Richard Li reviews China Business Law Journal’s first decade of covering China’s legal market
With the publication of this issue of China Business Law Journal, we have reached two important milestones – the publication of our 100th issue and the celebration of our 10th anniversary. In today’s challenging publishing environment, such milestones are not reached easily.
One hundred issues in, we have interviewed literally hundreds of the top lawyers and in-house counsel within China and elsewhere, spoken to learned members of the judiciary, secretaries and ministers of government, and the best of academia. We have felt the pulse of the legal consciousness in China on issues concerning its quickening evolution, gleaning views across the spectrum, from the very cream of Chinese lawyers to the humblest young associate.
And with all this history, everything began with you. Prior to the very first issue, the ethos for our journal began with listening to what our desired readership wanted to see in our new publication. “Practical, bilingual and for in-house counsel” were key words from our potential readers when we conducted research to decide upon the editorial principles for this magazine.
Those words have set the tone for our journal since. Through all the events and matters needing legal insights, the question at editorial meetings remains: “What information will be valuable and useful to in-house counsel and corporate executives?”
In the past 10 years, we have been growing together with China’s economy and the country’s legal services market. Our inaugural issue was published in January 2010, at a time when the world was still under the horrible shadow of the huge 2008 global financial crisis (GFC).
Our cover feature of the first issue found that although China kept growing at a relatively high rate, some lawyers were not sure whether that meant the crisis was over – or that it had not hit China yet. Given the downturn, many companies had tightened their budgets for legal expenses, and subsequently taken more work back to their in-house legal departments.
It turned out that China did not undergo a serious economic recession because of the 2008 financial crisis. In fact, the country’s GDP growth curve continued its rise. In 2010, China surpassed Japan in terms of total GDP, securing its position as the second-biggest economy in the world.
As the financial crises in the West slashed the prices of many quality overseas assets, Chinese investors – both state-owned and private – became active in overseas investment. The Belt and Road Initiative (BRI) expanded Chinese investment in developing countries as well. In line with this trend, Chinese law firms have also grown and expanded quickly on the global stage, along with the emergence of some “mega” Chinese law firms worldwide.
Interestingly, 10 years on the world again stands at the precipice of what may be another serious economic downturn. China’s situation is also plagued by a trade conflict with the US. Will the nation be able to maintain economic success? That is a question for the next decade.
Throughout these years, we have closely monitored capital markets, M&A, intellectual property (IP), arbitration, compliance, overseas investment, etc., and by this continual coverage we have tracked the crucial trends of China’s legal and regulatory developments. Overall, it is fair to say the incredible speed of improvements within the legal sector, and with regulatory evolution, has dominated the big picture of business law in China.
In terms of M&A, Chinese investors were very active in the first half of the 2010s. In February 2012, our cover feature analysed how the euro crisis might open more opportunities for Chinese investors, since many companies in Europe were still facing the financial squeeze of the GFC. The US was another popular target market for Chinese investors at that time, although transactions in some key areas already faced a high chance of being blocked.
Chinese investment has slowed in developed markets in recent years, given the increasingly tighter scrutiny from regulators in these countries. In contrast, investment in developing countries along the Belt and Road has increased.
In 2017, we published a special series of reports on the BRI, the country’s massive blueprint for outbound investment and cross-continental economic connection. We explored the most pressing issues in the development of this project, including the big challenges ahead for legal experts in overcoming the huge diversity of cultures, business practices and legal systems in so many different countries. The reports also looked at some of the large-scale infrastructure and project finance deals, as well as the long-term implications of the initiative including the hoped for entrenchment of mature legal systems in involved developing countries.
As cross-border commercial activities between China and other countries rise quickly, so commercial disputes grow just as rapidly. This has made commercial arbitration one of the more promising businesses in the legal services sector in recent times. Many domestic and international arbitration institutions are keen to be involved in this market, and the “internationalization of Chinese arbitration” has become a hot topic in China’s arbitration community.
Our latest report on arbitration graced the cover of the September 2019 issue. The revision of the Arbitration Law is now on the agenda of China’s legislative body, and some arbitration centres have adjusted their rules to adopt some good international practices. Some of China’s better traditions in arbitration practice have also been exported abroad, for example in mediation. So, while China’s arbitration practice becomes more international, international practice is also becoming more Chinese. It’s the view of many experts that this “internationalization” should not be a single-direction process, and that China’s arbitration community should be confident enough to have its voice heard in the world.
IPO first choices
In our IPO feature stories, we found that although the US has been an important choice for Chinese companies, its attractiveness has decreased. From 2014 to 2016, there was a wave of Chinese companies going private and delisting from the US market due to either higher valuations back home or regulatory pressure in the US.
Hong Kong has long been a popular IPO venue for mainland companies, especially so in the past year-and-a-half, since reforms in April 2018 enabled companies from emerging and innovative sectors with weighted voting right (WVR) structures, and biotechnology companies without a prior record of revenue or profit, to be listed in Hong Kong. Alibaba’s IPO in November 2019 was the biggest after this reform and to date.
The A-share market has transitioned from an approval-based system for IPO applications to a registration-based system, which has not covered all A-share markets yet, but has been applicable for the Sci-Tech Innovation Board (STAR Market) launched in June 2019 by the Shanghai Stock Exchange.
Just before the board was officially launched, our cover feature in the May 2019 issue analysed the changes it would bring. Technology companies are widely seen as the pillar of a successful securities market today, and the new board was designed for such companies with more friendly listing requirements. The next decade will witness whether world-class technology companies will emerge from this board.
Lack of IP protection has long been a source of criticism from the US, as witnessed in the recent trade war negotiations. But our coverage in these past years reveals that China has attached unprecedented importance to IP protection and accelerated regulatory changes in leaps and bounds. These advances in IP protection have also benefitted Chinese companies because the country’s economic growth is increasingly reliant on technology-intensive industries.
China has built a network of IP courts and tribunals in key cities countrywide. At the start of 2019, the IP tribunal of the Supreme People’s Court was established in Beijing to unify and standardize the trial of IP cases in future. Most importantly, punishment on infringers has been raised to a level that is strong enough to stifle possible crimes.
Our latest coverage of IP, in the April 2019 issue, pointed out that some foreign companies still lack a sufficient understanding of China’s evolving IP protection system, and explains that the blind spots and misunderstandings of these foreign companies may run them the risk of having an ineffective IP protection plan in China.
Our research strives to provide valuable data for in-house counsel, and in November 2017 we made a bold move to ask Chinese law firms to disclose their hourly billing rates. Executives and in-house counsel have long told us they would like to see transparency and consistency in the way that law firms charge for their services, but compiling such information had never been achieved before for public use. We saw a challenge.
Initial results were predictable, and many law firms politely refused to share their confidential billing rates, but as we persisted with our efforts to explain the rationale behind this project, we began persuading many firms to participate. Our groundbreaking first report was popularly received by our readers.
Since then, more law firms have realized the value of this project, and in the latest billing rate report, published in October 2019, we received responses from 29 quality law firms. The latest report finds that lawyers in Chinese law firms, ranging from junior associates and managing partners, charge an average RMB2,911 (US$420) per hour. We are confident that more law firms will join this project in future years, helping us to set yet another benchmark for China’s legal services market.
Deals of the Year was launched in our February 2011 issue, and since then it has been published annually in the bi-monthly December/January issue. The evaluation is based on submissions received from law firms. When determining the winning deals and cases, we do not merely look at the deal size, but focus more on their significance, complexity, difficulties, creativity, etc.
The inaugural China Business Law Awards was published in our February 2014 issue. Decisions were made according to nominations by corporate counsel, submissions from candidate law firms, and comments from referees provided by these firms.
The A-List, which features the prominent private practice lawyers for China-related business, was first published in our November 2016 issue. The assessment criteria for this is nominations and feedback from corporate counsel, combined with our own extensive research.
The methodologies for these awards were carefully designed to make sure the final results are impartial and reflect market sentiment. We are glad to see that many in-house counsel have taken our awards as an important reference when they look for external legal advisers.
After so many years of collaborating with corporate counsel, we have found that although they are making an increasingly important contribution to the development of their companies, the recognition and attention they receive is not proportionate.
Therefore, we initiated our first research on outstanding individual in-house counsel and in-house counsel teams. The result of our inaugural CBLJ In-house Counsel Awards was recently published in the November 2019 issue. We hope that more in-house counsel will receive the recognition they deserve in the next decade.
We are honoured to have interviewed some high-profile players in the legal sphere in the past 10 years. In September 2013, we talked to Rimsky Yuen, the then secretary for justice in Hong Kong. The close economic integration had given rise to judicial and enforcement issues between the legal systems of mainland China and Hong Kong, and at that time there were only limited forms of mutual legal assistance.
Yuen played an important role in building channels of communication between the two jurisdictions to resolve such issues. He was also working hard to make Hong Kong a dispute resolution hub for Asia, and actively liaised with mainland authorities to secure country-level support.
Since our interview with the secretary, more progress has been made on judicial co-operation between the mainland and Hong Kong in the realm of business law. In January 2019, the Supreme People’s Court and the Hong Kong government signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region. In April 2019, they signed another Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the mainland and of the HKSAR.
Our interview with Singapore’s Chief Justice Sundaresh Menon, published in the November 2016 issue, supported the premise that an increasing number of people believe we are living in an “Asian century”. Economic projects that reflect regional economic integration, such as the Asian Infrastructure Investment Bank (AIIB), the BRI, and the Regional Comprehensive Economic Partnership (RCEP), received extensive coverage and discussion at the time. However, the legal systems across Asian countries are diversified, which increases the risks for cross-border business.
Menon argued that economic connection does not mean the convergence of business laws will happen naturally. However, he said there was an urgency to formulate a seamless transnational legal framework for cross-border trade and commerce.
Given this backdrop, top-level judges and legal scholars from China, Australia, India and Singapore set up an institute in January that year committed to conducting research and promoting the convergence of Asian business laws. Menon said that although Asia had good economic prospects, it was not predestined – continual efforts had to be made to improve the region’s attractiveness so that the “Asian century” would finally arrive.
The February 2018 issue featured Miguel de Serpa Soares, under-secretary-general for legal affairs and the UN’s top legal counsel. His work experience at the UN had reinforced the conviction that we need an international order that is based on norms and rules, although the order was facing big challenges at that time.
In our interview, Soares said a well-developed modern and harmonized commercial law regime could help address most of the risks and concerns related to doing business across the Belt and Road countries. He gave the example of the New York Convention, which had ensured the enforceability of foreign arbitral awards in a wide spectrum of countries, and shaped a global preference for commercial arbitration.
Development of firms
In the July/August 2012 issue we published the first edition of China Business Law Directory, which contained extensive listings of Chinese and international law firms and provided an authoritative reference for corporate counsel and senior executives.
We have since formed the tradition of publishing the directory in conjunction with detailed research reports, checking the pulse of China’s legal services sector and trending market issues.
Over the years, we have witnessed the growth of Chinese law firms and the difficulties they face. As Chinese overseas investment has grown significantly, Chinese law firms have been expanding overseas as well, setting up offices in London, New York and other key cities.
Some firms chose to combine with other international firms, such as King & Wood’s merger with Mallesons, and Dacheng’s merger with Dentons.
Some Chinese law firms choose to build stronger ties or alliances with foreign local firms, so that they can play the role as a general co-ordinator when they advise on Chinese investors’ overseas projects.
The growth and internationalization of Chinese law firms has brought increasing pressure to international law firms in China. Some of these have closed their offices in China, and some have lost important partners, or even managing partners, to Chinese law firms or Chinese companies’ in-house departments.
Other international law firms established joint operations in Shanghai with Chinese law firms – usually their long-time local partners – because such a joint operation is allowed to practice both PRC and foreign law. Some international firms focus more on highly complex and specialized foreign legal issues.
Competition between Chinese law firms has also intensified. Some firms have striven to expand their size and increase their offices so that they are able to provide more comprehensive one-stop services, while others have opted to become boutique firms specializing on only a few areas – usually where clients need continued services, in areas like IP and litigation.
Chinese law firms are also paying closer attention to management issues. Quite a number of them have first-generation heads who have reached the age for handing over management to younger partners. Many law firms have focused more on the selection and training of young talent, and the centralization of management has also become a trend. Although almost all law firms are set up as partnerships, many firms now run themselves in a company style.
We must also take this opportunity to thank Andrew Godwin, who has been writing our Lexicon column since our second issue. Godwin was a former partner at Linklaters in Shanghai, and he now teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. His column focuses on exploring and comparing legal terminology, legal concepts, and issues facing the legal profession in the Chinese and English/Western contexts.
When he started, he was not sure whether he could write a regular column, but after 100 issues, Lexicon is still going strong, and still one of the most popular regular features for our readership. The collection of his first 40 articles was published in the book China Lexicon in 2014 by Vantage Asia. Given readers’ positive feedback, a second volume is being considered. Godwin is still full of inspiration and interesting ideas, and Lexicon continues to be an outstanding success.
In a significant expansion of China Business Law Journal, we were honoured to start arranging conferences in 2019, with our first held in Beijing in April, and the second soon after, in Shanghai, in November. Our conferences focus on practical legal issues and challenges facing companies, with a series of panel discussions between lawyers, business leaders and general counsel from leading law firms and reputable companies. We are grateful that our first two conferences were very well attended and received positive feedback.
Last but not least, as this article tracing our 10 years ends, we would like to take this opportunity to express our deepest gratitude to all our readers, friends and business partners who have given us encouragement, suggestions and feedback during our tremendously rewarding journey. Your support has been essential to the success and achievements of this journal, and we dearly hope you stay with us as our journey continues.
As China Business Law Journal celebrates the 10th anniversary of its founding, we asked senior in-house counsel and lawyers about what they regard as the standout legal trends and developments of the past decade. Some also gave their observations on the growth of our journal