PRC law firms reveal their hourly billing rates for the first time in this unique report on legal fees, Vandana Chatlani reports

Disclaimer: All Chinese law firms were eligible to submit their billing rates for publication, there were no fees or any other requirements for participating. The billing rates shown in this report were provided by the participating law firms, and have not been verified by the publisher.

How much should you be paying for legal advice in China? The answer to this question of course depends on who you engage and what kind of advice you are seeking. But one thing is certain navigating China’s complex and rapidly changing legal system requires diligence, intellect, creativity and a deep knowledge of national laws and the various ways they may be viewed by local governments, courts and businesses.

Partners at local Chinese law firms have said in the past that international lawyers would struggle to win assignments, particularly from state-owned companies, if they failed to offer more flexibility on legal fees. The situation is no different to India. In both jurisdictions, clients are exceptionally cost-conscious and firms quoting bargain prices often reign supreme.

In-house lawyers have become discerning, savvy buyers of legal services, with an increased awareness of how to secure value while also keeping costs low. They negotiate hard and demand fixed fees to keep a tight rein on their legal spending. The expansion and growing internationalization of Chinese firms through tie-ups with foreign partners also means that clients can enjoy domestic legal advice with a global outlook at attractive rates.

COST-CUTTING AND COMPETITION

As law firms in China jostle for a slice of the meatiest deals, they are often forced to come up with attractive fee quotes, much to the satisfaction of their clients. As Ye Qiuye, an in-house lawyer at CADFund in Beijing, says confidently: “There is no law firm that cannot be replaced. If your price is high, I’ll certainly be looking for someone else.”

The legal service market in China is more open than ever, says Paul Zhou, a partner at Wintell & Co in Shanghai. “Clients also have better knowledge of their legal service demands,” he says. “Law firms may need to lower their rates to drive revenue growth, improve marketing effectiveness and successfully compete against their rivals.”

But as Karen Ng, general counsel at Shui On Development in Shanghai, points out, the danger with undercutting is that it may result in a “lower quality of service provided to us”.

LOWEST AND HIGHEST RATES AT PRC LAW FIRMS

An Jun, the Beijing-based associate general counsel at Amazon China, says foreign firms may feel greater pressure as a result of price wars because a number of partners at local law firms have trained overseas. “They deliver pretty much the same quality at a much discounted price,” says An. “But ‘value for money’ is not my first priority when selecting law firms. I always want the best advice, and price consideration is secondary. Cutting prices to win clients does not work for me.”

Pan Qi, former assistant general counsel at Johnson & Johnson, takes a similar view, emphasizing that value should be the key focus rather than price. “The lowest price can be the worst value,” he says. “This is also what a good law firm wants the client to focus on.” But defining ‘value’ in a tangible way can be tricky. “In the China market, because most local clients do not have the tradition and experience of using law firms, it is even more difficult for them to judge the quality and value of a law firm,” says Pan. “It takes time for the market to mature. At the same time, law firms should also be more sensitive to the legitimate concern of clients for budget control. The highest price can be the worst value as well.”

FEE FEVER

Against this backdrop of competition, cost-consciousness and corporate counsel desires, China Business Law Journal presents its first annual billing rates survey. Our analysis of legal fees is based on 19 firms of vastly differing proportions, with firms of between 20 and 4,800 lawyers, from intellectual property boutiques to full-service behemoths across Beijing, Guangzhou, Shanghai and other cities taking part. We highlight our findings through a series of infographics and present the full table of billing rates at the bottom of the page.

While insightful and revealing, these figures are not necessarily representative of the entire legal market. Several law firms firmly refused to share their legal fee schedules, citing issues of privacy and confidentiality. As a result of the varying sizes and experiences of the participating law firms, our results offer a snapshot of legal billing trends in China’s vast legal market.

This year the average hourly rate for a lawyer was RMB2,788 (US$420). The average hourly fee for advice from a junior associate came to RMB1,494, and for a senior associate RMB2,069. Clients seeking input from lawyers at a partner level would be expected to fork out an average of RMB2,605 for a junior partner, RMB3,172 for a senior partner and RMB3,663 for an hour of a managing partner’s time.

The results reveal vast differences in the price of legal services. The hourly rate for a junior associate, for example, ranges from RMB500 to RMB2,200, while managing partner rates vary from RMB2,000 to RMB6,000 per hour.

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