Snapshot

A view-finding survey of lawyers provides an insightful focus on the big issues, negative and positive, confronting the legal sector, write Staphany Wong and Richard Li

The question we’ve been asking is: ‘What’s on your mind?’ And the answer, as it happens, is quite a bit. Far from one or two major issues stalking the thoughts of most Chinese and international lawyers, there are many fronts of concern, and also many expressions of optimism across the myriad categories of practice that occupy the nation’s major law firms, and those big international outfits that also reside here.

Some common denominators: more thorough regulation means more complexity (and a need to be constantly updated on new legal developments); factors that adversely affect some practices are proving beneficial to others; and integration with global markets and practice is constantly developing.

A primary element of concern relates to the slowing economy, itself a symptom of world economic malaise. In the second quarter this year, GDP growth fell below 8% for the first time in a decade, and there are concerns for the future of businesses. “Law firms’ business concerning foreign investment in China kept growing before 2008,” notes Sang Binxue, a Shanghai partner at Jun He Law Offices. “From 2008 to 2010, this trend was reversed and meanwhile IPO activity was cooling, affecting law firms’ business in these two areas.” Other law firms agree that IPO activity has slowed or even stalled, causing delayed or suspended payments from clients in this sector.

Law firms active in the areas of infrastructure, real estate and mergers and acquisitions (M&A) have also been affected due to the State Council’s strict control of an overheated property market. “The weakness of the real estate market has affected legal services related to property development, and furthermore indirectly affected legal services in the banking and finance area,” says Harry He, a Shanghai partner at AllBright Law Offices.

As Wang Jihong, the managing partner at V&T Law Firm and an expert in infrastructure explains, regulation has also made life tougher for lawyers in the volatile property development sector. “Last year the Invitation and Submission of Tenders Law Implementing Regulations were issued, to some extent reducing the owner’s rights for controlling tender invitation and submission while expanding the contractor’s,” she says. “Lawyers for the owner may run into some difficulties when designing the contract and acting for the owner. The chance of successfully investing in build-transfer (BT) franchising is getting slimmer. This is mainly a result of local governments’ usual high debts and lower credit ratings. Companies, especially state-owned companies, that invest several billion renminbi or even more than RMB10 billion [US$1.56 billion] in such a project have to impose a tighter risk control, and as a consequence the negotiation process becomes much more difficult for lawyers.”

Zhonglun W&D Law Firm Beijing partner Marvin Min says on the positive side, the implementing regulations set out in detail the examination procedure for the eligibility of bidders, make clear what should count as fraudulent bid invitations, and standardise how members of the tender-evaluation committee should be selected. “The regulations are of great significance as a solution to the most serious problems in current bid invitation and submission activities. We are now keeping a watch on whether it can be fully implemented,” he adds.