Today, Chinese enterprises engaging in cross-border business face formidable challenges. The global business environment is full of uncertainty, the geopolitical landscape is increasingly complex, and overseas laws and regulations on international business are being heavily reinforced.

On 12 November 2019, China Business Law Journal (CBLJ), in an event to help corporate executives and legal teams avoid these legal risks, hosted the 2nd CBLJ Forum with the theme of “Seizing Cross-Border Opportunities – Managing Global Risks” at the Shanghai Grand Hyatt Hotel.

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Ma Yi

Ma Yi, deputy director and secretary-general of Shanghai International Arbitration Centre, and Zhang Yunfeng, general manager of Shanghai Equity Exchange, addressed the opening ceremony.

Ma said that increasing cases of Chinese enterprises encountering risks in overseas investment had been reported in recent years as these companies undergo the process of going global.

“As a professional legal service group, it is necessary for us to seize the opportunities and stand up against the challenges,” said Ma. “We need to constantly facilitate the formulation of internal legal compliance and external risk prevention mechanisms for Chinese enterprises, with a broader global vision and in an ambitious progressive manner.”

Zhang observed that when trade protectionism and anti-globalization are on the rise, enhancing legal compliance and risk management capabilities is crucial for both real enterprises and related service organizations.

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Zhang Yunfeng

According to Zhang, the central government is actively building a compliant, international and convenient business environment covering areas of concern more comprehensively. “In the light of the central government’s strategy, Shanghai is deepening reform and innovation, and speeding up to shape itself as an international finance centre,” he said.

During the keynote speech session, Qin Shuo, the initiator of [email protected] and co-director of the China Business Culture Research Centre, analyzed compliance issues against the background of conflict due to globalization.

Qin said that China, as an economy with massive imports and exports, had deeply integrated herself into the global economy. No matter from the perspective of imports or exports, it was impossible to separate China from the global market. “Against this backdrop, whether to introduce overseas enterprises into China, or help domestic enterprises go global, it is very difficult for them to operate sustainably if there is no high level of conformity, consensus, or order in the sense of compliance.”

He said globalization is now facing conflicts and challenges. “Nowadays, the world has come to a crossroad. Globalization, previously centred on neoliberalism, is really in difficulty. The unfavourable consequences of capital flows and technologies are looming. The development of emerging economies has brought shifts of power, which, to some extent, has disturbed the fundamental order set by developed countries,” he said.

“Therefore, a new consensus needs to be formulated around the globe. Yet that doesn’t mean completely abandoning the existing rules. Chinese government leaders have stated on many occasions that China is not trying to subvert the existing order, but to supplement it.”

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Qin Shuo

At the end of his speech, Qin also mentioned that to deepen the understanding of compliance, the most important thing is still to develop values, especially the values of enterprises’ core leadership. “Only when compliance is deeply integrated into values can we transform ourselves from an economy earning the most cash to an economy earning the most respect internationally.”

The keynote speech was followed by a day of panel discussions. In the morning, Dentons moderated a discussion on “Coping with the trade war: Smart strategies for cross-border business”; Jingtian & Gongcheng spoke on “Venturing out: cross-border strategies for Chinese companies and funds”; DeHeng Law Offices took on “Playing safe: Risk management and dispute resolution strategies for outbound investment”; and Zhong Lun Law Firm moderated a discussion on “Belt and Road: The projects so far – the opportunities ahead”.

The afternoon sessions were split between three workshops. In workshop 1, Hui Ye Law Firm moderated a discussion on “Cross-border mergers and acquisitions”; Grandall Law Firm took on “Overseas listing strategies”; and Long An Law Firm spoke on “Resolving shareholder disputes”.

In workshop 2, CM Law Firm took on “Financing strategies for growth enterprise”; Dentons spoke on “Data compliance and GDPR”; and Blank Rome moderated a discussion on “Contemporary issues and challenges facing in-house counsel”.

In workshop 3, Xi Xiaohong, mediator/legal expert at Benchmark Chambers International and Benchmark International Mediation Centre, gave an opening speech on outbound investment. Member law firms of Lex Mundi participated in the following two sessions with a regional focus on Eastern Europe and Southeast Asia, respectively.

The forum was attended by nearly 600 participants. Shawn Zhao, the Greater China general counsel of Schneider Electric (China), agreed with the keynote speaker that China is still on a path towards globalization, and will be more open with its reforms. “That’s a very encouraging theme,” he said. “I think China Business Law Journal can do a lot in this regard – for example, preparing Chinese enterprises to go to the global market, or reaching out on the Belt and Road Initiative, and being more successful in the global market.”

Liu Fang, general counsel and chief compliance officer at NIO, said the topics of the forum touched on the hottest issues currently in the legal sector, relating to the China-US trade war and compliance. “Those topics are really appealing to me, and the forum is very well organized,” she said.

Navigation
Morning Sessions | Afternoon session – Workshop 1 | Afternoon session – Workshop 2 | Afternoon session – Workshop 3

 


Morning Sessions

Coping with the trade war: Smart strategies for cross-border business

Dentons panelists:
Cai Kaiming, senior partner; Ni Jianlin, senior partner; Wu Junjie, senior expert (customs and trade)
Institution/Enterprise panelists:
Jia Shen, legal director of compliance and international legal department, BOE Technology Group; Peter Su, general counsel, Tsinghua Tongfang; Su Yan, general counsel, Coca-Cola

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Cai Kaiming

Cai Kaiming gave a keynote speech to kick off this morning roundtable session of the CBLJ Forum 2019. He noted that a Sino-US trade war could ease somewhat, but wider conflicts will continue. “For multinationals and companies embarking on a global adventure, it stands as a real and pressing issue to gear up to meet the compliance requirements in different jurisdictions,” he said. Despite a bumpy ride head, Cai believes it is high time for China to learn from the US, where the Trump administration initiated all investigations within the scope of the rule of law from its trade-war toolkit.

Ni Jianlin held that Chinese enterprises must take the initiative to ride out the storm by sharpening their competitive edges and making the best use of a whole package of legal remedies in the US. Otherwise, “staying in a passive position to take a beating may only lead to heavy losses and the most direct consequence is a complete withdrawal from the US – the world’s largest consumer market”, he said.

Peter Su

Peter Su shared the way of survival with high-tech businesses. He highlighted a double-track approach adopted by Tsinghua Tongfang, where Chinese high-tech businesses are stepping up their efforts in independent research and development with a focus on domestic market, while maintaining and deepening the collaboration with leading US companies.

Wu Junjie opined that it called for concerted efforts from business-related divisions including accounting, tax, supply chain and legal affairs divisions within a company to study how to reduce the chilling effect of the protracted trade battles between the world’s two biggest economies without any breach of compliance requirement. This may include the smart use of the Rules of Origin and the First Sales Rule.

Su Yan

Su Yan shared her view from the perspective of an iconic US enterprise. She referred to the Foreign Corrupt Practices Act, which has come under the spotlight against the backdrop of the Sino-US trade conflict, and requires the establishment of a whole set of anti-corruption compliance systems within US companies. A thorough look at the act, she pointed out, may help Chinese companies understand how to do business well with their US counterparts.

As Chinese high-tech firms chart the course of going global, Jia Shen pointed out that trade secret protection must be recognized as a compliance issue of great significance, with potentially serious legal implications that could lead to criminal liability.

Cross-border investment of Chinese companies and funds

Jingtian & Gongcheng panelists:
Victor Wang, senior counsel; James Wang, senior expert
Institution/Enterprise panelists:
Lori Yao, general counsel, Cainiao; Shen Li, chief legal officer, Noah Holding Group; Wang Chunhong, legal director, V-Capital; Zhang Lu, deputy general manager of legal affairs department, Zhenro Properties

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James Wang

Serving as the moderator for the panel discussion, James Wang noted a growing trend where Chinese enterprises are reducing entire dependence on foreign legal professionals and working more closely with in-house legal teams or home-grown law firms as they beef up a business presence overseas. This is a trend that works both ways. At the other end of the spectrum, he said it is Chinese law offices that play a bigger part in, or even look to dominate, the cross-border transactions with legal talent making a beeline back home.

Citing “When in Rome, do as the Romans do”, a common practice seen in cross-border investment and financing, Victor Wang stressed the importance of having a clear picture of the complex nature of the legal and business environments overseas. Such complexity, he pointed out, highlighted the human factor, and companies were advised to have eligible professionals in place to offer advice and help solve problems.

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Lori Yao

Lori Yao shared her view from the perspective of an in-house counsel. As Chinese firms reinforce the theme of internal risk control, she said striking a delicate balance between external compliance requirements and internal commercial requirements, as well as professionals outside the company, and in-house departments and core decision-making teams, is no easy task.

Yao was echoed by Zhang Lu, who underlined the “bridge” and “connector” role that in-house counsel plays in facilitating investment projects with participation from different sides, internal and external, at home and abroad.

Drawing on his years of experience as a judge and arbitrator, Shen Li summarized the lessons learned from “going global” adventures of Chinese companies that had taken a good hard road to coping with the political, business and legal risks overseas. He said what matters is to choose internationally recognized dispute resolution bodies, arbitration institutions with a track record of being friendly to Chinese firms, and those known for strong professional standards and a good reputation from past arbitral awards in the company-specific investment fields.

“The economic conflict today has evolved into a raging political war, where resolution of disputes hinges on legal weapons, rather than gunpowder and firearms,” said Wang Chunhong. This required legal professionals with foresight to help companies take visionary, far-reaching initiatives to guard against any potential legal risk, she added.

Playing safe: Risk management and dispute resolution for outbound investment

DeHeng Law Offices panelists:
Shen Hongshan, Shanghai office managing director; David Chen, managing partner; Wang Junqi, Shanghai office executive director; Zhu Keliang, Silicon Valley office managing partner
Institution/Enterprise panelists:
Victor Shen, general counsel (Greater China & Korea), Henkel; Wang Xinglei, director of legal affairs, State Grid International Development; Leslie Zhang, GP general counsel, United Energy Group

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David Chen

Serving as chair for the topic, David Chen noted that in recent years Chinese enterprises had become a common sight across the globe, expanding their investment footprints in more than 100 countries and regions. He said this calls for a great deal of wisdom and experience to manage risks and resolve disputes over such a broad area.

Amidst heightened political and economic uncertainty, it stands as a pressing issue for Chinese enterprises, especially those who look to expand business footprints across the globe, to understand how to keep overseas investment risks under control, and how to gear up for commercial disputes, both at home and abroad.

Victor Shen said: “The outbound investment practices of Chinese investors should start from raising a question within the company: Are you equipped with teams, resources and reserves strong enough to support the running of overseas investment projects?” This is more about what the soft power companies have built than the money they have in their pockets.

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Wang Xinglei

Wang Xinglei pointed out that besides a wide range of risks regarding legal due diligence, regulatory review and approval, post-investment integration, contracts and lawsuits, the potentially biggest legal risk may come from uncertainty of the unknown. “Though you are not aware of the risk ahead, or just vaguely aware of the risk but cannot identify what it exactly is, you keep going down the road, ignorant and fearless. This is when the biggest risk comes to the fore,” he said.

As the world’s second-largest economy spearheads efforts to turn a complex vision of “Belt and Road” into reality, Leslie Zhang said the complexity and diversity of countries and regions along the route naturally gave rise to various risks. For companies, what matters is to distinguish between the systematic risk and business risk through qualitative and quantitative analysis, with the help of internal and external legal experts.

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Zhu Keliang

Zhu Keliang noted that if Chinese companies find themselves roped into lawsuits in the US, the most important advice is to take advantage of every possible procedural means to get the lawsuits withdrawn quickly. Lawyers can play their cards with a focus on three major areas: jurisdiction of the US courts, the validity of the service, and enforcement of the US judgments in China, he advised.

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Wang Junqi

Citing a survey from Queen Mary University of London, Wang Junqi said that 99% of cross-border disputes are eventually resolved by international arbitration rather than litigation. Through case studies, he said the most prominent problem related to cross-border disputes is the issue emerging from recognition and enforcement.

 

Belt and Road: The projects so far and the opportunities ahead

Zhong Lun Law Firm panelists:
Wang Jihong, partner; Yuan Ting, partner
Institution/Enterprise panelists:
Jiang Wenlu, general manager of legal department, Sinochem International; Liu Zhao, general manager of legal department, Golden Concord Holdings; Tong Liping, chief legal officer, Shanghai Electric Group; Xu Haifeng, general manager of management department and director of legal department, Shanghai Construction Group; Zhang Xiaojuan, general manager of legal department, Beijing Capital Group; Shawn Zhao, VP & general counsel, Greater China, Schneider Electric (China)

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Wang Jihong

Wang Jihong pointed out in her keynote speech that compliance business has been on the rise this year regardless of a slowdown in general legal business, indicating a growing demand for legal services to weather the storm as the rhetoric and mentality around the world today ushers in a new era of trade protectionism.

“Chinese enterprises have a long, hard road ahead to eventually become sophisticated global investors and international contractors with high-standard experience in project contracting,” Wang said.

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Shawn Zhao

“The China-led Belt and Road Initiative stands as an unprecedented historic opportunity when ambitious Chinese companies reach out to the outside world, embrace the international market and transform and update themselves,” she added.

Shawn Zhao believed the Belt and Road Initiative is a “golden opportunity for Chinese enterprises to go global and become multinationals in a real sense”.

Xu Haifeng summarized the potential challenges facing Chinese firms in the course of going global from three major areas: political environment; religion; and law and regulation. He also advised that companies could hardly get things done well abroad if they did not have the slightest idea what they were capable of, and excel in, at home.

Tong Liping agreed with him. “No matter running projects at home or abroad, the fundamental principle is to know very well where your competitive edge lies. Companies venturing out without knowing their limitations could be one of the root-causes of their failures overseas,” she said.

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Jiang Wenlu

Jiang Wenlu believed the cultural conflict arising from cross-border mergers and acquisitions (M&A) stands as a real and tough issue. A case in point, he said, includes a totally different understanding of the power of the parent company, where Chinese companies tend to show respect to, and follow instructions from, their parents, while in the overseas markets a parent company is largely regarded as an organization with different voting rights without necessarily having the authority to directly instruct subsidiaries on operations.

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Yuan Ting

Yuan Ting said “going global” projects were capital intensive, which put financing into sharp focus. He noted that companies should pay more attention to cash flow generated by projects, rather than obtaining credit support from their parents. Companies should also focus on asset liquidity when getting funds from overseas financial institutions and international markets, taking the future possibility of monetizing the projects into account, he added.

 


Afternoon session | Workshop 1

Regulatory issues in cross-border M&As

Hui Ye Law Firm panelists:
Gordon Yang, global head; Wu Dong, senior partner; Yuan Jiyu, senior partner; Pan Zhicheng, senior partner
Institution/Enterprise panelists:
Hang Dongxia, general counsel, JuneYao Group; Liang Leiming, division chief of legal department, Dongfeng Group; Leslie Zhang, GP general counsel, United Energy Group

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From left: Gordon Yang, Wu Dong, Yuan Jiyu, Pan Zhicheng, Hang Dongxia, Liang Leiming, Leslie Zhang

Gordon Yang noted in his keynote speech that, “mergers and acquisitions (M&A), no matter at home or abroad, within or across borders, are traditionally considered to be under the supervision of the judicial power”. However, government intervention in M&A has also been around for quite some time and is becoming even more frequent nowadays against the backdrop of escalating trade conflicts worldwide.

Wu Dong drew detailed comparisons between national security reviews in China and the US. In recent years, he pointed out, the US has frequently opened national security investigations in sectors such as energy, national defence, telecommunications, aviation, transportation, big data and personal data. Chinese companies must think twice and play it safe to do business in these areas, he said.

Wu said the trend was obvious today that the oversight power of the Committee on Foreign Investment in the United States (CFIUS) would be further expanded. “Bytedance, TikTok’s Chinese parent, is the latest that came under fire, after the CFIUS explicitly defined its purview to include companies holding “sensitive personal data”.

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Liang Leiming

Taking a pilot programme introduced by the CFIUS that applies to investments in US businesses covering critical technologies across 27 industries as an example, Liang Leiming said these 27 industries were ambiguously defined. He said this had caused problems to the operations of his company, raising a tricky issue about which investments need mandatory CFIUS notifications.

Pan Zhicheng shared the same concern. “Both antitrust review and national security probes have traditionally been part of normal methods to regulate the market,” he said. “But now, they have become part of the trade war toolkit.” Companies are still waiting for an exact answer as to how the law operates and whether the standards of review are clear and definite.

Speaking of the latest antitrust trends, Leslie Zhang put forward three points: Chinese companies are facing tougher antitrust scrutiny overseas; China has become a global pillar of antitrust enforcement, and a major hurdle for companies considering global M&A; and growing scrutiny of Chinese antitrust regulators is in fact a positive thing for the deal making of Chinese firms.

Yuan Jiyu said Europe has what it takes to replace the US as a go-to destination for China to realize its “going global” ambition. He highlighted a noteworthy development of the latest version of the EU tax blacklist, where the United Arab Emirates and Switzerland were removed from the blacklist, and even the grey list, of countries deemed to be tax havens.

Overseas listing strategies

Grandall Law firm panelists:
Ni Junji, managing partner; Yue Yongping, partner; Cheng Jingjiao, partner; Benny Peng, partner, F. Zimmern & Co. (in association with Grandall)
Institution/Enterprise panelists:
Chen Yang, legal director, China Renaissance; Hou Jie, partner, Ernst & Young; Qiao Wei, managing director/director (investment banking), Huatai Financial Holding (Hong Kong)

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From left: Cheng Jingjiao, Yue Yongping, Ni Junji, Benny Peng, Qiao Wei, Chen Yang, Hou Jie

Cheng Jingjiao said as China launched the Science and Technology Innovation Board with a pilot registration-based IPO system – marking a radical shift from the current lengthy and cumbersome process – more and more companies were setting their sights on A-share markets. On the other hand, she pointed out, as it still took time to put the new listing rules in place, getting listed overseas remained a good alternative for many domestic companies.

Yue Yongping noted choosing a listing venue had been a pretty old issue for companies. But it has taken on new significance today, riding high on sweeping reforms in financial systems and freer capital flows across borders, including more frequent exchanges among different securities markets, he said.

Having witnessed initiatives in recent years, such as the cross-border stock trading links between the Chinese mainland and Hong Kong, and the H-share full circulation programme, Yue said he was a firm believer that China would open its door wider to the outside world and such issues would become even more interesting.

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Qiao Wei

With so many initiatives blazing the trail, Qiao Wei said the market had become increasingly accessible and “tolerant” to various kinds of companies. Such a trend was particularly obvious this year, where there is a diverse range of options available to companies to select the location, structure and services of intermediaries along their journey of going public, Qiao added. “All roads lead to Rome,” said Yue, echoing Qiao’s views.

Ni Junji said what mattered for investors when choosing the right company to invest in is potential returns on investments – they do not care much about where the company chooses to get listed.

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Chen Yang

Chen held a similar viewpoint, noting the key factor that investors had in mind is fundamentals of the company, be it financial results or post-IPO performance.

Hou Jie opined that there is not necessarily a “good” or “bad” listing venue. The most important point is whether financial figures can truly reflect the fundamentals of the company.

“A successful IPO should never be a destination of the journey,” said Hou. “There is no dearth of companies listed on A-share or Hong Kong markets whose financial statements are found by auditors to have problems. Getting listed is just a starting point.”

As a Hong Kong-based lawyer, Benny Peng said the city, capitalizing on its advantages including cultural proximity to and same time zone with the Chinese mainland, was still a preferred listing venue for domestic companies.

Resolving shareholder disputes

Long An Law Firm panelist:
Qiu Lin, senior partner
Institution/Enterprise panelists:
Hu Lingbin, deputy general manager/deputy director of party committee office, PICC Asset Management; Qian Kun, managing director of compliance and risk management department, Pacific Asset Management; Su Yanan, legal director, China Life Capital Investment; Zhang Lu, deputy general manager of legal affairs department, Zhenro Properties

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From left: Qiu Lin, Hu Lingbin, Qian Kun, Su Yanan, Zhang Lu

Qiu Lin noted in her keynote speech that a valuation adjustment mechanism (VAM), often called a gambling agreement or bet-on agreement in China, had been a home-grown, widespread practice in the country’s capital market, such as in private equity and venture capital investments. From 2015 to 2018, she pointed out, the volume of VAM-related business had experienced significant growth.

At a time of heightened global uncertainty, however, a growing number of disputes have arisen from VAM cases. How to keep potential risks well under control at the front end of disputes is an issue of shared concern today, said Qiu.

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Qian Kun

Qian Kun emphasized the importance of carefully choosing a proper counterparty and distributing rights and obligations under the contract in a rational, reasonable manner. He said this was an effective means to avoid disputes from the very beginning.

Zhang Lu said a VAM was a security tool for investors to handle the uncertainty of future evaluation of an invested company. Meanwhile, it requires the investee to exercise independent judgement on, and disclose truthful information about, the company-level and team-level management capabilities, and serve as an incentive mechanism for the management team.

“What matters is how clauses and terms will be set to ensure that both parties enter into a fair and reasonable VAM agreement,” she said.

Su Yanan expressed particular interest in the redemption clause as an effective shield against the risk of exit process derailment – perhaps the biggest risk facing PE investment. The clause is so commonly used in the market that it has almost becomes a “standard component” embedded in PE investment, she said.

“Is the redemption clause a cure-all solution, and what is the potential side effect? Both questions should be the focus of attention and discussion,” she added.

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Hu Lingbin

Hu Lingbin said: “The validity of the contract stands as a ‘top of mind’ issue for the legal affairs division within a company.” How to get the deal that employs a VAM agreement done is of the greatest importance, and therefore a thorough discussion and study of the VAM is of much help to in-house counsel, he added.

 

 


Afternoon session | Workshop 2

Financing for growth enterprise

CM Law Firm panelists:
Wu Xiaoliang, partner; Li Qin, partner; Dong Geng, partner
Institution/Enterprise panelists:
Fan Ling, founder and CEO of Tezign, founding chair of Tongji University Design Artificial Intelligence Lab; Hao Yusheng, chief China representative, Nasdaq; Jin Xing, founder, So-Young International; Pan Pan, managing partner, Tiantu Capital; Jean Xu, legal director, Qiming Venture Partners

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From left: Dong Geng, Jin Xing and Hao Yusheng

Fan Ling shared his experience from the perspective of a young entrepreneur. He said an investor was nothing short of a talent scout for an early-stage company, which faces a lot of uncertainties on its survival and prospects.

“At this stage, it would be rather painful to work with an investor who purely does calculations and mathematics,” he said. “Instead, it would be better to find an investor who is willing to do ‘silly’ things with you.”

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Pan Pan

Known for his investments in Cheese Tea Bakery Nayuki and Zhou Hei Ya, a fast-food chain famous for its spicy braised duck, Pan Pan stressed the importance of working with a trustworthy lawyer with strong professional competency and a good understanding of company business for early investors.

Another major concern for investors is the fundamental principle and bottom line that a company has when doing business, he said.

Dong Geng, who worked as a judge in Beijing for more than 20 years, said compliance was the bottom line that every company must hold. “There is no lack of star companies that end up disappearing from public view due to non-compliance,” he said. “For firms in the growth stage, compliance is the foundation on which they survive and thrive.”

As Chinese companies join the years-long process of getting listed in the US, Hao Yusheng noted that compliance was also highly important in the US market. In fact, he pointed out, it stands as the biggest difference that sets it apart from the A-share and Hong Kong markets.

Unlike in the past, Chinese companies today with brand new business models felt it was increasingly difficult to find similar companies in the US market for benchmarking, Hao said. The hard fact is that US investors, albeit the most sophisticated and competent worldwide, do need time to study and understand the would-be listed Chinese companies. This cried out for more proactive communications with US investors, no matter pre-IPO or post-IPO, Hao added.

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Wu Xiaoliang

Drawing on his working experience as a lawyer for a dozen years, Wu Xiaoliang, who served as the moderator for the panel discussion, said what lawyers are able to or trying to do is to provide legal services with sense and sensibility, making a “slightly positive contribution” to the founding teams, investors and the whole ecosystem.

 

Data compliance and GDPR

Dentons panelists:
Ken Dai, partner; Deng Zhisong, senior partner; Zhang Jianmin, partner
Institution/Enterprise panelists:
Michael Chen, founder and CEO, BIPO Service; Jenny Shi, general counsel (APAC), KaVo; Yang Qin, group vice president/general counsel, Ctrip

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From left: Ken Dai, Deng Zhisong, Zhang Jianmin, Yang Qin, Michael Chen, Jenny Shi

Deng Zhisong noted that data protection compliance today stands as a real issue both for multinationals and Chinese companies embarking on an overseas journey. In light of China’s big push for data localization, he advised that companies should consider storing the data where cross-border transfers may give rise to hefty costs within borders.

Ken Dai, serving as chair for the topic, recalled that no single company had borne data protection compliance in mind in the past. This led to an awful lot of problems cropping up in recent years across China.

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Jenny Shi

Jenny Shi stated that, “change is the only thing that does not change” in today’s regulatory landscape of data privacy worldwide. “Despite a global data privacy compliance framework, data protection goes with quite a few regional characteristics,” she said. “Each country more or less has turned it into a political tool.”

This all requires legal professionals to give care and thought to looming “pain spots” and possible solutions, familiarizing themselves with jurisdiction-specific laws and procedures, and thus securing more room for business-related divisions to conduct operations, she added.

Although GDPR (General Data Protection Regulation) compliance is undoubtedly a major concern, Zhang Jianmin noted that compliance with laws and regulations at home should be a top-of-mind issue. For companies, he pointed out, it is far from enough to manage alone and stand aloof, because you never know what problems your business partners may have.

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Yang Qin

Yang Qin underscored the importance of not crossing the red line, be it personal privacy or personal payment information. This means protecting underlying data. He said companies look to strike a balance between convenience and security, making sure that data can be utilized in a convenient, compliant manner.

Michael Chen shared his experience in processing the information of employees. He said it is highly important to have a good mechanism in place to ensure each department within a company is compliant with GDPR or data security protection regulations. GDPR compliance means an extra workload in terms of process for HR managers, and Chen said the establishment of a whole set of processes cannot go without professional help from lawyers outside the company.

Drawing on his working experience as a lawyer for a dozen years, Wu Xiaoliang, who served as the moderator for the panel discussion, said what lawyers are able to or trying to do is to provide legal services with sense and sensibility, making a “slightly positive contribution” to the founding teams, investors and the whole ecosystem.

Contemporary issues and challenges facing in-house counsel

Blank Rome panelist:
Mike Margolis, Asia practice chair
Institution/Enterprise panelists:
Helen Gu, general counsel, SINA Group; Lu Yuping, legal director, TOTO; Victor Shen, general counsel (Greater China & Korea), Henkel; Junkan Shi, chief legal officer, Benchmark Chambers International & Benchmark International Mediation Centre; Ruby Zhou, CEO, LAWPLUS

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From left: Mike Margolis, Helen Gu, Junkan Shi, Victor Shen, Lu Yuping and Ruby Zhou

Mike Margolis opened the panel discussion by introducing a common career path in his home country, the US, for general counsel who quite often end up becoming chief operating officers or chief executive officers of large companies.

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Mike Margolis

Referring to a popular statement that general counsel, even without their legal backgrounds and skills, are capable of going straight to the helm of companies, Victor Shen said this implied it was far from enough for in-house counsel to explain legal affairs clearly. What’s equally important, if not more so, is to have a good understanding of business.

He summarized four major points for what makes a good in-house counsel. They include good health, commitment to lifelong learning, agility, and a concerted effort to be a business facilitator.

Lu Yuping shared his experience in, and advice for, working as general counsel. He stressed the importance of having thorough training in basic legal skills, and establishing a good understanding of corporate culture. He also advised that in-house counsel should learn to let outside lawyers share the load. “A good in-house counsel should first and foremost be a person of good character,” he said.

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Lu Yuping

As a lawyer and in-house counsel turned entrepreneur, Ruby Zhou said that, with the advent of cutting-edge technologies, legal professionals should keep an open mind, a strong sense of curiosity, and a never-ending thirst for knowledge in their quest to stay competitive in an ever-changing business environment.

Helen Gu works for a tech company on the front line of feeling the disruptive power of technologies including artificial intelligence, which has the potential to reshape the legal profession. She said AI is a helpful tool to take over the most basic part of work from legal professionals – the part that can be standardized. This is exactly what’s been going on in the market in the past two to three years, leading to a significant increase in the quality and efficiency of work, she said.

Junkan Shi shared similar feelings. He recalled he had to ask translators to work overtime and translate contracts overnight. But now, with the help of AI-enabled tools, the translation of a dozen versions of contracts can be completed in a mere five minutes, with an accuracy rate up to 90%.

“We need to move up the value chain, to focus on more strategic and sophisticated projects and matters. And then we will all be able to thrive as more successful lawyers,” said Shi.


Afternoon session | Workshop 3

Outbound investment insights and issues

Speaker:
Xi Xiaohong, mediator/legal expert, Benchmark Chambers International & Benchmark International Mediation Centre

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Xi Xiaohong addresses the forum on outbound investment

As a true witness to, and an active participant in, China’s development miracle and domestic companies’ “going global” adventure in past decades, Xi Xiaohong said the industrial influence of deals is equally crucial to the sheer number of deals.

Despite major deals worldwide, Chinese companies had seen a sharp drop in outbound M&A deals done in the first half of the year.

Xi said this was due to growing scrutiny from European and US regulators, ideological prejudices re-emerging in the West, and China’s stricter controls on capital outflows, along with its lengthy approval process.

Against this backdrop, as domestic investors switch their focus to promising new markets along the Belt and Road route, Xi, citing a number of popular Chinese proverbs, emphasized the importance of having a clear picture of the country and region of destination before making any move.

“For Chinese companies, riding high on the goals and undertaking of going global, there are questions worth considerable thought. Are you buying for the sake of buying? What’s your motive of making foreign investments: is it strategic or speculative?” he asked.

Xi also put forward a slightly cynical question: Apart from a price war, what are you truly good at?

Region focus: Eastern Europe

Moderator:
Xi Xiaohong, mediator/legal expert, Benchmark Chambers International & Benchmark International Mediation Centre
Law firm panelists:
Jelena Gazivoda, senior partner, Jankovic Popovic Mitic (Serbia); Olga Khoroshylova, partner and head of London office, Asters (Ukraine); Jan Kohout, partner, PRK Partners (Czech Republic); Lukasz Lasek, partner, Wardyński & Partners (Poland); Shao Chunyang, partner, JunHe

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From left: Lukasz Lasek, and Jelena Gazivoda

Lukasz Lasek introduced two primary options for conducting business in Poland for foreign investors, either by setting up a branch office of the company, or a local subsidiary.

When it comes to the establishment of a brand office, he pointed out that a crucial consideration is to figure out who will be responsible for business in this remote European country, who will actually take care of business from headquarters, and whether there is an efficient decision-making process in place.

By contrast, Lasek deemed a local subsidiary more suitable for companies preferring not to take too much risk. He stressed that no matter which vehicle the company decides to use in Poland, what matters is to “make a decision from quite early on”.

Jelena Gazivoda shared her first-hand experience of helping Chinese enterprises establish a presence in Serbia. She highlighted infrastructure projects, where foreign investments can simply act through a local branch office, as one of the primary channels for Chinese companies to make inroads into the market.

Gazivoda said a partnership with existing Serbian companies was also as a good last resort, when neither a branch office nor a local subsidiary proves workable and available.

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Olga Khoroshylova

Olga Khoroshylova introduced Ukraine as a country in dire need of infrastructure including seaports, river ports and a Kyiv circular highway, all of which spell potentially huge opportunities for Chinese investors. In July, Ukraine’s president held a meeting with Chinese investors who have bet big on a pipeline of projects with investment potential of as much as US$10 billion.

Xi Xiaohong, serving as chair for the topic, said, “Unlike some businesspeople, who normally have a big celebration by drinking champagne and everything when signing a deal, lawyers usually regard the signing of agreements as the beginning of negotiations”.

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Shao Chunyang

Shao Chunyang said it had long been a common practice for Chinese investors not to seek professional help from lawyers until disputes arose. When they do business overseas, he pointed out, “a switch of mentality” is needed. Shao also advised Chinese investors to seek resolution of disputes in the arbitral tribunal from the country of destination.

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Jan Kohout

Jan Kohout noted there was no treaty on mutual legal assistance between China and the Czech Republic. This means in certain areas Chinese investors have to rely on multilateral treaties, or take a more practical approach to address the issues of the contract with Czech partners.

 

 

Regional focus: Southeast Asia

Moderator:
Jiang Niao, group general counsel/managing director, Cathay Fortune Capital Investment
Law firm panelists:
Alan Adcock, partner and deputy director, intellectual property, Tilleke & Gibbins (Thailand); Carrie Bee Hao, partner, Romulo Law Office (Philippines); Addy Herg, partner, Skrine (Malaysia); Giffy Pardede, partner, ABNR (Indonesia)

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Alan Adcock, Addy Herg and Carrie Bee Hao

As ambitious Chinese enterprises embark on a global adventure and ratchet up their presence worldwide, Jiang pointed out that Southeast Asia has long been a point of focus thanks to its geographical and cultural proximity to mainland China.

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Jiang Niao

Traditionally, Chinese companies had focused their investments on areas like energy and infrastructure, Jiang Niao said. But in recent years, more and more tech firms including Baidu, Alibaba and Tencent – the country’s tech trinity collectively known as BAT – and consumer companies are betting big on the region’s internet, high-tech, sharing economy and consumer sectors, she added.

Alan Adcock highlighted the golden opportunities from the Eastern Economic Corridor, where foreign investment in sectors like next-gen automotive, intelligent electronics, advanced agriculture and biotechnology, and artificial intelligence have been particularly encouraged by the Thai government. “All of these sectors are what China is so good at, and will continue to be good at for a very long time,” he said.

Adcock added that the country’s Labour Protection Act and complete restriction on land ownership are things that foreign investors should bear in mind in Thailand.

Addy Herg said Malaysia is a business-friendly country where there are generally minimal restrictions on foreign investment. The country is a keen supporter of, and an active participant in, the China-led Belt and Road Initiative, with the government opening a green channel to help Chinese enterprises get their businesses off the ground.

At the heart of the potential investment opportunities in Malaysia include those from renewable energy, especially solar energy. Collaboration in this area may further consolidate Chinese firms’ impeccable strength in solar projects, he said.

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Giffy Pardede

Carrie Bee Hao introduced the latest update to the corporation code, after a long wait, in the Philippines. One of the biggest updates released early this year, she pointed out, is allowing the registration of corporations with less than five shareholders, including one-person corporations. Another notable update is removing the requirement for minimum subscribed and paid-up capital for the registration of a corporation.

With growingly stringent enforcement and the Corruption Eradication Commission to crusade against corruption, Giffy Pardede stressed that, “Indonesia is not a country where investors can cut corners anymore”. He advised companies to do their best to comply with the law and follow procedures. Otherwise, the cost of non-compliance could be fairly high.

For more information about the conference and videos of the forum sessions, please visit our CBLJ Forum 2019 webpage at vantageasia.com/forum