While several practice areas have been particularly active this year, Chinese law firms are actively optimising their billing arrangements to meet the rising demand for high-quality services in a legal market where fee structures are still dominated by businesses. Luna Jin reports

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fter five years of reporting on the dynamics of billing models, it is perhaps easy to default to the notion that China’s legal market is bound to become more accepting of the hourly rate model over time. But when it comes to pricing lawyers’ services, what criteria does the setting of cost profit margins for legal services reflect in the marketplace?

This year, we continue to collect and present data of the hourly rates of Chinese law firms for our readers, with a total of 34 leading law firms in the nation disclosing their hourly rates, by lawyers’ seniority, to China Business Law Journal.

In addition, we have sifted through the billing preferences of in-house counsel in mainland China and Hong Kong from a survey of Asia’s general counsel launched in September by our sister publication, Asia Business Law Journal.

So, how well is hourly billing, a wholly imported industry practice, currently accepted by the market in China? We have found that project-based and fixed fees are still the mainstream billing arrangements in China’s legal market, supplemented by alternatives such as hourly billing, retainers and contingency fees.

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Dispute resolution deals are more likely to have a capped fee due to the uncontrollable nature of dispute cases, while non-litigation practices tend to adopt a mixed “hourly + capped fee” billing arrangement for budget control. The proportion of hourly billed business has increased each year, but this trend is not significant.

Amid the current economic woes, the unit price of the hourly rate has also not shown significant change this year. According to our survey, the average industry hourly rate in 2021 is RMB3,010 per hour (USD472), an increase of 3.5%, year-on-year.

On the buyers’ side – for in-house counsel in mainland China and Hong Kong – 63.2% preferred project-based fees, 26.3% preferred fixed fees, while 7.9% and 2.6% preferred hourly and mixed billing models, respectively.

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