beijing
• Theapprovalcameoneweekafterthe joint venture between Credit Suisse and Founder Securities was permitted to offer investment banking services in the domestic Chinese market
• ThemovessuggestthatBeijingmay be more open to allowing international practices to influence its domestic markets
NEWS | deals >>
7www.legalbusinessonline.com
yoUr monTh aT a gLance ►Firm Jurisdiction Deal name Value
(US$m)Deal type
bugge, arentz-hansen & rasmussen
china/hong Kong/norway coSL norwegian aS acquisition financing 1,500 Finance
chengyi china mIh china – aDPg print media joint venture undisc Jv
china/hong Kong/US Datang Telecom Technology – SmIc 3g Investment
171.8 Finance
yuan Tai china ying Li International Sgx IPos 365.8 equity
yun Zhi nan china citélum group PPP – Infrastructure
Zhong Lun china Shanghai electric a-share debut 430 equity
Does your firm’s deal information appear in this table?Please contact [email protected] 61 2 8437 4700
| CHINA |
beIJIng FInancIaL STreeT ►conSTrUcTIon – hengTaI SecUrITIeS acqUISITIonUS$204.6m
Firm: GuantaoLead lawyers: Cui Liguo,NieRuiclient: Beijing Financial Street Construction
Firm: TianyinLead lawyer: Liu Wenyanclient:HengtaiSecurities
• BeijingFinancialStreetConstructionGroup,asaprincipalinvestor, cooperated with several other investors to invest RMB1.4bninHengtaiinreturn foran(approximately)40% equity interest
• Thetransactionillustratesanemerging trend where domestic securities companies actively seek investment from prominent state-owned companies by increasing capital and issuing new shares
• ThetransactionincreasedHengtai’sregisteredcapitalfromRMB1.15bntoRMB2.01bn,anditmaysignificantlyimproveHengtai’scompetitiveness and risk prevention ability in securities market
Cui Liguo, guantao
• DatangTelecomTechnologyhas invested US$171.8m in SemiconductorManufacturingInternationalCorporation(SMIC)inreturn for a 16.6% interest. Upon closing, Datang will be the largest shareholder of the company
• DLAPiperandGuantaorepresentDatang as the foreign legal consultant and domestic legal consultant respectively
• TheinvestmentinvolvesUS,HongKong and mainland China law. The share purchase agreement is governedbyHongKonglaw
• Throughthistransaction,aChinesecentral enterprise has made a strategic investment in a company listedonboththeHKSEandNYSE
8
NEWS | deals >>
iSSUE 6.1
| CHINA |
cITéLUm groUP PPP ►Firm: Gide Loyrette NouelLead lawyer:StephaneVernayclient: Citélum
Firm: Yun Zhi NanLead lawyer: Chen Zhiboclient:CityManagementBureau of Kunming
• DealinvolvedCitélumGroupnegotiation of urban lighting scheme for the management of urban lightinginKunmingMunicipality,YunnanProvince
• TheKunmingschemeisexpectedto be implemented in within six months and will last 15 years. After completion, the project will cover 50,000 lighting points
• “ThePPPisthefirstofitskindinChina and includes a commitment to meet energy saving targets,” said StephaneVernay
Firm: Simpson Thacher & Bartlettclient: Lead arrangers
Firm: White & CaseLead lawyer: HallamChowclient: Lead arrangers
• Dealinvolvedacquisitionfinancingfor China Oilfield Services Ltd(COSL)NorwegianAS,inconnection with its US$2.5bn acquisition of Awilco Offshore ASA
• LeadarrangersincludeBankofChina, Standard Chartered Bank, ICBC,HSBC,Calyon,Standard BankPlcandSumitomoMitsuiBanking Corporation
• Thisisacomplextransactionwhichrequires the coordination of the regulatory requirements of the HongKong,ShanghaiandOslostock exchanges
• Thedealwasthefirstmajorsuccessful cross-border acquisition byanA-andH-sharePRCcompanyand is largest 100%-stake overseas acquisition in the non-oil and gas sector in China by value to date
• CliffordChanceadvisedCOSLonglobal antitrust issues, debt financing andHongKongStockExchangeregulatory and compliance issues
Firm: Mayer BrownLead lawyer: Stephen Bottomleyclient:Hempel
Firm: Linklatersclient:HoiHungHHH(BVI)
• Hempel,aglobalmanufactureranddistributor of paint coatings, has completed a conditional buy-out ofitsjointventurepartner,HoiHungHHH(BVI)Ltd,anindirectwholly-owned subsidiary of China MerchantHoldingsInternational
• TheHK$1.1bnbuy-outincludedasaleshare,anassignmentofIPrights and the grant of other rights toHempel
Firm: Yuan TaiLead lawyer: Wang Daofuclient: Ying Li InternationalRealEstate
Firm: Stamford LawLead lawyer: Soh Chun Binclient: Showy International
• YingLiInternationalannounceditsintentiontolistonSGXthrougha shell company named Showy International
• TheIPOprocedureswerecompletedinthreestages:1.HongKongFuguangGroup,themajorshareholder of Chongqing Ying Li, completed a reverse takeover of SGX-listedShowyInternational;2. the assets of Ying Li were transferredtoShowyInternational;3. Chongqing Ying Li went public through the new shell company Ying Li International
• Thisisreportedlythefirstexampleof a Chongqing-based enterprise debuting overseas
• ShowyInternationalisthethirdmainland real estate developer to belistedonSGXafterSunshineHoldingsandChinaYuanbangPropertyHoldings
• MIHChina(Mauritius)hasclosedits 37% equity investment in a new joint venture established with Anhui-basedADPGMediaGroup,publisher of 13 newspapers and periodical titles
• GideadvisedVeoliaTransportregarding the establishment of a jointventurewithNanjingZhongbei,aPRCcompanylistedontheShenzhen exchange and majority-ownedNanjingMunicipality
• ThenewventuremarksVeolia’sfirst foray into the Chinese public transport market. It will operate public transport in six cities around Nanjingoveraperiodof30years,with 360 million people expected to use the system each year
• Paul,Weiss,Rifkind,Wharton&GarrisonadvisedMIHonthedeal,which required approval from theMinistryofCommerce,theGeneralAdministrationofPressandPublicationsandtheStateAdministration of Industry and Commerce
• Thedealisararecaseofaforeigninvestment in print media operations approved by several Chinese central government authorities
“The MIH China – ADPG print media joint venture deal is a rare case of a foreign equity investment in print media operations that requires many levels of government approvals. We hope that this successful deal will mark the beginning of the relaxation of foreign investment in the Chinese media sector”
• GST’soutstandingshares and options have been taken over by UTFE
• GST’scontrollingshareholder, GSTI,whichowns53.43%,has executed an irrevocable undertaking to accept the bid
• Thebidisconditional upon obtaining the applicable regulatory approvals or consents, includingunderrelevantPRCandCayman Islands law
• “Thestructureofthisuniquetransaction had significant bearing on the success and outcome of the deal. We chose to enable the controllingshareholderofGSTtocasthis vote and have it count towards the majority for compulsory acquisition, which was key to making this a successful privatisation,” said Colin Law,partnerofO’Melveny&Myers
• SyndicateoflendersledandarrangedbyDVBGroupMerchantBank(Asia)Ltd,SkandinaviskaEnskildaBankenAB(Publ),Singapore Branch and Bayerische Hypo-UndVereinsbankAG,Singapore Branch
• Cross-bordertransactioninvolvedPRC,BritishVirginIslands,Singapore,HongKong,CaymanIslands and England
Peter Chen, O’Melveny
& Myers
Colin Law, O’Melveny
& Myers
CHINA/HONG KONG/SINGAPORE
TPv – PhILIPS croSS-borDer ►acqUISITIonUS$15.4m
Firm: White & CaseLead lawyers: Seung Chong, Jeremy Leiferclient:TPV
Firm: Slaughter and Mayclient:RoyalPhilipsElectronics
• TPVTechnologyLimited(TPV)hasbeen in a cross-border acquisition of the IT display and public signage businessesofRoyalPhilipsElectronicsinmorethan45jurisdictions
• White&CaserepresentedTPVinthe transaction, with lawyers from 14officesglobally
• HongKong-andSingapore-listedTPVis the world’s leading manufacturer of monitors and flat screen televisions
• Thisacquisitionisafollow-ontransaction from an earlier transaction valued US$357m in 2005
Esther Leung, DLA Piper
Constance Choy, Sidley Austin
| CHINA/SINGAPORE |
chIna anImaL – Inner ►mongoLIa bIWeI anTaI bIoLogIcaL TechnoLogy acqUISITIonUS$42.05m
Firm: Rajah & TannLead lawyer: Danny Limclient:ChinaAnimalHealthcareLtd
• SGX-listedChinaAnimalisseekingapproval for the acquisition which isexpectedtobecompletedbyQ42009, depending on when relevant PRClicencesareobtained
• ChinaAnimalproposedtoacquire60% stake of Biwei. The acquisition is structured as a conditional sale and purchase40%stake,andoptionforlater additional 20% stake
issues involving mainland Chinese law, Sidley Austin served as the counsel to the issuer Strong, while DLA Piperrepresentedthesponsorandunderwriter, China Everbright Capital
Jeremy Leifer, White & Case
10
NEWS | analysis >>
iSSUE 6.1
M&A: tide turns for domestic acquirers
Just a few years ago, domestic companies were top acquisition targets for foreign investors. Today, many of them are buyers
on an overseas shopping spree. The total value and number of overseas investments made by domestic enterprises defined 2008 as a landmark year for outbound M&A.
In 2009, as markets in other parts of the world hit bottom and financing becomes more readily available, more offshore investment is expected to take place.
Law firms in the region are hoping incomes generated from advising on the cross-border transactions of Chinese investors will offset the downturns in some of the more damaged markets.
Hunger for resources Deal activity in the natural resources sector, particularly in Australia, Africa and Latin America, has been and will continue to be strong. Chinalco’s joint stake purchase with Alcoa in
Rio Tinto for US$14.3bn ranked as Asia’s largest deal in 2008. Sinosteel made its mark as the first state-owned enterprise (SOE) to successfully acquire an Australian-listed resources company with its US$1.3bn takeover of Midwest. CNOOC and Sinopec received international attention on a US$2.5bn takeover bid for Norwegian offshore oil company Awilco and a US$1.9bn offer to acquire Canada-listed oil company Tanganyika respectively.
ANALYSIS
International firms with a strong presence and experience in the resource-rich regions have found themselves in a better position to win mandates from Chinese investors.
According to Deacons partner Ian McCubbin, who led the Deacons team that advised Sinosteel on its takeover of Midwest, the firm’s cross-border M&A work with Chinese companies has doubled over the past 12 months. Half of the M&A revenue is from cross-border deals with state-owned enterprises and most of these have taken place in the resources sector.
Domestic firms which have a long-established relationship with large SOEs and listed and private companies have seen the range of services they provide change over the years to meet their clients’ international ambitions.
King & Wood partner Guo Guiying, who specialises in cross-border M&A, said at December’s Beijing International M&A Forum that her firm saw a sharp increase in the number of clients
Global crisis-induced low company valuations and favourable exchange rates create opportunities for domestic acquirers, but the pitfalls for those bargain-hunting abroad are numerous
chIneSe bUyerS on a ShoPPIng SPree ►Despitetheregionalandglobalturmoil,2008M&A•activity in China remained strong with US$159bn worthofdeals,a44%jumpfrom2007Chinese investors were the most active buyers in •theregionfor2008,with2,499dealsamountingto US$105bn or a 20.5% market shareCross-border outbound transactions for 2008 •recordeda64.4%growthtoUS$46bnfromUS$29bn in 2007
Source: Thomson Reuters
“Compared to international counterparts, local counsel are usually instructed at an earlier stage of transactions. Some clients also see local counsel as a useful channel for gathering information on foreign policies and legal systems, potential targets overseas and foreign service providers”
Zhang Shiwei, Kaiwe
NEWS | analysis >>
11www.legalbusinessonline.com
seeking legal support for their overseas investment and transactions in recent years. Up to 80% of the outbound transactions the firm has advised on are in the natural resources sector.
As outbound transactions take place in foreign jurisdictions and are governed by laws and regulations in these jurisdictions, international firms inevitably have an important role to play in getting deals done. However, domestic firms also form an integral part of the advisory teams for Chinese acquirers.
“Outbound investments usually involve a complicated approval process from multiple government bodies. One of the important roles of PRC counsel is assisting clients in obtaining all the approvals required,” said Zhang Shiwei, a partner at Kaiwen. He
recently advised Shenzhen Zhongjin Lingnan in its US$470m joint takeover bid with Indonesian partner Antam for Australia’s Herald Resources.
Yet the responsibilities of local counsel extend beyond getting government approvals. Zhang said that in cross-border transactions local firms undertake tasks including conducting due diligence, corporate restructuring, advising on transaction structure, establishing offshore entities used in the transaction structure and assisting clients to obtain appropriate financing.
“Compared to international counterparts, local counsel are usually instructed at an earlier stage of transactions,” said Zhang. “Some clients also see local counsel as a useful channel for gathering information on
foreign policies and legal systems, potential targets overseas and foreign service providers.”
Driven by client needs, many local firms in the past year have strengthened their global network and international capacity, either through establishing offices overseas, joining global law associations or forming strategic alliances with foreign firms. Latest examples include King & Wood’s New York office, Grandall’s Hong Kong office and Wang Jing & Co’s membership of Terralex.
Financial crisis brings opportunityWith the deepening global financial crisis, many companies in developed countries are suffering financial difficulties and seeing their share prices drop sharply. The turmoil could mean bargains around the world for Chinese investors.
“Chinese acquirers have fewer obstacles and frictions now in Western countries, given that these countries are lowering their thresholds for foreign investment to relieve the financial pressure on their companies,” said Zhang.
In the current circumstances, it is attractive for companies to take strategic stakes in western companies, either to gain market access, secure assets or brands, or acquire technology and management skills.
“Lower prices and costs in M&A deals would encourage PRC regulators to continue their policy of backing up domestic enterprises in their overseas investment and M&A. Such governmental support will result in an increased number of deals and better possibility of success,” said King & Wood partner Yang Xiaolei.
Although cheaper assets overseas are making more domestic companies eager to jump on the outbound M&A bandwagon, legal advisers have reported certain difficulties in closing deals.
“The economic uncertainty has created hurdles for the buyers and vendors to reach an agreement on the value of targets. Investors remain cautious, as some markets are still searching for the bottom,” said Zhang. “Some transactions we are advising on are progressing slowly and a few have come to a halt due to this uncertainty.”
Vinson & Elkins, which has represented Chinese companies on
a number of high-stake outbound transactions in natural resources, has seen the same market sentiment.
“The large SOEs are proceeding cautiously at this point. We don’t see any moves by our Chinese clients to immediately expand their acquisitions of overseas assets,” said Paul Deemer, co-managing partner of the firm’s Beijing and Shanghai offices.
“However, we do expect that the climate for Chinese overseas acquisitions will improve later in the year, particularly if it becomes clear that the slowdown has bottomed,” Deemer added.
In light of a lower level of activity in the legal services market, clients’ bargaining power is greater than a year ago.
Many law firms have been offering clients an array of alternative fee arrangements and discounted billing rates.
However, general counsel of companies that are not financially challenged insist that quality of services, efficiency and ability to complete deals within a tight timeframe are the top selection criteria for external legal advisers.
Challenges to overcomeThe lack of international experience and the unfamiliarity with foreign legal and business environments have always been the barriers to the globalisation efforts of domestic companies. And bringing a transaction to completion is becoming more difficult due to global turmoil.
“The regulatory and stakeholder environments in Western and emerging markets are likely to become more complex and difficult to navigate as recessionary conditions begin to bite. That means Chinese companies will need to plan their overseas investments carefully,” said Alastair Da Costa, DLA Piper’s managing director for Asia.
Outbound M&A deals of Chinese companies share the same pitfalls as any international M&A transaction. Chinese investors are strongly advised to seek expert advice and engage legal counsel with extensive expertise and experience in cross-border transactions.
Deemer of Vinson & Elkins suggested that the three key elements for a successful deal are: finding assets or companies at prices that reflect their true value; carrying out a thorough due diligence; and negotiating agreements that provide solid protection to the buyer. “We expect that there will be more distressed sellers in the market, and those will need to be carefully vetted to assure the buyer that it’s getting what it pays for,” said Deemer. ALB
“Large SOEs are proceeding cautiously at this point … However, we do expect that the climate for Chinese overseas acquisitions will improve later in the year, particularly if it becomes clear that the slowdown has bottomed”
Paul Deemer, VinSon & elKinS
NEWS | analysis >>
13www.legalbusinessonline.com
International firms look on the bright side
ANALYSIS
International players are undeniably facing hardships in their home bases of London, New York and beyond, but many of them tell ALB China that the fundamentals of their China operations remain strong
There are several thoughts and narratives on how the financial crisis will play out in China, but it is clear that this crisis
has already caused a decrease in deal-making activity.
The last quarter of the past year saw a dramatic drop in IPO issuances and M&A transactions, with private equity funds putting the brakes on investments. Like the clients they represent, international firms are also feeling the pain.
“The influence of the financial crisis on international law firms is slower than on international banks, but it’s getting more and more noticeable,” said Liu Wei, managing partner of DLA Piper’s Beijing office.
“As far as I could figure out, some international law firms in China are trimming staff and 80% of the firms are not busy at this stage,” Liu continued.
Some firms that recruited aggressively when the market was at its peak 18 months ago are adjusting their teams in China by downsizing and becoming more cost sensitive. They have cut back on out-of-demand practice areas, such as capital markets and M&A, to increase those in demand, such as dispute resolution, regulatory and restructuring. Only a few firms have decided to make redundancies in China offices.
While economic growth is slowing in China, it continues to offer opportunity. Some recent moves in the market have added more credence to the view that China enjoys a relatively healthy outlook compared to markets elsewhere in the world and is likely to recover from the crisis more quickly.
There is a significant trend emerging as internationals increasingly eye China in the midst of the global economic crisis. Some firms, although
they have had to lay off staff or close offices in the US or UK, have established new offices or bolstered their China practices through lateral hires and promotions.
Clifford Chance, for example, promoted four lawyers to counsel and appointed several new senior associates in China, following its decision to lay off associates across its offices in the UK and US. O’Melveny & Myers elected four lawyers in China in their global 15-strong 2009 partnership overhaul, while DLA Piper created seven new partnership positions in Asia, six of which are based in China offices.
Clifford Chance’s Asia managing partner, Peter Charlton, said that the promotions will help to strengthen the firm against the market conditions.
“In such dynamic times, it’s impossible to predict precisely what the year will hold,” said Charlton. “However, having the right people – such as these counsel who understand the region, our clients and their businesses – is essential if we are to stay ahead of changing trends.”
Commenting on the new promotions, DLA Piper’s Asia managing director Alastair Da Costa said: “The promotions form part of a strategy that optimises our firm’s team at a time when clients need the best legal and business advice to deal with heightened uncertainty.”
“A China practice has been a crucial driver of DLA Piper’s Asian and global growth strategies, and the firm expects it to continue as a source of strength and ongoing growth,” he said.
While some firms are boosting their headcount in the region, others are pressing ahead with their plans to penetrate the market or expand their presence. At the end of 2008, US
firms Miller Canfield and Loeb & Loeb decided to establish themselves in China, and Bird & Bird and Slaughter & May both announced plans to add one more office to their China practices.
Bird & Bird, like Loeb & Loeb, said the IT sector was a driving force. “China continues to be an exciting market, particularly in many of our key sectors, namely IP, communications, IT, life sciences and sport,” said Bird & Bird’s China managing partner, Matthew Laight.
And in early January, Herbert Smith, a long-established firm in the region, changed its international management structure by creating two new Asia management roles to improve regional collaboration.
Hong Kong corporate partner Andrew Tortoishell has been appointed as Greater China managing partner and Austin Sweeney as the new South East Asia managing partner. Both will report to the firm’s head of Asia, Ashley Alder.
Alder noted that the adjustment was not a response to the current market conditions; instead, it was prompted by an increase in business activity across Asia for Herbert Smith, requiring greater cross-office collaboration and more focused management of each of
“In such dynamic times, it’s impossible to predict precisely what the year will hold. However, having the right people … is essential if we are to stay ahead of
changing trends” Peter Charlton, ClifforD ChanCe
ParTner heaDcoUnTS on The rISe ►Firm Total number
of new partners in China
Number of new partners in Beijing
Number of new partners in Shanghai
Number of new partners in Hong Kong
Dechert 3 0 0 3
DLAPiper 6 2 2 2
Latham&Watkins 9 0 0 9
O’Melveny&Myer 5 2 0 3
ReedSmith 2 0 0 2
Note: Numbers include lateral hires and partner promotions between 16 October and 16 January. This table does not purport to be exhaustive.
the three sub-regions of China, South East Asia and Tokyo.
“Each Asia sub-region has its distinct markets and growth opportunities, but they also interact actively with each other. Particularly strong trends include China energy companies doing business in Indonesia and Japanese trading houses investing across South East Asia,” said Alder.
As in every economic downturn, the business and practices of law firms are inevitably affected. In all, international firms are confident that China has a resilient economy and its legal market holds promising growth prospects. But there is little doubt that 2009 will be a difficult year for everyone and firms are not going to be as busy as they were in 2008. Those who have a balanced set of practices and strong client relations will be better able to weather the storm. ALB
“The promotions form part of a strategy that optimises our team at a time when clients need the best legal and business advice to deal with heightened uncertainty”
alaStair Da CoSta, Dla PiPer
16
NEWS >>
iSSUE 6.1
news in brief >>
CLIFFORD CHANCE NEW YEAR CLEAN OUTClifford Chance has announced that around 80 associates in the London office will be made redundant as it responds to worsening economic conditions and the inexorable slump in the firm’s staple areas such as M&Aandbanking&finance.Itisunderstoodthatthelayoffs will not affect partners or trainee lawyers.
However,arecentpromotionofsixnewAsia-basedcounsel shows a reaffirmation of the firm’s commitment to the Asian region. Despite the financial crisis, the firm willremain“ambitious”,saidAsiamanagingpartnerPeterCharlton,withgrowthinAsiabeingcentraltothose ambitions. But, although the firm’s redundancy program focused on the London office only, sources close to ALB ChinasuggestthatHKcutsarenext.
Shanghai lawyers launch new international initiative
Shanghai lawyers’ continuing desire to foster industry leadership and
seek international cooperation was apparent in the recent signing of a strategic agreement between the Shanghai Bar Association (SBA) and the Law Society of England and Wales (LSEW).
The two signatories agreed to share information, conduct exchange visits, hold annual seminars and organise training programs.
“Shanghai aims to be an international financial centre, and its legal service is an important element in this,” said Anthony Qiao, vice president of the SBA.
“The demand for lawyers with international expertise will increase in Shanghai, so the intention of the agreement is to improve collaboration between Shanghai lawyers and foreign legal professionals,” he continued.
The approach of World Expo 2010, in particular, has made the need for internationally qualified lawyers more acute in Shanghai.
Under the five-year cooperative agreement, Shanghai lawyers will have the opportunity to participate in training programs, delivered by English solicitors, on many key areas of international practice in Shanghai, and to study overseas through schemes sponsored by the SBA.
The agreement will also be beneficial
for the UK solicitors’ firms. Paul Marsh, president of the LSEW, said that China will continue to attract investment despite the current economic climate and provide opportunities for the legal sector.
For example, he said, as Chinese companies continue to expand internationally, the Law Society will inform lawyers in China of the UK’s role as the jurisdiction of choice for international dispute resolution.
“Our agreement with the Shanghai Bar will also assist solicitors’ firms to develop links with their Chinese counterparts that may well lead to new business opportunities in what is an important and growing regional legal centre,” said Marsh.
The first joint activity for 2009, in March, will be a visit by a delegation of Shanghai shipping lawyers to the Law Society.
This year will also see the Shanghai Bar strengthening ties with legal professions in a number of other countries. Qiao indicated that a series of similar initiatives with law societies of other mature jurisdictions including Japan, Australia, Germany and the US will be established by the end of 2009. ALB
SHANGHAI
Anthony qiao, SBA
US FIRM COvINGTON IN DOHA ALLIANCE USfirmCovington&Burlingtonhasformedastrategic alliance with a Qatar-based law firm. The firm will leverage its relationship with the Institution QurayshforLaw&PolicytoexpanditspresenceintheMiddleEast.
Although the firm has tapped the Asia market through an office in Beijing, the firm has yet to establishitselfintheMiddleEast.
PATTON BAGGS MORE QATAR OFFICE SPACEMarkingthefifthanniversaryofitsopeninginQatar,US-basedlawfirmPattonBoggsmovedtoabiggeroffice as a result of its steady growth.
Thenewoffice,locatedintheCommercialbankPlazain Doha, was inaugurated in the presence of staff and officials including the US ambassador to Qatar Joseph LeBaron, the former Qatari economics minister Sheikh MohamedAlThani,andQatarUniversityvicepresidentDr Sheikha bint Jabor Al Thani.
“Wenowhave12residentprofessionalsfromsixdifferent countries, including three Qatari nationals,” saidRobertHager,thefirm’sDohamanagingpartner.The firm was the first US firm licensed to practise in Qatar.
NEWS >>
17www.legalbusinessonline.com
uk report
of its departments to move to a four-day week and put the entire corporate team on two weeks’ unpaid leave in the run-up to Christmas.
No new staff for CadwaladerCadwaladerWickersham&Taftwillhavetobreakits impressive 100% trainee retention rate, which has remained steady for the last two-and-a-half years, due to worsening market conditions. The firm recently announced that it will not be offering jobs toanyofitsCitytraineesduetoqualifyinMarch2009. The intake freeze will affect three trainee solicitors and makes Cadwalader one of the first leading firms in the City to make this move.
Deloitte survey reveals slow growth for firms It may not come as a surprise, but recent research from Deloitte reveals that UK firms are struggling with growth in light of the economic crisis. The report noted that fee income across the country’s 100 largest firms had increased by only 5.8% during the second quarter of 2008–09 compared with the same period the previous year. Firms in the top 10 are faring slightly better than their smaller rivals, reporting an average rise in fee income of 11.1% for Q2, but large firms have still been affected, posting only modest increases in revenue.
Hey big spender – Norton flashes the cash While most UK firms are having to cut corners in mostcostcentres,itseemsNortonRoseissailingalong just fine – having just spent more than £8m on improvements to its offices. According to the firm’s 2007–08 annual report, £8.6m was spent on additions to its offices worldwide and a further £1.5mhasbeensetasideforITintheNewYear.
ROUNDUPDavidHarriswillstarthissecondfour-yeartermasLovellsmanagingpartnerinMay.Hewasrecently •re-elected,despitestiffcompetitionfromEuropeanheadHaraldSeislerBryanCaverecentlylauncheditsParisoffice,withformerDechertpartnersKathieClaret,JilaliMaazouz•and Joseph Smallhoover and five other associates on boardAustrianfirmSchoenherrissettotakeoverHerbertSmithallyfirmGleissLutzintheNewYear.•SchoenherrwillobtainGleissLutz’sPragueandWarsawbranches,simultaneouslylaunchingitsownofficein Bratislava, SlovakiaEversheds,Allen&OveryandAshurstarejustafewofthetop-tierfirmstoreceivegongsfortheirwork•and employees at the recent 2008 British Legal Awards. Eversheds won firm of the year and lawyers from Allen&OveryandAshurstpickedupthelifetimeachievementandseniorpartnerawardsrespectively
London layoffs rifeIt has been a bad few months for lawyers in London and beyond. UK firms have been hit hard by the credit crunch, triggering a number of layoffs in quick succession.
Among the firms to dismiss City staff in recent monthsareEversheds,Orrick,MayerBrown,ReedSmith,DLAPiper,TaylorWessingandSquireSanders.
Eversheds is up to its second redundancy consultation, with the latest round tipped to include 45lawyersandrelatedsupportstaff.
Fresh from making cuts across its US network, White&CasehasnowturneditsfocusontoitsUKoffices, and although the number of job cuts in the firm’s London office is not yet clear, it is reportedly aiming to reduce its legal and non-legal headcount by approximately 3%.
Forty associates across the real estate, structured financeandcorporatepracticesofOrrickHerrington&Sutcliffearesaidtobefacingredundancy,aswellas two associate jobs and one support staff post in the firm’s London office.
MayerBrownrecentlylaunchedaredundancyconsultation for 11 lawyers working in its London office,whileDLAPiperhaslaunchedaredundancyconsultationlikelytoresultinupto40joblossesacrossitsUKoffices.Partnershavebeentoldtheywill be out of the firing line.
Crisis turns focus to strategy While many firms are taking to redundancy consultations to balance the financial fallout from the economic downturn, a few UK establishments are also initiating other tactics to stay afloat. FollowingaJuneredundancyconsultation,MiltonKeynes firm Kimbells recently told lawyers in three
general corporate and international trade legal support.
“Ningbo has one of the largest ports in China and is expected to have greater development opportunities in the near future,” said Lv.
“The Ningbo office is an integral part of our strategy to develop a solid shipping practice across major port cities.”
In Tianjin, Grandall has an established shipping practice team.
A team of experienced shipping lawyers, led by partner Li Daofeng, joined from Zhejiang Jinhan to form a core part of Grandall’s Ningbo office. Li, who served as a judge in Ningbo’s Maritime Court, has been appointed as the managing partner of the new office, where he is working with four other partners. ALB
HONG KONG LAUNCHES MASTERS PROGRAM FOR MAINLAND JUDGESTheSchoolofLawatCityUniversityinHongKong(CityU)hasannouncedtheinaugurationofaMasterofLawsprogramfor30ChinesejudgesinHongKong.
Organised by China’s legal authorities, the program highlights the government’s strategies to advance judicial reform by widening the exposure of China’s judiciary to international legal knowledge.
The one-year program is specially designed under atripartitearrangementbyCityU,theNationalJudgesCollegeoftheSupremePeople’sCourtofthePRCandColumbiaLawSchool.Thejudgeswillstudy for one month at Columbia Law School, after which they will take a study tour to Washington DC, visiting the US Congress, the Supreme Court and the Department of Justice.
“AsChina’sinternationalstaturegrows,ourlegalsystem must grow with it, complete with the higher competence of our judges. Upon their completion of studies at CityU, I am confident they will make important contributions to the betterment of the legal system in China,” said Wan Exiang, vice-presidentoftheSupremePeople’sCourtofChina,atthe inauguration.
It is also the first time that China’s legal authorities have organised for Chinese judges to further their legal studies at postgraduate level outside the mainland.
“TheProgrammewastoencourageand motivate students to use their legal skills to conduct research into an area in which they felt there was a pressing social need,” said Thomas E Jones,BeijingcorporatepartnerofAllen&Overy.
英国安理国际授奖40名学生 40多名法律专业的中国学生获最新一期英国安理国际律师事务所奖学金。
“奖学金是为了鼓励和激励学生利用他们的法律技能,对他们认为有迫切社会需要的领域进行深入研究。”安理北京代表处合伙人Thomas E. Jones说。
Thomas Jones, Allen Overy
ZHEjIANG
10th Grandall office opens in Ningbo
Lv Hongbing, grandall
Shortly after the building of the 36km-long bridge on Hangzhou
Bay, which has cut the travel time between Ningbo and Shanghai in half, Grandall Legal Group has opened its 10th office in this important port city.
The opening of the Ningbo office gives Grandall three offices in the Yangtze River Delta region, with Shanghai and Hangzhou being the other two. This puts the firm in a better position to service a broader and diverse portfolio of clients in the region.
Although the three offices are geographically close to each other, Grandall’s executive partner Lv Hongbing is certain that competition between these offices is minimal, as they have different specialties and will focus on different practice areas.
The Ningbo office will primarily provide advice and services in relation to all aspects of shipping and property insurance matters. It will also offer
new Asia management positions designed to improve regional collaboration.
Hong Kong-based partner Andrew Tortoishell and Singapore managing partner Austin Sweeney will assume two new management roles, overseeing the China and South East Asian regions respectively.
Tortoishell will become the Greater China managing partner, looking after the firm’s business development interests in Beijing, Hong Kong and Shanghai. Sweeney moves from Tokyo, where he has spent two years as a corporate partner, to become the new Southeast Asia managing partner overseeing the Singapore, Thailand and Indonesia offices.
Both will report to the firm’s head of Asia, Ashley Alder.
“Having in place an appropriate regional management structure will, among other benefits, support this collaboration so Andrew’s and Austin’s appointments mark an important step forward for us,” Alder said. ALB
ROUNDUPKirkland&Ellishaspromoted67ofitslawyerstopartneracrossitsUSandLondonoffices.IntheUS,the•corporate practice alone saw 23 promotions, while litigation had 20ClearyGottliebhaspromoted10lawyerstopartnerrecently–sixintheNewYorkoffice,twoinRomeand•one in BrusselsNewYork-basedcorporateheadTimGoodellhaslefttroubledWhite&CasetojoinUSoilcompanyHess•Corporation as general counsel King&SpaldingisclosetoreachinganagreementwithThacherProffittregardingtheacquisitionof•around 100 of the latter’s 195 lawyers White&CasechairmanHughVerrierhasvoicedhiscommitmenttoexpandingandfurtherdeveloping•the firm’s existing international network, in the wake of a management shake-up that saw firm power splitamong14regionalgroupsanda16-memberglobalpracticecouncilsetup.VerrierconfirmedLatinAmerica and Asia as prime targets for investment
among the firms whose US associates are receiving reduced bonuses at the end of the year.
At Cravath, year-end bonuses for 2008 will range from $17,500 to $30,000, and the firm has canned the special bonus element of its 2008 payments. Simpson Thacher has also cancelled the additional special bonus for its associates, which last year ranged from $10,000 to $50,000, and junior lawyers will receive $17,500 – a severe drop from last year’s payout of $35,000.
Clifford Chance associates will receive between US$17,500 and US$32,500 – a far cry from last year’s US$32,000 to US$65,000. The story is similarlyaustereatDavisPolk,andClearyGottliebandDewey&LeBoeufaretwomorefirmstohaveslashed back associates bonuses.
Skadden Arps, however, has decided to go against the grain and has actually matched 2007 figures – minus supplemental bonuses.
Partners at DLA Piper share financial load PartnersatDLAPiperhavebeenaskedtocontribute capital to the firm from next year. The strategy – a bid by the firm to reduce its reliance on bank credit and simplify its compensation structure – will only affect the 275 salaried partners at the international firm’s US offices who now receive an income rather than hold an equity stake at the firm. The amount to be contributed will depend on seniority and will give the partners a stake in the firm’s profits less than that of full equity partners.
Firms slash staff to battle credit crunch UK firms aren’t the only ones turning to redundancy to counter the effects of the economic downturn. USfirmsacrosstheboard–SquireSanders&Dempsey,ProskauerRoseandReedSmithamongthem – have also been engaging in some pruning of the payroll.
Squire Sanders dismissed a total of 30 associate and support staff following its annual employment reviews, citing current and projected business conditionsasthemajorreason.ProskauerRose,meanwhile, made 35 associates and 25 support staff redundant in its US offices (despite major advancesindevelopingitsinternationalnetwork).But perhaps the most dramatic culler of staff has beenReedSmith,whomade115redundanciesacross its US offices.
Christmas bonuses hit by downturnFirms are increasingly having to display Scrooge-like tactics in a bid to soften the blow of the credit crunch on their finances. Cravath Swaine, Simpson Thacher,CliffordChanceandDavisPolkare
Andrew Tortoishell, Herbert Smith
Austin Sweeney, Herbert Smith
20
NEWS >>
iSSUE 6.1
new rules on equity investment in Pudong new area
T he Shanghai Pudong New Area Government issued the Notice of Pudong New Area on Promoting the Development of Enterprises for Equity investment and Equity investment Management Purposes (“Notice”)
and the implementing Measures of Pudong New Area on Promoting the Development of Enterprises for Equity investment and Equity investment Management Purposes (“Measures”) in December 2008.
1. Types of enterprisesOnly EEis and EEiMs whose business registration, tax registration and principal business premises are all in Pudong New Area and complying with the necessary conditions specified in Article 3 in the Notice on Business Registration and Other issues of Equity investment Enterprises and their senior officers are eligible to enjoy said preferential treatment.
2. Incentives for enterprises(1) An incentive on a lump-sum basis for an EEi established
in company formAn EEi with a registered capital of RMB500 million: RMB5 millionAn EEi with a registered capital of RMB1.5 billion: RMB10 millionAn EEi with a registered capital of RMB3 billion: RMB15 million
(2) An incentive on a lump-sum basis for an EEi established in partnership formAn EEi with fund raising amounting to RMB1 billion: RMB5 millionAn EEi with fund raising amounting to RMB3 billion: RMB10 millionAn EEi with fund raising amounting to RMB5 billion: RMB15 million
3. Subsidies for senior officers(1) For the chairman of the board, vice chairman of the board,
general manager or deputy general manager of an EEi and an EEiM established in company form, a subsidy equivalent to 40% of his/her total remuneration in the current year shall be granted, and for the investment manager and project manager a subsidy equivalent to 20% of his/her total remuneration in the current year shall be granted.
(2) For the chairman of the board, vice chairman of the board, general manager or deputy general manager of an EEi established in company form with a registered capital of RMB 500 million and an EEiM established in company form with RMB 1 billion under management, he/she shall be given a housing allowance or rental subsidy of RMB 0.2 million on a lump-sum basis.
4. Encouragement of investments in Pudong’s enterprises
EEis are encouraged to invest in the state-owned enterprises, high-tech enterprises, and small and medium-sized enterprises in Pudong New Area. EEis investing in enterprises specified in industries catalogue and encouraged in Pudong New Area, or investing in other emerging projects encouraged in Pudong New Area, shall be given an incentive equivalent to 50% of the total return on investment achieved in Pudong New Area by such EEis.
Charles Qin: [email protected] Michael Mei: [email protected] Llinks Law Offices 通力律师事务所 19F, ONE LUJIAZUI 68 Yin Cheng Road Middle Shanghai 200120 P.R.China Tel: (86 21) 3135 8666 Fax: (86 21) 3135 8600
Shanghai
UPDaTe >>
China: new merger guidelines bring more work for firms
A series of new guidelines issued by the Anti-Monopoly Bureau of the Chinese Ministry of Commerce (AMB)
will generate more work in M&A deals, law firms have told ALB China.
The new guidelines outline the merger review framework and process, and the information required to notify the AMB of a transaction in accordance with the compulsory pre-merger notification regime under the Anti-Monopoly Law (AML).
Notable changes, including draft guidelines for consultation and a merger filing template, make the system of notification more transparent, making it easier for law firms to advise clients on the relevant procedure.
For lawyers, more work has to be done, particularly in the pre-filing stage under the new guidelines, which are broadly consistent with the existing practice applied in other mature jurisdictions, such as the US and EU.
“More detailed information and documents may be required. The collection and preparation of such documents may be more challenging and result in increased costs,” said Alex Zhang, a partner with Jones Day Shanghai. “Pre-filing consultation with MOFCOM may become a very important process for the purposes of both complying with MOFCOM’s information request and reducing [any] unnecessary burden for the applicants.”
Soh Chun Bin, the director of Stamford, holds a similar opinion. “As the reporting requirements under Rule 10 [the rule on foreign M&A introduced in September 2006] are numerous, the new guidelines may have the effect of making some domestic M&A transactions more complex and more challenging to execute,” he said. “However, for foreign–PRC transactions, I don’t think law firms need to adapt their practices significantly.”
Kirstie Nicholson, counsel with Lovells Shanghai, saw one potential future opportunity offered by the guideline.
“MOFCOM used to require filings under the AML to be made either by the parties themselves or by a domestic PRC law firm, but the new guideline may leave the door open for international law firms to submit filings to MOFCOM in the future,” she explained.
Some international firms have already taken early action reacting to the guidelines. Jonathan Gowdy, partner of Morrison & Foerster, said the firm has established a China antitrust team that assists clients in analysing and completing
ANtItRUSt
NEWS >>
21www.legalbusinessonline.com
UPDaTe >>
Insurance
a retrospective of the chinese insurance industry in 2008
John F Dobbyn, an American professor of insurance law, stated in the preface of his book, American Insurance Law, “there will be great calamity if the insurance companies serve people as people would draw water
from a mill”. As the insurance industry is suffering greatly from a
sequela of the bull market in 2008, the chief task is to reduce and remove risk from within it.
When international insurance groups such as AiG gradually slid, the chinese insurance industry became lost in a sea densely covered by fog throughout 2008, although plain sailing had predominated in 2007.
increasing numbers of insurance companies have been investing in capital markets as a profit-making venture but their expectations failed to flower in 2008. The data provided by China Insurance Regulatory Commission (ciRc) revealed the yield ratio was 2.41% in the first half of 2008, which was no greater than that of the first quarter of 2007.
The insurance industry is an important aspect of finance but the essential aspect, insurance protection, has gradually been diluted. Fortunately, revisions of insurance law focus on insurance contract law, in order to protect and benefit the consumer. However, most people anticipate expansion of the investment channels.
With the issuance of the Administrative Provisions on the Solvency of insurance companies, strengthening the monitoring of insurance companies’ solvency becomes the most effective measure for protection. At the request of the ciRc, Universal Life insurance, interest-distribution insurance and insurance Wrappers have gradually decreased their business, their traditional products becoming part of the mainstream current market. Approximately 300 billion RMB in insurance capital has left the securities market.
No matter which direction the insurance industry takes, insurance companies must change their operating strategy. Otherwise, not only will harm come to consumers, but shareholders also will suffer.
currently, insurance companies are acting in an urgent and practical fashion to address financial emergencies, due to the strict policies and the pessimism surrounding possible objections. in addition, winter has arrived and traditionally this is the time when the rate of economic growth slows and interest rates are reduced.
When the toughest time for the insurance industry arrives in 2009, more and more disputes will appear. Against the background of the global economic crisis, non-contentious matters will shrink while the need for legal services for litigation and arbitration will rise sharply.
China: new merger guidelines bring more work for firms
any required notifications for their M&A transactions. “With more than 60 lawyers in China, we actively monitor developments in antitrust and other areas, and keep our clients up to date on changes in the legal and business environments,” added Gowdy.
There are still other uncertainties, however, regarding a number of key issues relating to the application of the AML, including whether and how the AMB will apply the AML to joint ventures and how turnover should be calculated. Legal practitioners are awaiting further information. ALB
有些跨国律师事务所已经采取措施,回应新《指引》的要求。美富律师事务所合伙人 Jonathan Gowdy 表示,美富已经在中国组建反垄断业务团队,协助客户分析并完成并购交易必要的通告工作。Gowdy 补充道:“我们在中国拥有60余位律师,正密切关注反垄断和其它领域的发展,并就法律和业务环境的最新变化及时告知客户。”
The UK pre Budget report was announced by UK chancellor Alastair Darling on 24th November 2008, with many changes / increases to UK tax rates. The main UK tax changes are :
UK VATThere will be a temporary reduction in the standard rate of UK vAT from 17.5 per cent to 15 per cent from 1 December 2008 until 1 January 2010.
UK Income taxFrom 2009/10:
increases in personal allowances.•From 2010/11:
A progressive reduction in the basic personal allowance to •one half for those earning between £100,000 and £140,000 and to zero for those earning over £140,000, reducing by £1 for every £2 of income above these thresholds.
From 2011/12:A new 45 per cent income tax rate on income (other than •dividends) over £150,000.A new 37.5 per cent rate of tax will be introduced on •dividends that would otherwise betaxable at the new 45 per cent rate.
TrustsFrom 2011/12 all trusts (other than vulnerable Persons Trusts and interest in Possession Trusts, which are not taxed at the rate applicable to trusts, but at the beneficiary’s marginal rate) will be subject to a tax rate of 45 per cent on general income and 37.5 per cent on dividends, in line with the rates for individuals with income over £150,000, but applying at any level of income corporation Tax The Small companies corporation Tax rate was set to increase from 21% to 22% from 1 April 2009; this increase has now been deferred to 1 April 2010.National insurance From 2009/10:
The Upper Earnings Limit for primary class 1 Nics will be •aligned with the level at which individuals start to pay higher rate income tax.
From 2011/12:The Nics primary threshold will be broadly aligned with the •income tax basic personal allowance.The main rate of class 1 and class 4 Nics will be increased by •0.5 per cent to 11.5 per cent and 8.5 per cent respectively.The class 1 employer rate of Nics will be increased by 0.5 •per cent to 13.3 per cent. The increased rate will also apply to class 1A and class 1B contributions.The additional rate of class 1 and 4 Nics will be increased •by 0.5 per cent to 1.5 per cent.
Review of offshore centresA further consultation on the status of the UK’s offshore financial centres ( ie Bermuda, Guernsey, Jersey and the isle of Man) was announced.
By Debbie Annells, Managing Director, AzureTax Ltd, Chartered Tax Advisers Suite 1010, 10/F Lippo Centre, Tower Two, 89 Queensway, Hong Kong www.azuretax.com, a member of AzureTax Group (Tel) +852 2123 9339 (direct line), (Main Line) +852 2123 9370, (Fax) +852 2122 9209 Registered with the Chartered Institute of Taxation for purposes of anti money laundering legislation.
Debbie Annells
SHANGHAI
M&A financing carves out new turf for lawyers
In a bid to boost economic development, the China Banking Regulatory Commission (CBRC) recently overturned a
ban issuing guidelines to allow commercial banks to lend to domestic companies undertaking acquisitions at home and abroad.
Shortly after the guidelines were promulgated, two banks in Shanghai took the plunge by signing an agreement with the Shanghai United Assets and Equity Exchange to offer acquisition finance. Under the cooperation agreement, the Shanghai branch of ICBC and the Bank of Shanghai will offer a total of US$1.46bn (RMB10bn) financing support for M&A transactions.
“The financial crisis has created great opportunities for M&A. Several banks have announced acquisition finance as one of their major products in 2009,” said Liu Dali, a Shanghai-based Jun He partner.
The new guidelines will help banks extend the scope of their business and stimulate M&A activity, creating new markets for M&A and banking & finance lawyers.
“Domestic purchasers now have one more financing tool available for their business growth and expansion, so they are able to close deals more easily,” said Liu Yan, a partner at Tian Yuan. “This change will bring about more opportunities for lawyers to be involved in domestic M&A transactions and industrial consolidations.”
However, the guidelines are in general terms and lack specific regulations for certain issues, which could potentially curb deals as banks hold back from lending.
EDUCAtION
Legal education turns a new page
With the advent of two joint law schools – the China–EU School of Law (CESL) at the China University of
Political Science and Law, and the Peking University School of Transnational Law (STL) – China’s legal education is striding vigorously towards the international arena.
CESL, which is reportedly the first Sino–EU managed law school, will be jointly operated by 16 Chinese and European universities. It aims to cultivate professionals acquainted with both Chinese and EU law. Academics from prominent European law institutes assume teaching positions.
STL, which for the first time applies US-style teaching methods to legal education in China, is also the first law school outside of the US to seek American Bar Association (ABA) accreditation that emphasises intellectual skills rather than the Chinese traditional form of teaching where the students normally play a passive role and memorise legal rules.
Both not-for-profit programs have received enormous support from the PRC government and legal professions.
China has more than 600 law schools. The addition of these joint law schools supports China’s ambition to push domestic legal education to an international level.
“If it’s successful … then I believe the STL could function as
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“It will take a few months before banks engage in M&A lending. They are very cautious amid the global financial crisis, despite having sufficient liquidity,” said Liu. “They also have to meet certain requirements before they can obtain approval from the relevant regulators to provide M&A lending. There are also restrictions on which transactions and purchasers banks can lend to.” ALB
In 1993, as Russian oligarchs snapped up valuable state assets at a discount, china’s legislators set out to draft laws to guard against the same happening in the PRc. Fifteen years and multiple redrafts on, the Enterprise
State Assets Law (the “Law”) was passed on October 28 this year and is due to become effective on May 1 2009.
The Law sets out a comprehensive framework for the treatment and preservation of “State-Owned Assets”, defined widely as “the rights and interests derived by the state from its investment in various forms in any enterprise”, and extending to cover “State-invested Enterprises”, i.e. enterprises owned or invested by the state. The Law also contains an array of regulations and punishments aimed at those managers of State-Owned Assets who may be tempted to exceed their powers or abuse their position for personal enrichment. However, while its purpose is more to preserve assets’ value than to prevent their sale, Article 72 of the Law raises serious issues for acquisitions involving State-Owned Assets or State-invested Enterprises.
Article 72 applies to transfers of State-Owned Assets, and to other transactions that involve related persons of a State-invested Enterprise. it provides that “malicious collusion” (a concept without a fixed definition) in such a transaction would render the transaction invalid if State-Owned Assets are harmed as a result. Although the prohibition of “malicious collusion” already exists under PRc contract law, its inclusion in the Law underlines the government’s determination to use all available measures to preserve the value of State-Owned Assets.
in order to minimize the risk that transactions involving State-invested Enterprises or State-Owned Assets may be cancelled due to “malicious collusion”, we suggest that parties:
Be transparent in all discussions and negotiations, and •keep a full and contemporaneous record that can be produced as evidence; Ensure the valuation of any State-Owned Assets being •acquired will stand up to close scrutiny by regulators; andconduct thorough due diligence into onshore sellers •and management, and consider the benefits that may flow through to management or their family, directly or indirectly, at the expense of benefits to the State. Legislators have informally acknowledged that Article 72
creates uncertainty, and further guidance may eventually be forthcoming. Until then, once the Law becomes effective, caution must be exercised in such transactions.
Peter Davies, associate Paul, Weiss, Rifkind, Wharton & Garrison Hong Kong Club Building, 12th Floor 3A Chater Road, Central Hong Kong Email: [email protected] Ph: (852) 2846-0377
Peter Davies
REGION
Ex-Heller China partners: where are they now? Where are They noW? ►
Name Firm OfficeDavid Chu Dechert HongKongNickSeddon Eversheds HongKongHenryLiu NixonPeabody Shanghai/NewYorkYing Li ProskauerRose Beijing/HongKongJoseph Cha ProskauerRose Beijing/HongKongYang Ing Loong Sidley Austin HongKong/SingaporeSimon Luk Winston&Strawn HongKongDavidHall-Jones Winston&Strawn HongKongMichaelPhillips Winston&Strawn HongKong
S ince the century-old US firm Heller Ehrman dissolved last September, most of the partners and counsel from
the firm’s Greater China offices have been snapped up by new entrants keen to expand their offices in the region.
Nixon Peabody became the latest firm to build its China practice by picking up seasoned lawyers formerly with Heller. Henry Liu, the former head of Heller Ehrman’s China desk in New York, has been appointed by the firm as the chair of its China practice, to play a leadership role in China and Asia. Liu, also a global finance partner, will divide his time between Nixon’s office in New York and its office in Shanghai, the firm’s first Asia office launched in early 2008.
Prior to joining Heller, Liu had served as the general counsel and director-general at the China Securities Regulatory Commission (CSRC) and as a managing director of investment banking Donaldson, Lufkin & Jenrette and Credit Suisse First Boston.
“Our clients around the world will benefit from Henry’s deep, first-hand and interdisciplinary experience with business, finance, and how rules and regulations work in China and Asia,” said Harry Trueheart, chairman of Nixon Peabody. “Our China and Asia practice will gain from his veteran knowledge of successful building and managing country practices in the past.”
Dechert, Winston & Strawn, Sidley Austin, Proskauer Rose and Eversheds have also appointed ex-Heller partners to expand or establish their Asia presence.
HONG KONG
Allen & Overy is restructuring its Hong Kong office in the wake of a seven-partner departure late last year.
The Magic Circle firm outlined in a statement that the restructure was caused by the adverse economic climate and the departure of seven corporate partners – including the firm’s top corporate people Michael Liu and Kenneth Chan – who moved to Latham & Watkins last October.
“Our business in Hong Kong is undergoing a restructuring, in view of the departure of seven partners and exceptionally difficult market conditions. In any restructuring, the interests of our people are paramount. We are still exploring a number of options with our people and, due to this, we are not able to comment further.”
The departures left the firm’s corporate practice with only four partners.
Allen & Overy restructures Hong Kong office
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arbitration
Prof ge Huangbin
作者:葛黄斌,新加坡国际仲裁中心 By Prof Ge Huangbin, Head of China Desk Singapore International Arbitration Centre Address: City Hall 3 St Andrew’s Road Singapore 178958 Tel: + 65 6334 1277 Fax: +65 6883 0823 Email: [email protected] Website: www.siac.org.sg
Ex-Heller China partners: where are they now? Winston & Strawn, for example, has hired Simon Luk,
David Hall-Jones and Michael Phillips as partners to set up a Hong Kong office, which will be formally affiliated with a local partnership encompassing these three new partners. The firm has also begun the process of formalising its presence in Beijing and Shanghai, with several legal professionals from Heller’s legacy offices in China. ALB
Although it is believed that around 10 associate positions were being reviewed as part of the restructure, a message posted on Allen & Overy’s intranet last week was said to have reassured staff that the firm was maintaining job security as a top priority. ALB
安理重组香港办公室 继去年七位合伙人离职后,安理律师事务所正重组香港办公室。
该所在一份声明中指出,不利经济环境和七位公司法合伙人的离职是重组的主要原因,离职合伙人包括律所顶尖公司法律师Michael Liu 和 Kenneth Chan,二人于去年十月加盟瑞生律师事务所。
Grandfield bolsters IP practiceThelatestadditionofYangSidongfromGenesistoGrandfield’spartnershipwillenhancethefirm’sexpertiseincommerciallegalservices,particularlyIPpractice in China.
BeforejoiningGenesis,Beijing-basedYangwasrecognised as the founder and former director of the firstChineseprivatepatentfirm,CapitalPatentFirm,establishedin1994.
Hehas14years’practicalexperienceinpatentfilings, intellectual property protection and litigation. Hehasadvisedalargenumberofclientsonawiderangeofwork,withanemphasisonIP-relatedmatters.Clientsinclude:HuaweiTechnology,FAWMazdaMotorSales,Huawei3COM,BeijingRateNewTechnology,ShanghaiKangyuandCopperDoorDesignEngineering.HehasalsohandledmanycorporaterestructuringprojectsandM&Adeals.
Two consultants get nod from Yao LiangYao Liang has added two corporatelawyers,CharlesPanand Eliot Clauss, as consultants in its Shanghai office, a move demonstrating the firm’s desire to increase its capability of servicing international corporate clients.
Immediately before joining YaoLiang,Panwasadivisionchief of the China International EconomicandTradeArbitrationCommission(CIETAC)–ShanghaiSecretariat.“JoiningYaoLiangissimplydueto my interest in the areas of dispute resolution practice, especially transnational commercial arbitration. This firm providesmewithasolidplatformtobuildon,”Pansaid.
Clauss has worked for the past 20 years on cross-border business transactions, particularly on China–
US-relatedmatters.Hebringskeyclientcontactsfromhis China–US work and will advise Chinese clients establishing businesses in the US.
A graduate of the University of Wisconsin and the NewYorkLawSchool,ClausssuccessivelyservedthestateandfederalcourtsofNewYorkandConnecticut,and the United States Court of International Trade before joining Yao Liang. 耀良新增两位顾问律师耀良新增两位公司法律师潘燕峰和柯龙斯(Eliot R Clauss),担任上海办事处顾问律师,表明律所正不断巩固自身实力,为跨国公司客户提供更好的服务。
柯龙斯毕业于威斯康星大学(University of Wisconsin)和纽约法学院(New York Law School),加入耀良前,曾在纽约州和康涅狄格州的州法院和联邦法院以及美国国际贸易法院执业。
various Run Ming
Run Ming adds international lawyers to corporate teamThe bleak outlook for the economy has not discouragedRunMingfromitsdesiretoboostitsservice team by recruiting legal professionals with an international background.
The Beijing-headquartered firm lured corporate financelawyerDingZhenyu(Philips)fromtheHongKongofficeofDewey&LeBoeufforthepartnershipofits Shanghai office in January 2009.
Ding has extensive experience in the area of cross-borderM&A,corporatefinanceandprojectfinance.HestartedhislegalpracticeatFangdaPartnersbeforemovingtoHongKongwherehesuccessivelyservedtwointernationalfirms,Simmons&SimmonsandDewey&LeBoeuf.DingwillleadRunMinginitsfurtherdevelopment of foreign-related legal services in Shanghai.
RunMinghasmadeseveralotherappointmentsfromotherinternationalfirms,includingLatham&Watkins,OrrickandPaulHastings.Thenewrecruitswill be based in Beijing and Shanghai to strengthen and improve the firm’s position in China’s foreign-related legal service market.
Wang Jing welcomes two to partnershipWangJing&CohasappointedGuangzhou-basedWangJianyunandXiamen-basedLiRongcuntoitspartnership as a result of their performance.
Wang’s practice focuses on litigation and contentious matters relating to international trade, foreign investment,M&AandIPOs.HeworkedinWuhanbefore joining Wang Jing in 2003. Wang has been head ofthecorporate/IPgroupsinceJanuary2007.
LijoinedWangJingin2002fromPenavicoShantouwhere he had taken the position of the manager of theshippingdepartmentandlegalcounselfrom1994to2002.EducatedatShanghaiMaritimeUniversity,Lispecialises in international shipping management and maritimelaw,andwillcontinuetopractiseinXiamen,one of China’s main port cities.
Leading M&A lawyer joins Jones DayJonesDayhaswelcomedM&AexpertDonaldJHessintotheglobal partnership of the firm’s finance practice team in its HongKongoffice.
Hesshasovertwodecadesof extensive experience in M&AdealsacrossAustralia,Europe, the US and particularly HongKong,whereheactedfor multinational corporations with interests in China,HongKongandotherAsianmarketsfor 14years.PriortojoiningJonesDay,hewasapartnerinHongKongforleadingAustralianlawfirmAllensArthurRobinson.
DLA Piper boosts corporate expertiseDLAPiperhasappointedUS-qualified lawyer Kit Kwok as a corporate partner in Shanghai. KwokjoinsDLAPiperfromRooseveltSinoRetailerswherehe was chief operating officer andlegalcounsel.Hefocuseshis practice on a variety of corporate matters including structuring, due diligence, documentation, regulatory compliance and taxation planning.
FollowingKwok’sappointment,DLAPiperfurtherstrengthened its China practice by promoting four associates to partnership.
O’Melveny elects four new partnersFour China-based lawyers have beenpromotedatO’Melveny&Myers.InBeijing,competitionlawyerNathanBushandcorporate transactions attorney DavidRoberts,and,intheHongKongoffice,FrivenYeoh,who advises on cross-border disputeresolution,andcorporatefinancelawyerPeterChen are now partners.
Reed Smith promotes two in Hong KongReedSmithhaselevated22new partners worldwide, includingtwoinHongKong.
ThenewHongKongpartnersarePatrickWongandNathanDentice. Wong has extensive experience in corporate finance matters including initial public offerings, debt and equity type fund raising exercises, corporate restructurings,takeovers,M&Aand general commercial matters. Dentice has had extensive practice in general commercial and public law litigation.
两位香港办事处新任合伙人是Patrick Wong 和 Nathan Dentice。Wong 在公司金融领域经验丰富,包括首次公开募股、债务和股权类型融资操作、公司重组、收购、并购和普通商业事务。Dentice 在普通商业事务和公共法律诉讼领域经验丰富。
various Morrison & Foerster
MoFo’s Beijing office changes handsWhilenoneofthe10lawyersMorrison&Foersterrecently made partner across its global network based in China, the firm has reeled in Sherry Yin, a corporate specialist, as a partner to bolster its Beijing team.
YinjoinsMoFofromOrrickwhereshehasbeenthemanagingpartnerofitsBeijingoffice.PriortojoiningOrrick, she had been at Coudert Brothers for 11 years.
Atthesametime,MoFohasnamedPaulMcKenziethe new managing partner of its Beijing office, succeeding Steve Toronto, who has departed to join the executive team of one of the firm’s top clients in China.
RegardingToronto’sdeparture,PaulMcKenziesaid:“Stevewillbejoiningtheexecutiveteamofoneofourtop clients in China. We expect to continue to have a close working relationship with Steve in his new role.”
与此同时,美富任命 Paul McKenzie 担任北京代表处管理合伙人,接替 Steve Toronto。Toronto 近期离开美富,加入该所在中国的一位大客户的管理团队。
Toronto 自2000年担任北京办事处主管合伙人。在其任期内,美富曾担任第29届奥运会北京奥组委国际法律顾问。
Friven yeoh
Patrick Wong
Nathan Dentice
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iSSUE 6.1
FInancIaL SecTor LeaDS In oUTboUnD m&a ►Afterdomesticbankscleaneduptheirbalancesheets,tookonforeigninvestorsandconductedIPOs,theywentonabuyingspreeinothercountries.SomeofthemorenotableacquisitionsoverthepastfewyearsincludeChinaMerchantsBank’stakeoverofHongKongbankWingLungforUS$4.6bn,ICBC’sUS$5.5bnacquisitionof20%ofthesharesinSouthAfrica’sStandardBankandMinshengBank’spurchaseofupto20%ofsharesinUSbankUCBHHoldings
Global business in safe handsZhang Wei, general manager of the legal department of the Industrial and Commercial Bank of China, discusses the evolving role of in-house counsel in a globally expanding Chinese company such as his own
Ever since 2005, when the Industrial and Commercial Bank of China (ICBC) was preparing for its history-making IPO and the dual
listing in Hong Kong and Shanghai, Zhang Wei’s plate has been overflowing.
As an integral part of the IPO team, Zhang led the legal department at ICBC’s headquarters, which then consisted of fewer than 20 staff; he worked around the clock to ensure every part of the IPO process was completed within the timeframe.
The country’s largest bank going public marked an important milestone in the reform of the financial sector and was an intricately structured project on a vast scale. Zhang recalled that the paper documents in the data room for the due diligence, restructuring and IPO could easily have weighed more than 80 tons.
All the professional service providers in the IPO team, including investment banks, financial advisers and legal counsel, had to be prudently appointed by a selection panel headed by the now ICBC president Yang Kaisheng, given the magnitude of the task in hand.
Six firms with strong capital markets practice stood out from the rest and were given the privilege of working on the IPO. King & Wood, Herbert Smith and Davis Polk advised ICBC on PRC law, Hong Kong law and the US law respectively, while Shearman & Sterling, Freshfields and Haiwen & Partners acted for the underwriters.
ICBC’s IPO is a success on multiple levels. With US$21.9bn raised, it is the largest IPO in the world to date, and was the first simultaneous A-share and H-share offering, setting
a precedent for future offerings of this kind. More importantly, becoming a publicly listed company has broadened ICBC’s international shareholder base, brought a wealth of opportunity for international expansion and brought about fundamental changes to its in-house legal department.
“The renowned success of the listing was the best reward possible for everyone in the team, who put in a great effort and worked very hard,” said Zhang.
“It also marked a turning point for the legal department. Since the company went public, the size of the department has doubled and its standing in the company has been elevated substantially.”
Zhang now manages the legal department of ICBC’s head office, which consists of 40 legal staff in six teams that are responsible for different legal duties. He also oversees the legal departments in 38 provincial-level branches and many subsidiaries. In total, there are over 1,400 legal staff in ICBC, but the number seems not to be enough in a bank with total assets of US$1.3trn that has over 20,000 outlets at home and abroad, offers 3,000 products to both individual and corporate clients, and employs more than 360,000 staff.
“The volume of work at the legal department grows by 40–50%
each year, but the headcount of our department hasn’t increased at the same pace. We feel a strong need to continue strengthening our team and upgrading the quality of legal staff,” said Zhang.
Similar to the changes in the volume of work, the quality of work is also increasing. He noted that his team is actively involved in board meetings, the decision-making process, risk management and strategic planning.
“Our in-house legal function faces new responsibilities, heightened expectations and unprecedented challenges in the increasingly sophisticated legal and business environment. We are also expected to make a value-added contribution to the business,” said Zhang.
However, to meet the giant company’s legal needs, Zhang has come to realise that a good mix of in-house and external resources is essential.
“We are considering additional outsourcing, especially certain types of routine legal work. The cost and value differentials between in-house and external counsel are most effectively managed through outsourcing packages for routine, repetitive legal services that don’t require a deep knowledge of the industry, business operations, culture and strategy,” he said.
Outsourcing clearly frees up in-house teams to devote more time
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name: Zhang Wei organisation: ICBC Position:HeadoflegalIndustry: Financecompany turnover:US$37.4bn(2007)market cap:US$173bn(RMB1182bn)asat31/12/08Total assets: US$1.3trnTotal number of employees: 360,000Total legal capacity:40intheBeijingheadoffice;morethan1,400,takingsubsidiariesandbranches into accountexternal law firms used recently:King&Wood,HerbertSmith,DavisPolk,Linklaters,Baker &McKenzie
Education 1991–94:PhD,PekingUniversityLawSchool
Work history 1994-2004: In-house counsel and then vice manager of the legal department, ICBC2004–present:Headoflegal,ICBC
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iSSUE 6.1
to sophisticated, business-critical legal work.
However, external counsel are preferred when cutting-edge legal knowledge and a broader market perspective are required. Some examples include complex litigations, investigations, transactional work and international work where the legal department lacks a presence in or knowledge of the local jurisdiction.
Navigate global expansionShortly after the listing, Zhang and his team had a busy two years providing legal support and advice on the company’s strategic acquisition and expansion overseas.
In the past two years, ICBC has been ahead of other domestic banks in the race for overseas M&A. It has successfully acquired stakes in foreign banks, such as Indonesia’s Halim Bank, Macao’s Seng Heng Bank and South Africa’s Standard Bank.
At the same time, the legal department has assisted the bank in opening new subsidiaries and branches in foreign markets, including Moscow, Sydney, Doha, Dubai and New York.
Zhang believes that leveraging international firms’ resources, experience and expertise is a key element for effectively closing the deals and safely managing the risks involved in taking a domestic Chinese company onto the global stage.
“International counsel are increasingly instructed to help in-house departments bridge gaps in capacity and expertise in high-stakes
transactions in foreign jurisdictions,” he said.
“Their specialist expertise, market knowledge and resources are valuable to the strategic development of globalising companies.”
In light of the establishment of ICBC’s Sydney branch, the legal department’s selection panel appointed Mallesons Stephen Jaques – a top-tier Australian firm that has offices in Beijing, Shanghai and Hong Kong – to provide local legal services.
“When our panel is selecting external counsel for a certain project, we won’t only look at firms’ track records and expertise in similar types of transactions; we also find out what resources they would be dedicating to our project and how efficient they would be,” said Zhang.
With ICBC becoming an increasingly global bank, its legal departments are facing many new challenges it has not encountered previously. Meanwhile, the new challenges reflect that the role of in-house is now more important than it has been previously.
Zhang gave insight into his legal department’s new multi-jurisdictional approach: it has to understand the legal environment and regulatory framework of each jurisdiction that its companies operate in, and ensure that the companies comply with these; it must assist its companies to manage an increasingly sophisticated array of multi-jurisdictional legal risks and issues; and it must prevent a legal matter in any jurisdiction from developing into a world-wide public relations crisis.
Icbc croSS-borDer TranSacTIonS hIghLIghTS ►Deal External counsel value
The post-Lehman worldThe global financial crisis, – particularly the dramatic collapse of the revered Lehman Brothers, which acted as financial advisor to ICBC in its IPO – has shaken ICBC’s senior management as well as its legal department.
At the time, ICBC held US$151.8m worth of bonds related to Lehman. Although the bank reported that its mainland and overseas branches would not be strongly affected by Lehman’s bankruptcy, its legal department’s workload increased.
“We were one of the first departments the executive board contacted after receiving the news,” said Zhang. “The legal department has worked closely with other business arms to keep the loss to a minimum.”
Most major banks in China are studying the Lehman case and trying to learn from its demise, ICBC included.
“With failed strategies, Lehman’s failure was inevitable, regardless of whether it had an excellent legal department or not,” said Zhang. “But legal departments undeniably play an important role to help keep banks afloat amid a crisis. Domestic banks will heighten scrutiny of risk and the importance of compliance, especially when they provide structured finance products and derivatives.”
With the global financial crisis deepening and having a continuing negative impact on the domestic economy, Zhang and his team may have a year ahead that is even busier than the IPO year of 2005. ALB
Asia’s most respected monthly legal magazine Asian Legal Business (ALB) is proud to present ALB In-house legal Summit Shanghai on 15th May, 2009.
This special one-day legal event is tailor-made to bring together leading private practice lawyers and senior in-house counsel. The summit represents a fantastic opportunity to address some of the most active and influential corporate counsel and business leaders in Asia today. The focused practice area workshops, plenary sessions and panel discussions provide a unique platform for the frank exchange of views, sharing of best practices and formation of strategies to best deal with change in 2009.
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Ayear full of surprises and unexpected turns for the business community sums up 2008. Law firms and in-house
legal departments found themselves dealing with issues they could not have predicted.
In line with the country’s economic development, many law firms experienced a slow-down in growth and only a number of them hit the revenue targets they set at the beginning of 2008, when the market was still bullish.
As the Chinese New Year draws near, the legal fraternity are leaving the past year behind with mixed feelings
What will the Year of the Ox bring for the legal profession? What impacts will the financial crisis have on law firms’ results in 2009? How will client demands change? ALB China asks nine legal experts this new year to predict trends in nine different practice areas
and welcoming in the new one with cautious optimism.
Although there is uncertainty still in the air and the impact of the unprecedented global financial crisis is likely to continue throughout the entire year of 2009, law firms are hoping for the best and recognising that opportunity can come from crisis.
A panel of legal experts, specialising in different areas, has come together to give their unique take on the pipeline issues and how things will pan out in the legal market.
According to our experts, each sector and practice area – such as
M&A, IP and banking & finance – will present legal professionals with a distinct set of opportunities and challenges. IPOs and private equity-driven deals may continue their downward trend, but restructuring, bankruptcy and litigation could help cushion the drop-off in transactional work. Emerging practices, such as anti-trust, are expected to produce groundbreaking work implementing new legal developments. The RMB4trn (US$586bn) economic stimulus plan is anticipated to help restore the confidence of investors in the infrastructure sector and stimulate demand for relevant legal services. In-house legal teams will be stretched due to reduced budgets for external legal services, and it is possible that the legal recruiting market will be tight.
No matter what 2009 has in store, it will be a year of adjustments and hard work. Firms that embrace the changes will be best equipped to weather this storm. ALB China wishes all the law firms and in-house teams success in the year of the golden ox.
aLb chIna: year oF The ox PreDIcTIonS PaneL ►Anti-monopoly: Alex Potter, partner, Freshfields Bruckhaus DeringerBanking & finance: Liu Dali, partner, Jun Hecapital markets: Yan Yu, managing partner, Jia Yuan Law FirmDispute resolution: Gary Seib, Dispute Resolution Practice Group in the Asia-Pacific, Baker & McKenzieinfrastructure: Wang Jihong, partner, V & T Law Firm M&A: Yang Xiaolei, partner, King & Wood Private equity: Jonathan Zhou, partner, Fangda PartnersReal estate: Zhang Xuebing, managing partner, Zhong LunRecruitment: Frazer Xia, founder and managing director, China Legal Career
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Banking & financeLIU DALI PARTNER, JUN HE
Bank IPOs and local incorporation of foreign banks will decrease sharply �Opportunities lie in infrastructure project finance, acquisition finance, REITs and debt restructuring �
anti-MonopolyALEx POTTER PARTNER, FRESHFIELDS BRUCKHAUS DERINgER
Enforcement landscape of competition law will take shape �Level of merger notifications to pick up �
If 2008 was the year that comprehensive competition law finally came to China, 2009 will be about how the enforcement landscape of Chinese competition
law takes shape. We can expect to see the first signs of real enforcement activity from the three government departments that together constitute the new Anti-monopoly Enforcement Authority (AMEA) and, following early signs of a readiness by private litigants to bring civil actions, from the courts. Uppermost in the thoughts of those subject to the law will be questions about whether the system for investigations of both mergers and anti-competitive conduct will be designed in a pragmatic and transparent way, and whether analysis will focus on ‘pure’ competition law issues or whether the authorities will succumb to the temptation to use the Anti-Monopoly Law (AML) as an additional instrument to achieve industrial policy goals.
At the AMEA, the Ministry of Commerce (MOFCOM), State Administration of Industry and Commerce, and National Development and Reform Commission are all drafting and consulting on guidelines to fill the many gaps left by the high level nature of the AML. MOFCOM has already shown a willingness – in the clearance of Inbev’s
acquisition of Anheuser-Busch – to use its new powers to require merging parties to give undertakings in order to obtain an approval, albeit that the undertakings given indicated that MOFCOM chose to use the occasion to put down a marker about potential future consolidation rather than evidencing concerns about the deal which was under consideration. Thus far, the number of merger filings under the new law has been relatively low, and there are already some rumblings of discontent that not enough deals are being caught.
Notwithstanding the economic downturn, I would expect to see merger notifications level pick up in 2009: the filing thresholds are low and, even at a time of much-reduced global M&A activity, will be triggered by relatively small investments into China. Increasing awareness of filing obligations by domestic businesses should also contribute to MOFCOM’s workload.
The other two limbs of the AMEA are reported to have already received complaints about anti-competitive conduct but are thus far biding their time. Reflecting a balance between ensuring that they are ready and wishing to send a clear signal that they mean business, I would think that 2009 will see the first signs of these agencies opening
formal investigations against companies accused of infringing the law.
Perhaps the most surprising feature after enactment of the AML was the willingness of private litigants to bring actions against both government departments and state-owned enterprises. The first of these cases – reported to be lodged on 1 August 2008, the very day that the AML came into force – was dismissed rapidly, but may be appealed. Other cases are still progressing through the system, and we will over the course of the year begin to get a feel for whether the courts will seriously entertain cases brought against significant state-owned businesses. The early signs are that complaints about abuse of dominance may form a greater proportion of civil actions than would be typical elsewhere.
As both the authorities and courts gear up, it will become increasingly important that businesses operating in China are able to combine technology from knowledge of competition law enforcement in more mature jurisdictions with a detailed understanding of the system that operates in China, and how the AMEA and courts are likely to react to what for them will be novel enforcement issues. The Year of the Ox promises to bring a voyage of discovery.
The year 2009 will see a very promising market in the banking & finance area of legal practice, though it will still be in the midst
of a serious global economic crisis. Financial institutions in China are not as
seriously impacted by the current global economic crisis as their counterparts in the US or Europe. Although the slow-
down in GDP increase will always be accompanied by an increase in non-performing loans, it seems this will not be material as the growth rate of China’s GDP will still remain over 8% annually.
Bank IPOs and the local incorporation of foreign banks will decrease sharply in 2009. However, the market will still see IPOs of Chinese banks.
The Agricultural Bank of China will launch its IPO in 2009. China Development Bank and China Minsheng Banking Corporation Limited are also likely to start their IPOs. Lawyers will compete strongly for such deals.
There will still be a few local incorporations or foreign bank investment cases in 2009. Experienced
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capital Markets yAN yU MANAGING PARTNER, JIA yUAN LAW FIRM
Although outlook not unduly pessimistic, conservative approach needed in months ahead �Debt capital markets practice will be active �
Like the US and European stock markets, the A-share markets also suffered a steep decline from the end of 2007, dragging the
average PE ratio to a historically low reading. However, the decline in China’s capital markets was reported to be a correction from the over-inflated stock bubble, while the financial tsunami in the West is due to the sub-prime crisis and credit squeeze. Nevertheless, the adverse market conditions have caused many companies to postpone or even withdraw their IPO plans.
One thing for certain is that most companies still have the need to raise money for their operations or expansions. We also noticed that, in early December, the State Council launched a RMB4bn economic stimulus package. Thereafter, PBC, CSRC, CBRC and the Administrative Office of State Council promulgated a series of incentives and encouraging policies and regulations with a view to
Yet it is not unduly pessimistic, as we can still see the opportunities for IPO substitutes in the markets, even if the outlook for IPOs remains gloomy for a while.
However, legal counsel need to be up to date on new laws and regulations in order to keep abreast of the constantly changing market needs. This way, they will not be left behind.
providing more channels through which companies can raise capital.
With the understanding gained through the above observations, we may expect that the need for legal services related to bonds issuance, M&A and bankruptcies will become stronger in 2009. Debentures are always considered an alternative for companies to raise capital when the cost of equity is expensive, explaining the phenomenon that the bonds market has held steady for several months.
Historical data shows that in a bear market, M&A increases because the cost is much cheaper due to the low share price. In addition, many bankruptcy cases have been filed in courts in the past few months, and there would be more should the economic conditions continue to deteriorate.
Overall, we have a more conservative prediction about corporate finance-related legal services.
Chinese big five banks have announced acquisition finance will be a major product in 2009.
The government is trying to prevent the real property market from undergoing a severe downturn. The State Council named the introduction of real estate investment trusts (REITs) as one of the major measures to stimulate the market in its 2009 plan. The market has been waiting for many years for REITs. Various REITs are expected to be launched with the support of the government in 2009.
With more and more industrial corporations affected by the global economic crisis, the rate of non-performing loans of banks will inevitably increase in 2009. A new debt restructuring market will emerge in 2009.
lawyers in this area will be engaged for these deals.
New opportunities for lawyers will most likely be in the following areas: infrastructure project finance; acquisition finance; REITs; and debt restructuring.
China’s central government has announced a RMB4-trn fiscal stimulus plan. Local governments have been reported as having further enhanced this figure to RMB18trn. A large part of such investments will go to the infrastructure industry, which will trigger a large number of bank loans.
On 6 December 2008, the China Banking Regulatory Commission issued the Guidelines on Risk Management of Acquisition Loans of Commercial Banks, which allows banks to fund share acquisition deals. The economic crisis has caused a falling market, which creates the best chance for M&A. Several of the
“The economic crisis has caused a falling market, which creates the best chance for M&A. Several of the Chinese big five banks have announced acquisition finance will be a major product in 2009”
liu Dali, Jun he
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Dispute resolutiongARy SEIB DISPUTE RESOLUTION PRACTICE GROUP IN THE ASIA-PACIFIC, BAKER & MCKENZIE
Further increases in the use of the courts �Arbitration will continue to be very active �
Dispute resolution – in its variety of forms – is a growth area in China in 2009, continuing the trend we have seen
over recent years. We will see further increases in the use of the courts for the resolution of commercial disputes and the enforcement of commercial rights. Alternative dispute resolution techniques – most particularly arbitration – will also continue to be very active, as will calls on the skills of dispute resolution lawyers and those in some other practice disciplines in the field of compliance – in training, establishing programs & policies and, ultimately, in internal investigations and enforcement.
There are several factors underlying these trends: law reform; increasing reliability of and confidence in mainland courts, tribunals and arbitral bodies; and, more recently, the impact of the financial crisis. There are also some ‘non-cyclical’ drivers of activity, for example, the increasing emphasis on and enforcement of domestic and ‘long-arm’ compliance and anti-corruption laws, both in China and elsewhere, plus information sharing between regulatory and enforcement authorities across the world – both of which have led to increased awareness of these issues in developing jurisdictions. The focus is starting to shift in China to enforcement against bribe-payers, not just recipients.
We have seen significant legislative reform in key areas of commercial law – Company and Securities Laws, Enterprise Bankruptcy Law and Anti-Monopoly. The latter, in particular, is both important and brand new – the application and enforcement of China’s new Competition Law will be a key issue, although this may be constrained to some degree by the current financial crisis, as the number and size of transactions are likely to diminish year-on-year in 2009.
In the corporate law sphere, we will see an acceleration of what Baker
& McKenzie views as an already discernible trend – shareholder and securities litigation. Interpretations issued by the Supreme People’s Court in 2001 and 2003 limited the recourse that shareholders had to the courts. Over the past few years, this has changed in favour of the protection of shareholders, for example, through the CSRC’s Provisions on Strengthening the Protection of the Rights & Interests of the General Public Shareholders issued in late 2004, and the new Company Law and Securities Law, each of which took effect from 2006.
While there are (relatively) few cases under the new laws, and several still pending, the increasing incidence of shareholder litigation is evident – often (but not exclusively) following from CSRC action.
The Enterprise Bankruptcy Law came into play two years ago and is likely to be actively utilised in the current market conditions. There remains a sense, particularly among foreign creditors, that there is yet to be a completely level playing field in terms of creditors’ rights in practice – with self-help and individual creditor action still seen in ways that are not elsewhere evident. This remains a challenge as experience in the application of the new law by the courts develops.
Product liability will also inevitably be a focus. Recent incidents have been high profile and cross border – the business is global and so are the exposures. This serves to highlight a further trend that we have seen, namely the exposure of Chinese corporates to outbound litigation risk. We have seen it in anti-trust, product liability, energy & mining and other areas, not only before US courts but in other jurisdictions as well.
As direct foreign investment by Chinese corporates continues, the exposure to outbound litigation must grow. This can often come as an unwelcome and hugely challenging issue, particularly in Common
Law adversarial systems. For example, discovery obligations and deposition procedures, with sometimes onerous penalties for non-compliance, are often outside the experience of mainland litigants. Mainland corporates can view the process as hostile and utterly unfamiliar. Working with mainland clients and navigating these uncharted waters is a key value-added proposition for litigators.
We will also see still-increasing numbers of arbitrations before mainland arbitral bodies, most especially CIETAC. International arbitrations in the region involving mainland entities will also be very active, not least following from the ICC’s establishment in Hong Kong. The HKIAC, SIAC and other tribunals will also continue to be busy, as parties often prefer to resolve disputes through arbitration over litigation in the mainland.
This preference may be impacted to some extent (and over time) by another recent and important reform – the reciprocal recognition and enforcement of judgments between the courts of Hong Kong and the mainland. Arbitral awards have been recognised for some time. However, this arrangement came into effect in August 2008 and, although its application is subject to a variety of conditions, its importance cannot, in my view, be underestimated. Through it, foreign parties contracting with mainland entities may see some juridical advantage in agreeing to resolve disputes exclusively through the courts in Hong Kong.
Firms need to be global in their perspective and reach, and locally savvy. The management of disputes, inbound or outbound, typically is transnational. Litigators and arbitrators need to work across borders, and deliver a fluent and seamless client service if they are to help clients manage these rights, risks or exposures.
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intellectual propertyLIAN yUNZE PARTNER, HyLANDS LAW FIRM
Domestic demand to soar and drive further growth �Financial hard times to help promote quality and efficiency of services �
infrastructureWANg JIHONg PARTNER, V & T LAW FIRM
Government stimulus package to stimulate more transactions �Increasingly sophisticated projects require full-service firms with strong infrastructure practices �
In the face of the economic crisis, the central government has released a RMB400bn investment plan for infrastructure to maintain the GDP
increase rate of 8%. As a result of the stimulus plan, the legal service market in this area will remain buoyant. However, in order to reach the target economic growth rate, the investment of RMB400bn is not enough. Take 2006 as an example: GDP growth reached 9% when the investment in the infrastructure area amounted to RMB900bn. There is no doubt that the 8% increase will rely on a great amount of domestic and international floating capital. Such capital entering China under different names and from various channels will promote active transactions, including equity transfer and acquisition.
In the aforementioned course, the PPP legal service should be affected the most. Major infrastructure projects in China such as expressways, water plants, sewage
treatment plants, subways, light rail, bridges, ports and docks are undertaken by way of concession and implemented by legal practitioners through public bidding or competitive selection. As China does not have unified legislation in concessionary operation, much negotiation space is left to the government and investors and creates an arena where lawyers of both parties can play their role. However, there are not enough lawyers with expertise in this area.
The persisting heat in the infrastructure area will, in a sense, lead to the integration of legal teams and law firms. An infrastructure project has many facets that need legal input, such as project financing, syndicated loans, negotiation of concession contract, acquisition of land use rights, project construction, real estate project development combined with infrastructure building, listing after project completion, and involvement of privately offered funds. It is very difficult for individual
Public awareness of Intellectual Property Rights (IPRs) has increased remarkably in the past decade.
This will lead to a promising IP legal service market.
IP boutique firms and IP practice groups in law firms have been expanding and growing in recent years.
The demand for high-quality IP legal services will continue to rise rapidly in 2009, despite the global financial tsunami.
In the current market conditions, it is clear that many foreign companies
lawyers to work on all of these; only strong professional teams of lawyers are capable of doing so. This will have two results: first, it will push lawyers to update their practices and skills; and, secondly, integration among law firms will be proposed. As a result, only full-service law firms with specialised expertise can win contracts and come out in front.
In addition, the sustainable development in infrastructure will give rise to a surge of legislation in related fields. To promote the smooth operation of infrastructure projects and effective protection of the legal rights and interests of the parties to the contract, there is an urgent need for China to issue regulatory documents and establish legal systems – such as land, tax, insurance and guarantee systems – to address the needs of infrastructure projects. This also means that the existing legal systems of relevant practice areas need to be revised and adjusted as soon as possible.
may not have the same ability and willingness to fund R&D, technology transactions and complex IP litigations in China as they had a few years ago. So the prosecution and enforcement of IPRs by foreign companies may be less active.
However, driven by the substantial adjustment of national industrial development policy and the national IPR strategy, the prosecution and enforcement of IPRs of both Chinese enterprises and individuals, in China or abroad, will continue and create more work for law firms.
China has entered a new era of developing a knowledge-based economy in which IPRs are regarded as the core assets. IPRs also provide market competitiveness.
Domestic companies are encouraged to create, implement and protect their own IPRs, increase the number of patent applications and grants of patents, foster internationally recognised brands, promote the copyright industry and protect various other types of IPRs.
At the same time, the legal services market will be increasingly competitive and only firms that can provide
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high quality services can survive in the market.
In the past few years, the threshold of market entry of IP legal services, especially for trademark matters, was lowered, resulting in severe undercutting in pricing in the market. Some small IPRs services providers, whose businesses had low prices and poor quality, will face a particularly hard time.
Due to the economic downturn, clients want to spend every penny effectively and efficiently, which will
result in the promotion of service quality in the whole market.
We believe that the fierce competition and the financial crisis will shake up the industry, and high quality IP agencies and law firms will occupy a dominant position.
M&ayANg xIAOLEI PARTNER, KINg & WOOD
M&A activity may rebound after first quarter of 2009 �PRC firms to play a more important role in cross-border transactions �
Since the financial crisis, which started in Wall Street in September 2008, has spread quickly into other countries
around the globe, the M&A market in the PRC has undergone a sharp decrease in activity. Under the basic assumption that the impact of this unprecedented crisis may last for all of 2009, the M&A market would be seeing the following events or situations:•Anumberofenterpriseswould
be confronted with problems in maintaining their financial chain, which produces a greater likelihood of M&A deals taking place. However, clients may opt for acquisitions which would help in integrating the industry chain, adjusting products structure and upgrading their own overall competitiveness
•IntermsofthepolicyofPRCgovernment, the PRC regulators will encourage M&A deals by providing encouragement through taxation, loosened fund-raising channels, and flexible and variable consideration payment measures, such as share swap or consolidation, or a combination of different types of consideration
Furthermore, clients may rely on their PRC legal counsels to create a cost-effective acquisition structure, seek an optimised channel of fund-raising and even provide acquisition opportunities for the client.
To cope with the changing demand of clients, PRC lawyers will need to study: the new market development; the purpose of the governmental policy; the expectations and business purposes of the clients; and relevant international practice and law so as to design acquisition structures compatible with the new economic environment in the PRC. For instance, PRC lawyers may need to research the market of M&A deals involving listed company or foreign investors.
•LowerpricesandcostsinM&Adealswould also encourage PRC regulators to continue their policies in backing up domestic enterprises for its overseas investment and M&A. Such governmental support will facilitate overseas M&A in terms of increasing the number of deals and improving the possibility of success
•Echoedwiththemarketparticipants’gradual adaptation to the financial crisis and the decreasing of mental panic, the M&A market will gradually recover its vitality after first quarter of 2009In 2009, clients in M&A deals may
have new requirements for legal services, including the expectation that PRC lawyers will provide a legal service with more detailed and thorough legal due diligence and effective contractual terms to reduce potential legal risks.
Those PRC lawyers who provide a legal service in overseas M&A should be able to work in English or another foreign language, and also possess more international practice and legal training and qualifications in relevant fields, while being equipped with an in-depth understanding of the operations and needs of our domestic clients.
“The demand for high-quality IP legal services will continue to rise rapidly in 2009, despite the global financial tsunami”lian Yunze, hYlanDs laW Firm
Legal advisers to private equity firms will have far fewer billable hours in the first half of 2009 �Opportunities may arise since valuations are being adjusted downward significantly �
The ongoing financial turmoil and possible global economic recession will certainly have a deep impact on the private equity industry as
well as its advisers. From the last quarter of 2008, it has become evident that private equity transactions have been hindered by the tight credit market, capital market volatility and general economic uncertainty. Investors are becoming more and more cautious when making investment decisions in the current climate. As a result, M&A in general and private equity buyouts in particular are likely to slow down in the first half of 2009.
On the other hand, compared to hedge funds, private equity firms are relatively less exposed to the financial market meltdown. Limited partners have committed their money for a longer period. Though it is a significantly lower amount than that raised in the same period in 2007, US$43bn was
be reasonable to expect that once the market stabilises, the volume of private equity activity will increase.
Legal advisers to private equity firms will have far fewer billable hours in the first half of 2009, due to reduced deal activity. However, firms with strong restructuring, corporate governance dispute and distressed asset acquisition practices will have more opportunities since clients are expecting more sophisticated advice and the deal structure may no longer be plain vanilla growth capital deals as once was the case in China. Clients may also shift their strategies away from ‘buying in anticipation of a quick IPO’ towards maintaining their investments in companies for much longer periods and turning around the business when the credit circle turns. Since clients are getting more hands-on with their portfolio companies, counsel will be often sought for advice on post-closing matters.
raised by private equity firms in the fourth quarter of 2008, according to The New York Times’ Deal Book on 9 January 2009. Opportunities may arise, since valuations are being adjusted downward significantly. Leading private equity firms may continue to outperform traditional investment managers and may even strengthen their positions as less competitive private equity players are squeezed out.
China is seen by many as the hope behind an early rebound. Historically, larger buyout funds have been relying more on their limited partners’ funds and less on borrowed money. Therefore, their China investments are less impacted by the tight debt market. In the meantime, given the relatively small size of the China deals, it would be easier for private equity funds to make investment decisions since these deals are generally far less significant than those made in the US and Europe. It would
real estateZHANg xUEBINg MANAGING PARTNER, ZHONg LUN
Transactional work in the sector will decrease in the near term �Issuing bonds could become the key source of financing �
In light of the global financial crisis, Beijing may ease restrictions on foreign investments into its property market. Foreign exchange restriction could also be
relaxed. So the market for real estate legal services could be correspondingly restored.
Deals including M&A and large-scale property transfers may increase. At present, many industry players still think highly of China’s huge long-term market potential, but are waiting to re-enter the market at its bottom. However, in view of the bleak outlook for real estate, and uncertainty over fundamental valuations, industry players could maintain their wait-and-see attitude. It is estimated that construction for real
estate projects might see a revival by the middle of this year and only then can related services also pick up steam. Much of the existing foreign investment in China’s property market is also debt financed, or has investment return hurdles. Should rentals become insufficient to service debt or fulfil investment interest, there will be some liquidation activity.
Issuing bonds could become the key source of real estate financing. At present, real estate companies may stand only a slim chance to receive approval for additional share issuances, while corporate bonds issuances have increased steadily. Before the recovery of the stock market, bond
issuances will provide real estate companies with a continued source of financing.
Litigation and arbitration cases will increase. With credit tightening, existing deals, especially equity-financed and asset-financed deals, may sour and lead to legal disputes. Real estate attorneys should be prepared to weather the market and monitor regulatory developments.
The demand for legal services in property acquisitions, transfers, IPOs and financing transactions will decrease in the near term. Before the market recovers, legal services activity will focus around the day-to-day operation of commercial properties, such as maintenance contracts and rental contracts.
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recruitMentFRAZER xIA FOUNDER AND MANAGING DIRECTOR, CHINA LEgAL CAREER
Good time for firms with tight budgets to upgrade their teams �Redundancies will be minimal, but chances for pay rises will be slim �
Attorneys in the M&A and private equity practice areas should not worry too much about losing their jobs, while the safest practice areas will include employment, litigation, distressed assets, restructuring and bankruptcy.
The in-house side will see similar patterns and mentality. The financial crisis will trickle along the food chain to slow down many industries including automotive, shipping, and high-tech. Some in-house openings will emerge, especially for mid- to senior-level in-house counsel with a high degree of independence. The market will further localise to hire more local talent, partly as an attempt to reduce costs on top of being more effective.
It will be more a buyer’s market in 2009, so it will be unrealistic to expect any salary hikes. Candidates will set their eyes more on guaranteed payment, rather on target bonuses or long-term incentives when company performance is a big question mark. Candidates will be more cautious when switching jobs, though some would actively look
for a change if they happen to be in a precarious industry.
One uncertainty, though, would be to what extent MNCs would turn to China’s markets for a solution when their home markets are experiencing larger troubles. It is very likely that many more will come to this market, as a better option among other choices. General counsel will need to be prepared for more hands-on work when their applications for headcount in 2009 are frustrated.
This year will see further reductions in legal recruiting opportunities. Except for a few newcomers to the market from
the US and the UK, existing foreign and even local law firms will continue to cut expenses to avoid redundancies and adjust their teams in China to the right size.
A ‘wait-and-see’ mentality is the tone of the market at least for the first quarter of 2009. Capital markets and real estate attorneys will either be let go or retooled to work on M&A or even FDI deals if they are lucky enough to have that chance.
There are some blessings, though. For one, some clients are taking advantage of this special market situation to upgrade their teams so with the same budget they can now put a better team under their belt. Another interesting phenomenon, observed from our 20 years’ experience in legal recruiting, is that partner search, contrary to common understanding, will be more active, especially for those who carry a book of business.
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ISSUE 6.1
The firms to keep your eye on in 2009
best fit into the dynamic and ever-changing market, and draw on their past experiences to establish goals for future success.
In the past two years, particularly as the market was still buoyant and corporate work and cross-border transactions were easy to come by, a large number of new partnerships were forged.
While law firm merger activity continues to be strong, a new trend has emerged in the legal sector in recent years – the sprouting of a large number of new firms in the market. These firms are founded by partners from other firms – always senior partners, sometimes founding partners – after they withdraw from their previously established partnerships.
Law firm mergers can be driven by various strategic objectives: geographical expansion; the addition of a specialised practice area; and access to bigger and better clients, and more sophisticated work. As in any industry, consolidation marks one aspect of marketplace maturation.
However, the main cause of the recent split-offs is the ambition of some senior partners to adopt a good law firm management structure. They
Of the many newly established partnerships, some have achieved outstanding results and demonstrated their potential to shake up the market. ALB China identifies the 10 rising stars worth watching in the years ahead
have realised that good management practices are essential in order to deliver consistent, high-quality legal services across a range of specialised areas. This is a clear indication that the legal profession is increasingly diverse. And the increasing sophistication of management practices is another indicator of maturation.
“The decision to establish a new firm is a response to changing client needs,” said Martin Hu, founder of Boss & Young, who left the firm to set up Martin Hu & Partners (MHP) in 2008.
“As clients are growing bigger and doing more complex transactions, they increasingly require an integral team of lawyers specialising in different areas to deliver seamless, quality legal services.”
Hu’s goal is to develop a law firm with a team-based approach, characterised by both a strong firm–client relationship and harmonious firm governance.
The single biggest obstacle to teamwork in most local firms is the eat-what-you-kill business model that, in its purest form at least, gives no incentive for partners to cooperate and results in difficulties representing clients in large deals.
The four stages of man are infancy, childhood, adolescence and obsolescence,” quipped American author Art Linkletter.
Man, perhaps. China’s law firms definitely not.
The legal industry is in its adolescence – not mature yet but full of immense potential and showing great promise. It is at a stage in which motivated and ambitious partners of firms start to identify their own niches, find their own ways of how to
CHINA
2009 ALB ChinA WAtChList* ►Han Yi Law Offices 瀚一律师事务所
Hylands Law Firm 浩天信和律师事务所
Jin Mao Partners 金茂凯德律师事务所
JinchengTongda & Need 金诚同达律师事务所
Martin Hu & Partners 胡光律师事务所
MWE China Law Offices 元达律师事务所
Run Ming Law Office 润明律师事务所
Sloma & Co 四维乐马律师事务所
Zhong Yin Lawyer 中银律师事务所
Zuo Quan Law Firm 左券律师事务所
*Firms listed in alphabetical order
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MWE China is another notable firm in the ALB China Watchlist that has adopted an “all for one and one for all” approach to overcome this. It is noteworthy that it has achieved this fundamental change by means of forming an exclusive strategic alliance with international firm McDermott Will & Emery (MWE), based in Chicago.
MWE China’s founder John Huang, who also founded AllBright in 1999, noted that the alliance has been a success, with significant growth in his firm’s revenues and headcount since its establishment.
“The strategic relationship with our US partner enables us to have the best of both worlds of local and international legal practices,” said Huang. Although MWE China and MWE remain two independent legal entities, they share the same standards for most aspects of the legal practices, including client service, quality assurance procedures and professional training programs, IT and telecommunications infrastructure, and management system.
“Leveraging MWE’s international platform and management skills, we’ve become an international firm based in China. Our clients and lawyers benefit greatly from this strategic platform,” said Huang. “MWE’s clients from the US and Europe have also received quality PRC legal services delivered in an international manner.”
Due to increased offerings and capacity in China under the arrangement, the total billable hours of MWE’s China practice has increased exponentially.
Similar to the stories of MHP and MWE China, all of the firms on the ALB China Watchlist have managed to balance the often-competing concerns of ambition, risk and growth with pragmatism; they have identified their competitive edges and discovered that which separates them from the rest.
If their results in the past few years are indicators, these firms are set to accomplish bigger and better things in 2009 and beyond. Whether it is pioneering new practice areas or management techniques, striking tie-ups or alliances, closing the big deals or poaching partners from their rivals, watch for these firms to play far bigger roles in the near future.
Han Yi Law OfficeManaging partner: Richard Xu •Established in 2007•Headquarters in Shanghai•Founded by ex-partners of Commerce & Finance •and Jingtian & Gongcheng
Former partners with Jingtian & Gongcheng, Richard Xu and Hu Jun, and a former partner at
Commerce & Finance, Hu Ji, founded Han Yi in early 2007. Several months later, the firm opened an office in Beijing. Now, with four partners and nearly 20 lawyers, the firm provides a range of corporate legal services, mostly involving transactional work. Although co-founder Hu Ji left the firm to join Haiwen’s Shanghai office last year, the firm continues to show notable strength in advising on private equity and M&A deals.
JT&nManaging partner: Tian Yu•Established in 2008•Headquarters in Beijing•Founded through a merger between Jincheng & •Tongda and NEED International
To forge a well-balanced law firm with expertise in cross-border transactions and international
business, Jincheng & Tongda has merged with NEED International, creating a new brand, JT&N. The addition of the international practice group, headed by senior partner Lan Lan, significantly boosts the firm’s international offerings and adds new US and international clients to its business. The new firm is committed to taking its place as one of the leading home-grown international law firms.
Jin MaO ParTnersManaging partner: Li Changdao•Established in 2008•Headquarters in Shanghai•Founded by ex-partners of Jinmao•
Nine partners of established Shanghai firm Jin Mao, including Mao Huigang and Li Zhiqiang, splintered off to set up a new practice named Jin Mao
Partners in early 2008. The new firm primarily focuses on areas of corporate finance, capital markets, M&A and foreign investment and has an impressive following of local and international clients.
HYLands Law firMManaging partner: Liu Hong (chairman, management committee)•Established in 2007•Headquarters in Beijing•Founding based on a merger between Hao Tian and Li Wen & Partners•
Formed on the basis of a merger between two firms established in the 1990s, Hylands has 29 partners and 117 qualified lawyers in offices in Beijing, Shanghai
and Nanjing. The full-service firm serves a diverse local and international corporate client base, and enjoys a solid reputation in the practice areas where they have been traditionally strong, such as real estate, construction, IP and dispute resolution. Leveraging the new platform and its membership in Terralex, the international business group led by partner Jiang Jiang has experienced strong growth.
44 ISSUE 6.1
Feature | ALB Watchlist >>
run Ming Law Office ZuO Quan Law firMManaging partners: Wang Yadong and Liu Yi•Established in 2007•Headquarters in Beijing•Founded through a merger between Run Bo and a •team from Jun Yi
Run Ming was established in 2007 as the result of a merger between Run Bo, headed
by founding partner Wang Yadong, and a team of Jun Yi lawyers led by partner Liu Yi. Given the solid track record of both groups, the new firm instantly made an impact in Beijing and Shanghai. The past year has seen the firm strengthening its legal teams by hiring senior lawyers from leading domestic firms and international firms, and establishing new practices and expanding main practice groups. Its client base, mainly Fortune 500 companies and their portfolios and subsidiaries in China, is also growing steadily.
Managing partner: Yan Xizhong•Established in 2007•Headquarters in Shanghai•Founded by ex-partners from Co-effort •
The year 2007 saw the establishment of the country’s first tax boutique firm – Shanghai
Zuo Quan. The firm was founded by a group of experienced tax lawyers, led by partner Yan Xizhong, from Shanghai Co-effort. The firm now has four partners and a number of associates, providing ‘one-stop’ tax legal services in foreign investment, M&A, restructuring and liquidation, and corporate finance. Most of them are dual-qualified as lawyer and CPA.
Mwe cHina Law Offices ZHOngYin Managing partner: John Huang•Established in 2007•Headquarters in Shanghai•Founded by former partners of AllBright •
Two former rainmaking partners of AllBright, John Huang and Kevin Qian, have masterminded
an exclusive strategic alliance with US firm McDermott Will & Emery as the basis for their newly founded local firm MWE China. Having the best of both worlds, the firm has grown significantly in size and revenue in its first two years, and has contributed considerably to the expansion and success of its US partner’s China practice. With a core focus on corporate and litigation matters, the firm impresses clients with its depth of local knowledge and internationally sound pragmatic advice.
Chief partner: Tang Jinlong•Established in 2008•Headquartered in Beijing•Founded through a merger between Zhongyin •and Zhengtai
On the same day as the new Law on Lawyers took effect in 2008, Beijing-based firms Zhongyin
and Zhengtai announced their merger, which formed a new partnership under the name Zhongyin. Before the merger, both firms already had a strong reputation in capital markets and finance practices. The merger reinforces Zhongyin’s leading position on its traditional turf. It also allows the firm to expand its offerings in other practices, such as corporate, real estate, foreign investment, IP and dispute resolutions, benefiting its clients on the local and international scene.
MarTin Hu & ParTners sLOMa & cOManaging partner: Martin Hu•Established in 2008•Headquarters in Shanghai•Founded by ex-managing partner and founder of •Boss & Young
Martin Hu left Boss & Young, which he founded in 1999 with other partners, to start a new firm.
Determined to build a local firm with international management structures that can produce a consistently high standard of quality of legal services, he created the boutique firm that bears his name. Most of his clients followed him to the new firm. In addition to Hu’s extensive experience in providing corporate and M&A legal services to multinational clients, several new partners and lawyers have brought their expertise in areas of litigation, education, tax, IP and employment and labour to the firm.
Managing partners: Yu Genrong and Li Ming•Established in 2007•Headquartered in Shanghai•Founded through a merger between Sloma & Co •and Siway & Seaway
Sloma & Co, traditionally a boutique maritime firm, has made the transition into full-service capability
by merging with Shanghai firm Siway & Seaway. The merger boosted the number of its offices to five – Shanghai, Dalian, Shenzhen, Kunshan and Berlin. The revamped Sloma continues to focus on maritime-related practices, and is also developing practices in areas such as IP, corporate finance, foreign investment and international trade. The firm now has a total of more than 70 lawyers, including 14 partners.
Minter Ellison is the largest law firm in the Asia-Pacific region. With an in-depth understanding of the local market and how business is conducted in China, our lawyers in the Greater China region
have been working with clients and busi-ness partners since the 1980s. In the Year of the Ox, we wish ALB China and its read-ers a happy and prosperous year.
HARNEYSMichael Gagie resident partner, Hong Kong
ALB China provides us with invaluable access to information on issues affecting law firms in the region. We wish ALB China and all its readers every happiness and success in 2009.
CHEN & CO LAW FIRMFrank Chen managing partner
We appreciate ALB China’s informative and insightful coverage of the legal profession in Asia and look forward to its continued success. On behalf of Chen & Co. Law Firm and its staff in
Beijing, Shanghai, and Hong Kong, I would like to wish ALB China and its readers a safe and happy holiday season and best wishes for a healthy and prosperous Year of the Ox.
COMMERCE & FINANCE LAW OFFICESDong Shuguang partner
With its in-depth insights, ALB China adds dimensions to China’s legal industry. This is a big plus for both our lawyers and clients. Commerce & Finance wish ALB China and its wonderful readers
all the best in the year of 2009.
LExISNExIS CHINAAley Chan managing director
ALB China has become one of the leading publications in the fast growing China legal industry by enabling the sharing and communications among the legal professionals.
LexisNexis wishes ALB China readers all the best for 2009.
DEHENG LAW OFFICESWang Li managing partner
Congratulations to ALB China on its sixth anniversary. Deheng wishes ALB China a smooth and prosperous year with the lucky six. The world is focusing on China and, worldwide, lawyers
on ALB China for its efficient, profound, practical and up-to-date information on Chinese laws and professional practice. To be, to be different, to be the best!
ZHONG LUN Zhang Xuebing managing partner
ALB China has played an important role in informing PRC legal professionals of the current developments in the PRC legal market and has provided an excellent platform for the exchange of
ideas. Zhong Lun wishes ALB China even greater success in 2009.
DLA PIPERDr Liu Wei office managing partner, Beijing
DLA Piper has achieved great success in the PRC both in practice and professionalism over the past year. We would like to thank our clients for your continued support and thank ALB China
for being a quality publication providing informed, professional information about the legal services sector. On behalf of DLA Piper, we would like to wish the team at ALB China and its readers good fortune and a happy and prosperous New Year of the Ox!
MALLESONS STEPHEN JAQUES Larry Kwok managing partner, Beijing
I would like to take this opportunity to wish ALB China and all its readers a prosperous and joyful Year of the Ox. Mallesons will continue to provide innovative and strategic legal
advice for our clients and we look forward to sharing legal insights with ALB China readers in the coming year.
FEatUrE | Chinese New Year messages >>
49www.legalbusinessonline.com
HAN KUN LAW OFFICESCharles Li partner
ALB China is the best platform to serve the legal community in China. It is a great plea-sure to read each informative journal of ALB China. Han Kun wishes ALB China and its readers a happy new year for 2009.
CITY UNIvERSITY OF HONG KONG SCHOOL OF LAW Professor Wang Guiguo dean & chair professor of Chinese and Comparative Law
The City University of Hong Kong School of Law sends the world-wide readers of ALB China warm wishes for a prosperous Year of the Ox.
HUGHES-CASTELL (HK) LTDKaty Lang, managing director Doreen Jaeger-Soong, managing director
Hughes-Castell wishes ALB China and its readers a happy and prosperous 2009. Best wishes for a bull year in the Year of the Ox.
HOGAN & HARTSONJun Wei and Steve Robinson co-managing partners of China offices
ALB China helps Hogan & Hartson lawyers keep abreast of important developments in the Asian legal market. We wish ALB China and all its readers all the best in 2009.
GIDE LOYRETTE NOUELStéphane Vernay co-head, Beijing office and head, Hong Kong office
At Gide Loyrette Nouel, we look forward to the opportunities and challenges that the Year of the Ox will bring and to more excellent coverage of the Chinese legal market from ALB
China. We hope that the magazine and its readers will all enjoy a very happy and prosperous year in 2009.
LOvELLS Robert Lewis managing partner, Beijing
On behalf of Lovells and the Sino-Global Legal Alliance (SGLA), I would like to wish all ALB China readers a successful and prosperous Year of the Ox!
KING & CAPITALBing Meng managing partner
ALB China with its comprehensive and in-depth content focusing on the Asian legal industry has been a great connection between lawyers and enterprises. It is a high standard,
professional magazine to read. At this time of the year, I wish ALB China and its readers all the best for 2009.
EvERSHEDSPeter Corne managing director
Thanks ALB China for all your support this last year – we have been proud to present on anti-trust at your very well-supported conferences. Hoping the Year of the Ox will bring
our renewable energy clients a lot more “waste to energy” opportunities in China!
HAOLIWEN PRC ATTORNEYSDeming Zhao senior partner
I feel refreshed each time I read ALB China. It is like a family reunion celebrating the Chinese New Year, but in a ‘legal profession’ way.
ALB China is essential reading for those who want to keep abreast of legal developments in China. On behalf of everyone at Vinson & Elkins, we would like to wish our friends and clients a happy and prosperous Chinese New Year.
50 iSSUE 6.1
ALB ASIAN LEGAL BUSINESS
alB SpECial rEport | Korea 09 >>
alB SpECial rEport | Korea 09 >>
51www.legalbusinessonline.com
In the midst of undeniably gloomy economic indicators, lawyers in Korea have plenty of cause for optimism. Business opportunities arising from this side of the Yellow Sea are among them. ALB China reports
The Yellow Sea narrows
It is the sediment washing down from the Huang He that gives the Yellow Sea its colour and name. And it is the economic miracle occurring on
the western side of the sea that is giving the country to the east reason for optimism.
The economic ties across the Yellow Sea have steadily increased over the past decade and will continue to strengthen, providing rich opportunity for business lawyers.
Statistics show that bilateral trade between China and Korea has rocketed over the past 15 years. The trade volume between the two countries reached US$145bn by the end of 2007, an increase of nearly 300% from the US$50bn in 1992.
South Korea had set up more than 30,000 enterprises in China by the end of 2007, representing an accumulated investment of US$35bn.
The neighbouring countries are also actively seeking to forge a free trade agreement (FTA). According to a study by the state-run Korea Institute for International Economic Policy (KIEP), an FTA with China would boost Korea’s gross domestic product by up to 3.2 %, while China’s economy would grow an additional 0.6%.
Riding the wave, a number of Korean law firms have established offices in China, including top-tier firms Lee & Ko, Shin & Kim and Bae Kim & Lee.
Horizon Law Group is one of the newer entrants in the China market. It set up an office in Shanghai in 2007. Horizon Law Group’s previous China-related work comprised mostly outbound investment from Korea. One such deal was helping Daewoo Shipping establish a joint venture in China to build a shipyard valued at over US$100m.
On the inbound side, the firm advised China Construction Bank when it established a branch office in Seoul. “We will just be building on our existing client base, which is mostly Korean, and hopefully we can expand to include other Asian clients,” said Sung-Ho Moon, partner of the firm.
The competition between Korean firms in China continues to be strong. Bae Kim & Lee plans to open its second Chinese office in Shanghai within this year. “We were the first Korean law firm with an office in Beijing, and we would like to maximise our investment and experience here,” Kyu Sang Chung said. “Shanghai is one of China’s biggest cities, and with so many Korean companies doing transactions there we need to set up an office.”
Even for firms without offices in China, demand for legal advice related to Chinese investments continues to expand.
Hee Chul Kang, a partner at Yulchon, says that his Korean clients are showing more of an interest in China.
“Although partly motivated by the poor state of things in Korea, our clients are looking more to China,” he says, suggesting that the trend of Korean companies using China as an export base for their EU and US operations is shifting,” he says.
“The mentality of clients setting up in China has really changed. They are starting to look at China as their home market, an independent market that has endless opportunities,” he continues.
While Korean inbound investment remains relatively high, the same can also be said of investment in the other direction.
“Chinese interest in Korea is certainly an interesting phenomenon
chIna oFFIceS oF Korean LaW FIrmS ►Firm Number
of foreign offices
Location
BaeKim&Lee 1 Beijing
Lee&Ko 1 Beijing
Shin&Kim 1 Beijing
Horizon 2 HoChiMinhCity,Shanghai
Deryook 1 Shanghai
Dong Bao Lawyer Office
1 Shenyang
noTabLe SIno-Korea TranSacTIonS In ►The PaST TWo yearS
Deal name value (US$m)
Deal type
Lotte–CTAMarkrotakeoverbid 184 M&A
Doosan – Yantai acquisition – M&A
SK Telecom – Shenzhen E-eye acquisition
15 M&A
Hyundai–Shouqin(Qinghuangdao)acquisition
527 M&A
3NODKOSDAQIPO 108 Equity
HuafengTextileKOSDAQIPO 26 Equity
Cowell Optic Electronics KOSDAQIPO
– Equity
DomeSTIc FIrmS WITh Korea PracTIce ►(non exhaUSTIve)
Firm Head office
Guantao Beijing
GoldBalance Beijing
B&D Beijing
Huamao&Guigu Beijing
Zhongyin Beijing
Yingdao Beijing
Shenhua Shanghai
Shanghai Brilliance Shanghai
Wanlong Shanghai
Deheng Qingdao
Bridge Qingdao
Sun-land Shenyang
Yuehanlin Hangzhou
52 iSSUE 6.1
and one that we are seeing more and more of,” says Wonkyu Han, partner at Lee & Ko. “We have been approached by many Chinese companies and Chinese funds that are interested in making strategic investments in Korean companies, especially in the automotive and electronics industries.” He added that the firm’s Beijing operations have been ‘very busy’ of late.
Another noticeable trend is that Chinese companies are increasingly looking to raise funds from Korea’s capital markets.
The first listing of a foreign company on the Korean Stock Exchange (KRX) occurred in August 2007, when Shenzhen-based audio components manufacturer 3NOD Digital Group closed its IPO in August, advised on Korean law by local firm Yoon Yang Kim Shin & Yu. Following the precedent set by 3NOD, Huafeng Textile and Cowell Optic Electronics (Shenzhen) has also listed in Korea.
“There’ve been several attempts to do this type of project, and we are subsequently handling at least one similar deal, and at least one other deal is being considered. This’ll be a growing area of work,” Yoon Yang Kim Shin & Yu’s senior foreign legal consultant Jiyul Yoo said.
Driven by client needs, a number of domestic firms have established a Korea practice. Deheng Law Firm and Zhong Lun, for example, have some of the most competitive Korean practices among domestic firms.
The FISCMA ‘big bang’: Starting is half the taskThatcheresque in scope and Reaganistic in vision, the long-awaited overhaul of the country’s capital markets may be just the tonic for Korea’s ailing economy, say lawyers.
“The capital market reforms are a paradigmatic change in the way of thinking in Korea,” says Wonhyo Han, partner at Lee & Ko.
Luke Shin, a foreign attorney at Kim & Chang, agrees, and adds: “[The reforms] are a step in the right direction – a move to be more regionally and globally competitive.”
But it remains to be seen whether Korea and its nascent financial
“Partly motivated by the poor state of things in Korea, our clients are looking more to China. The mentality of clients setting up in China has really changed.
They are starting to look at China as their home market, an independent market that has endless opportunities”
hee Chul Kang, YulChon
services industry are prepared for such a change and able to bear the pressures it will exert – much less willing to embrace it.
The rationale for these reforms is an ambitious undertaking to establish Seoul as northeast Asia’s financial and commercial hub by attracting the world’s leading asset management companies to open their regional headquarters there. And, at the same time, expanding the prerogative of at least one domestic financial institution will make it a serious regional and international player. At their core, the aim of the reforms is to remove the impediments regarded as inhibiting the development of a sophisticated financial services industry in Korea.
“The [Financial Investment Services and Capital Market] Act will remove restrictions that separate securities, futures, asset management, trust services and other financial services businesses,” says Han.
“It will provide a blueprint for innovation in the industry.”
The consolidation brought about by the reforms is equally important, say other observers. “The sector has been sorely in needed of consolidation for a while now. It was important to pave the way for the entrance of foreign players, but just as important to get the domestic sector into good shape as well,” says Yong Jae Chang, another partner at Lee & Ko.
“The Act is going to consolidate the local industry and we should also see the emergence of domestic banks,” says Tony Dongwook Kang of Bae, Kim & Lee. “We should expect the rise in
consolidation to affect competition and so yield gains in efficiency to improve the allocation of capital and help the sector generate long-term growth.”
But whether the optimism of lawyers is well founded and the reforms work to achieve their stated objectives remains to be seen, particularly because the reforms are set to come into effect in the midst of the most inclement economic conditions ever seen in Korea.
“The reforms are needed, yes, but their actual implementation will be challenged by the economic environment – most notably the large foreign exchange problems we now face,” says Chang.
“Korea is probably not fully prepared for the reforms at this point in time,” adds Hee Chul Kang, a partner at Yulchon. “There are still restrictions on doing business here compared to other countries, fewer technical experts and fewer English speakers. The turbulence overseas may have refocused the attention of the West on the importance of Asia, but I don’t think we are going to see Seoul become the next hub as a result of these reforms.”
So, maybe Seoul becoming the northeast Asian financial hub is a stretch – or, at least, probably not achievable by 2012, as stated by President Lee Myung-Bak. What we can look for in the short term, however, is a flurry of M&A activity in the domestic financial services industry.
At present, about 50 companies are registered as full-service investment banks in Korea, of which many – if not most – are facing an uphill battle to survive in a deregulated market.
alB SpECial rEport | Korea 09 >>
alB SpECial rEport | Korea 09 >>
53www.legalbusinessonline.com
Korean LegaL marKeT LIberaLISaTIon: ►ForeIgn LaWyerS’ gaIn To be DomeSTIc LaWyerS’ PaIn?
The number of lawyers practising in Korea is expected to double in the next seven years as the Korean government advances moves to liberalise its legal services market in line with its obligations under the recent free trade agreement with the US.
But while liberalisation is expected to raise standards in the industry and bolster the number of lawyers able to handlethecomplexM&Aandcross-borderworkthatisdrivingthedevelopmentofKorea’snascentfinancialservicesindustry, it is also set to drastically affect domestic ‘independent’ lawyers – those attorneys who do not operate within the corporate space – with many expected either to leave the profession or fall into bankruptcy.
In 2007, the Korean Bar Association stated there were 10,176 attorneys registered to practise in Korea, of whom less than 200 were foreign. Both figures are expected to increase by as much as 20% in the years ahead, due to the influx of foreign attorneys and changes to law school testing, which would see the admission of 2,000 new lawyers by 2012 instead of the 1,000 previously suggested. These statistics do not bode well for domestic lawyers.
“Thejobmarketforlawyersisoneofthemostcompetitiveintheworld,”saysaseniorpartneratoneofKorea’sbiggestfirms.“BecauseofthenatureoftransactionshappeninginKoreaatthemoment,thereisnorealneedfor counsel to be admitted here so, unless some of the younger lawyers are particularly brilliant, they may find themselves having to serve independently.” Of the lawyers who pass the Korean bar exam each year, only the top 30–40%findgainfulemploymentasstateprosecutorsorjudges,orassociatesatthetopsevenlawfirms.
However,whilethesetopsix–Kim&Chang,Bae,Kim&Lee,YoonYangShinKim&Yu,Shin&Kim,YulchonandLee&Ko–accountformorethanhalftheKRW1.3trnlawmarket,theyemployonlyabout10%ofKoreanlawyers.“It’sreallytoughforlawyersatthemoment,”thesourcesaid.“Weseealotofthemhavingtoresorttostreet-peddling and eventually falling into bankruptcy… many lose face and can’t go on.”
Korea Times research indicates that the number of matters handled by independent lawyers is in free fall. In 1997, the average was around 57.2 per year and now the figure is closer to 31.5 and is expected to fall further in the years ahead.
“Thisiscertainlyregrettable,butit’spartoftheliberalisationprocess,”ALB’ssourcestates.“What needs to be done is to change the nature of legal education in this country – to make Korean lawyers more marketable internationally.”
And, indeed, the Korean government and the bar association are already making moves in this direction, to increase the standards and reputation of Korean law schools with a view to making English instruction mandatory in the long term.
“Thelegalestablishmenthasrealisedtheneedtomaketheskillsgainedbylawyersmoreportable,soifwehaveproblems like this in the future, there’ll be nothing stopping young lawyers seeking employment overseas – or, ideally, right here in Korea,” the source said.
This is bad news for bankers but great news for lawyers – all of whom also expect an M&A surge, albeit on a smaller scale, in the near future.
“It’s quite generally accepted that the new regulation could play a role in creating more transactional work in Korea,” says Chang.
“The banks that want to stay in the sector are going to have to diversify to remain relevant. However, the more likely scenario is that they will become casualties – absorbed by the larger players – and the number of investment banks will reduce over the next two years.”
M&A and rationalisation in the crowded brokerage industry is already occurring. Last November, Kookmin Bank acquired Hannuri Investments and Securities, and has stated that there is plenty more to come. The Industrial Bank of Korea (IBK) has had KRW1trn (US$1bn) added to its acquisitions war chest and CJ I&S has been hitting the recruitment trail in the lead-up to its planned 2009 IPO.
In addition, Woori I&S intends to merge with a broker yet to be named, to reach KRW5trn (US$5bn) in net assets, and both Seoul Securities
54
alB SpECial rEport | Korea 09 >>
iSSUE 6.1
“Chinese interest in Korea is certainly an interesting phenomenon and one that we are seeing more and more of. We have been approached by many Chinese
companies and Chinese funds that are interested in making strategic investments into Korean companies, especially in the automotive and electronics industries”
wonKYu han, lee & Ko
and NH I&S have been considering the prospects of M&A as a route to expansion. All this is not to mention KBS’s now ignominious race for a stake in Lehman Brothers’ Asia operations in September 2008.
But whether such activities continue through 2009 remains to be seen. While the complexion of the financial services industry may alter, more profound change – ‘1980s London’-type change – may be much further off.
This is because no matter how serious the financial crisis unfolding in Korea becomes, the one that FISCMA is going to be launched into is unlike anything ever seen before and most certainly more grave than the one that slashed share prices late last decade.
The calm before the storm: M&A upsideWhile consolidation in the country’s financial sector is expected to provide M&A and banking & finance lawyers with a slipstream of deals in the mid to short term, longer term projections remain sketchy.
Ask any Korean lawyer to don their soothsayer cap at present and chances are you will get a response that is non committal – an unvarying reply that it is simply too early to tell what will happen.
Is this evidence of the conservative nature of the legal profession in Korea or simple pragmatism? ALB’s research suggests it is probably – marginally – more the latter. For, while there may appear to be a steady stream of work coming out of the financial services industry for Korean lawyers, we must not forget the comparatively small size of this sector in the country’s economy. The relevant question is how much work lawyers can derive from an industry that has only 50 companies?
It pays, then, to cast the net a bit wider. Despite Korean lawyers’ pragmatic foreboding, this year’s empirical data alone suggests that there is more than enough evidence to be genuinely optimistic about the general M&A outlook moving forward.
In the first three-quarters of 2008, Thomson Reuters statistics show that cross-border activity involving any Korean company was up by almost
85% to US$17bn from US$9bn in the comparable period last year.
And, while most of this total was comprised of capital investment from Europe and the US, it is interesting to note that the bulk of it is made up of Korean companies investing abroad – a trend that Shin notes has rolled steadily through the last five years.
“When we used to speak of M&A, we would traditionally talk about it being inbound but, given the developments over the last couple of years, there has been an ongoing story of outbound M&A by Korean companies.”
Hyung Jin Kim, a partner at Yulchon, agrees. “Outbound M&A is now more popular. Most of the clients I and my other partners speak to – particularly of the larger companies but also those of some smaller ones – are taking the position that probably the first or second half of next year will be a good time for outbound investment,” he says.
At this point, one may be forgiven for thinking that the current discussion is about the M&A prospects for zaibatsu and not chaebol – so striking are the similarities between the two.
Both have reached the maximum level of growth allowable in their home markets – hence the need for strategic overseas acquisitions – and both have strong balance sheets – hence the need to clear their cash reserves. The only discernible difference, it would seem, is the strength of local currency, as the won is considerably weaker than the yen at the moment.
Nevertheless, Chang believes that the current situation may be simply too
enticing for strategic investors in Korea, as long as they have sufficient appetite for risk. “Korean companies need to be bold if they are going to make such outbound investments,” he told ALB.
“For strategic investors – companies that are healthy and have a lot of cash – it makes sense to acquire interests overseas – in the US or elsewhere. If things can be bought at a good price, we expect to see a lot of activity in 2009.”
“We are all waiting for the dust to settle a little,” says Shin. “But if we look beyond that, Korean companies must check out overseas markets and compete globally – in 2009, they should be more aggressive.”
Needless to say, aggressiveness and looking overseas have never been problems for Korea’s intensely nationalistic chaebol.
Global Energy (Beijing): Senior M&A lawyer (6-9 PQE) – Strong m&a transactional experience is required, particularly in oil and gas industry to support their acquisition activities across China. Good proficiency in English & Mandarin is required.
Global Energy (Beijing): Deputy General Counsel (10-15 PQE) – Strong corporate finance experience is required, preferably with some knowledge of oil & gas industry to manage a team of lawyers. PRC qualified lawyer is ideal but is open to strong international lawyer with relevant experience. Fluency in English & Mandarin is required.
BANKING & FINANCIAL INSTITUTION
European Private Banks (Hong Kong): Legal Counsel (3-6 PQE) – Qualified lawyer in HK with private banking experience is ideal but is open to lawyers with general banking experience. Proficiency in English & Mandarin is required.
PRIVATE PRACTICE
International Law Firms (Hong Kong/ Beijing/ Shanghai): Corporate/Finance (2-8 PQE) – Various UK and US law firms are looking for HK, US or other commonwealth jurisdiction qualified lawyers with various expertise to join their offices in HK or China.
For more details on these positions, as well as a full listing of all available positions, please log on to our website at www.legallabs.com. Please contact us at +852 3189 7032/ +65 6236 0166 or [email protected] for a confidential discussion.
IN-HOUSE
US listed Global IT Solutions Company: Contracts Manager, Beijing (5-8 PQE) [C1600] – Experienced senior legal contracts manager to provide support to its business across China and Hong Kong. Candidate should have legal experience in corporate commercial work, ideally with experience in contracts administration and commercial risk issues. They would also be open to consider non-legally qualified candidates who have strong contracts administration and management experience. Fluency in English and Mandarin language skills is essential.
US listed Global Electronics Company: Contracts Manager, Taipei, Taiwan (4-8 PQE) [C1599] – Senior legal contracts manager to provide support to its business across Asia Pacific (with focus on China and Taiwan). Candidate should have legal experience in corporate commercial work, ideally with experience in contracts administration and commercial risk issues. Fluency in English and Mandarin language skills are essential.
Global US Tech & Manufacturing Corporate (Shanghai): Legal Counsel (5-10 PQE) [C1530] – Ideally with good in-house corporate experience to provide legal support in PRC region. Familiarity with PRC laws & regulations is required.
Major Private Equity Investment (Singapore): Senior Legal Director (10+ PQE) [C1472] – Strong cross border corporate transactional m&a experience is required.
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Ethnicity in the City US firm Morrison & Foerster recently hit headlines with the
news that it had appointed tax partner Trevor James to managing partner of the firm’s London office – making him the first black managing partner at the international firm.
James takes over from Julian Thurston, who will continue at the firm as co-chair of the life sciences group.
The announcement has brought to light a number of figures regarding firms and their race-based managing partner records.
According to the Black Solicitors Network’s (BSN) 2008 diversity league table, until recently Beachcroft, Clifford Chance, DLA Piper and Linklaters were the only UK firms with any black partners. On the US firm front, 10% of City partners at Weil Gotshal & Manges are black (two partners), while fewer than 1% of Reed Smith’s partners are black.
Weil Gotshal & Manges City managing partner Mike Francies, Freshfields financial
institutions co-head Will Lawes and Slaughter and May corporate heavyweight Charles Randell recently came across an extra five minutes of fame when they were named in the 2009 edition of Who’s Who – along with numerous film stars, musicians and other notable characters.
The high-profile lawyers are three of the 1,000 new individuals to snag a mention in the 161st edition of Who’s Who which profiles some 33,000 individuals in its most recent issue.
Pannone senior partner Joy Kingsley, Freshfields London corporate head Mark Rawlinson, Simpson Thacher & Bartlett finance partner Tony Keal and Slaughters’ corporate partner Nigel Boardman and senior partner Chris Saul are also part of the annual list of notable Britons.
Constance Briscoe, one of the UK’s few black judges and author of controversial memoir Ugly, and Paul Mitchard, head of litigation at Skadden Arps, are also included in the list.
Leading UK lawyers grace pages of Who’s Who
ToP LegaL aDvISorS on gLobaL m&a ►by vaLUe: 2008
Year to date, as of 12 December 2008
Legal advisor No. of Deals
value (US$m)
1.Sullivan&Cromwell 126 371,857
2. Linklaters 209 351,242
3.Allen&Overy 224 324,721
4.Skadden 170 324,211
5. Freshfields 257 323,857
6.Latham&Watkins 248 307,975
7. Clifford Chance 225 271,559
8. Cravath, Swaine &Moore
61 266,498
9.WeilGotshal &Manges
116 231,259
10. Simpson Thacher &Bartlett
61 216,541
Industry total 34,756 2,811,335
Source:ThomsonReuters
Rochester Law Firm is serious about forcing staff to be healthy. The firm made a stand on smoking when it legally fired
a 56-year-old staff member for defying a new policy at work that banned smoking breaks for hourly employees.
Karen Kridel took a five-minute smoke break in the morning and another in the afternoon every day in the14 months she worked for the firm as a paralegal – but was fired for continuing the practice after breaks outside of lunch were then prohibited in an October 2006 e-mail.
Kridel was fired on the grounds she had engaged in misconduct by violating the no-break policy, a decision that was upheld by the Supreme Court in Albany and could now have to repay the US$3,000 in unemployment benefits she received.
No smoking without firing Big bucks Bingham USlawfirmBinghamMcCutchenrecentlysnaggedatopspotinFortune
magazine’s annual report on 100 Best Companies to Work For. The corporate firm received its ranking for being one of the highest paying
employers on the market – the firm offers fresh law school graduates a base salaryofUS$160,000onarrival,andthemagazinereportsthat“eventhefirm’s legal secretaries average a not-too-shabby US$69,000 a year”.
Bingham brought three firms into its fold in 2007, increasing staff levels to over 1,000 lawyers spread across 13 different offices, the largest of which is its headquarters in Boston.
The average total pay for associates at the firm is reported to be around US$211,017.InAsia,BinghamhasofficesinTokyoandHongKong.
www.hughescastell.com
LONDON • PARIS • HONG KONG • SINGAPORE • BRISBANE • MELBOURNE • PERTH • SYDNEY • AUCKLAND • WELLINGTON伦敦 • 巴黎 • 香港 • 新加坡 • 布里斯本 • 墨尔本 • 柏斯 • 悉尼 • 奧克兰 • 威灵顿
In-houseLegal Director (10+ yrs pqe) Shanghai This is an excellent opportunity to take up a management position in a leading European company. You will report directly to the American managing director in Shanghai. You must be a PRC lawyer with a minimum of 10 years corporate and commercial legal experience, including as an in-house counsel. Strong commercial sense and fluent English is essential. Ref: 7784/CB
M&A Counsel (10+ yrs pqe) Beijing Fortune 50 company needs a senior-level lawyer who has substantial PRC M&A experience gained with an international company or firm. Prior exposure to large scale deals is sought. A law degree from China or extensive knowledge of PRC law and native fluency in Mandarin are prerequisites along with good English. Good communication skills are needed to interface with stakeholders, government and business units. Ref: 8028/CB
Head of Compliance (10 yrs exp) Beijing Lawyer or compliance professional sought by this international bank to lead a banking compliance team in Beijing. You need to have a minimum of 10 years experience in either stated owned banks or foreign banks. PRC national with excellent command of English and familiarity with PRC banking regulators is essential. Ref: 8023/CB
Senior In-house Counsel (8 yrs pqe) Shanghai Award winning global company desires a lawyer with PRC experience gained from a top MNC or international law firm. This position will supervise a team of lawyers based in several offices throughout China. Regulatory background would be a distinct asset. Strong English and Mandarin language skills are mandatory. Look forward to excellent career prospects. Ref: 8030/CB
In-house Counsel (7-8 yrs pqe) Shenzhen This US based giant continues to grow and seeks a senior-level counsel with solid PRC experience gained from an international firm or corporation. In this APac regional role, the incumbent will report to the China GC and will need to have the experience and skills to manage a team. You must have a general commercial background and be willing to take on the broad scope of day-to-day operational support of all the business units. Ability to read and write Mandarin Chinese and English is required. Excellent promotional prospects. Ref: 8007/CB
Senior Legal Counsel (7 yrs pqe) Beijing A fortune 500 US company seeks a Senior Legal Counsel to be based in Beijing. The position will advise and support junior lawyers. The qualified applicant must have at least 7 years legal experience gained either from top tier law firms or fast paced multinational companies. You will need to have solid experience in handling general corporate and commercial transactions, as well as possess sound IP knowledge. LLB/LLM from a leading PRC or overseas university is required, and excellent English and Mandarin language abilities are essential. Prior legal experience from an IT company is highly desirable. Ref: 7961/CB
Senior Legal Counsel (5-10 yrs pqe) Shanghai or Beijing Working closely with the General Counsel, this is a senior role with tremendous growth potential within one of the world’s biggest companies. PRC law degree and a foreign law degree are prerequisites, together with a foreign bar admission and international firm training. The position requires corporate commercial experience. Our client is looking for a dynamic and business savvy person who has excellent English language skills. Ref: 8008/CB
Corporate Counsel (6+ yrs pqe) Hong Kong This US based global giant has been experiencing tremendous growth necessitating the need for an additional attorney to support the Asia-Pacific region. This senior hire will handle a broad range of transactional and operational matters. Candidates need prior experience gained either in an international law firm or multinational. Ability to work independently is important. Excellent English and native Mandarin language skills are required. Expect top compensation and benefits with excellent career prospects and friendly work environment. Ref: 7738/CB
Private PracticeChina Partner (10+ yrs pqe) Hong Kong This leading international law firm has seen its firm’s profits show record growth, year-on-year for the past 4 years. It is committed to building on its international platform. Currently, it has an opening for an accomplished partner to grow their China business. You will need a China law background and a following of corporate clients. Excellent English and Mandarin language skills are essential. Ref: 7987/CB
China Partner Shanghai/Beijing This dynamic US firm has seen fantastic growth in Asia. There is an urgent need for partners to be based in their Shanghai and Beijing offices with the expertise to leverage off the existing practice, as well as a proven track record of building a business. The focus will be on corporate, M&A, finance and projects. Fluency in Mandarin and English is required. Ref: 7335/7334/CB
Corporate Finance (4-7 yrs pqe) Shanghai Talented lawyers with a mix of finance and general corporate experience will be considered for openings within this international law firm. To be considered, you need a substantial background in PRC law gained in an international law firm. Strong English language skills are required. Fluency in Mandarin is preferred but not required. Look forward to working with an exciting and friendly corporate team. Ref: 8001/CB
Project Finance Lawyer Shanghai Well regarded practice is recruiting a Project Finance Lawyer to work in an expanding team on deals in China and across Asia. Strong academics and US qualification are needed. The work will cover all aspects of project finance and will be mainly PRC focused. You must have strong project finance skills and Mandarin language skills to be considered. Ref: 7974/CB
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