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London-based law firm Herbert Smith Freehills in China tie-up

London practice is sixth international group to be licensed in Shanghai initiative

London-based law firm Herbert Smith Freehills will affiliate its Chinese business with a local company in a new test for integrating foreign legal services with domestic law practice in China. The tie-up comes after nearly a decade of experimentation by foreign groups seeking to boost their presence in China by partnering local companies. Several affiliations, such as that of China’s King & Wood and Australia’s Mallesons, or global firm Dentons and China’s Dacheng, have formed some of the world’s largest practices but have yielded mixed results. Chinese regulation does not allow full integration of foreign and domestic legal teams. Foreigners are barred from practising Chinese law, as are Chinese nationals who work for foreign law firms.  Instead, some foreign companies, such as King & Wood Mallesons, have established so-called Swiss verein structures, where firms combine under a single brand but maintain separate finances. Others, such as HSF and Ashurst, have received formal licences to set up joint operations under a pilot programme in Shanghai. HSF will become the sixth global law firm to gain approval from Shanghai’s Bureau of Justice to integrate with a Chinese practice, allowing it and its Chinese partner, Kewei, to rebrand the China business as Herbert Smith Freehills Kewei.

The two firms will be able to work closely on individual deals and share the fees from such projects. HSF said the integration with Kewei would focus on cross-border mergers and acquisitions, banking and finance and financial services regulation. Kewei, which has 20 partners and lawyers, was launched in 1995 in Shanghai. HSF, which posted profits of £306m for the year ending in April, has more than 300 lawyers in the region. “When clients come to see us, we [HSF and Kewei] are now under one umbrella and we are both responsible for them,” said May Tai, HSF’s Greater China managing partner, noting that both firms’ reputations will now be formally linked. Such joint operations are still in a pilot phase and do not have full recognition as legal entities. HSF follows firms such as Baker McKenzie, Linklaters and Hogan Lovells to link up with Chinese practices under the Shanghai initiative. King & Wood and Mallesons in 2011 became the first test in which a Chinese firm merged with a large western one. In 2015, Dentons merged with Dacheng, one of China’s biggest practices, to form what was then the largest global law firm by attorney headcount.

Firms are fighting for a share of China’s cross-border legal work, which has grown rapidly over the past decade as Chinese companies invest more overseas. But integration has had a mixed record as global groups, often drawing on more than a century of history, mix with Chinese practices with just a few decades of experience, according to several lawyers with experience in such tie-ups. People close to the partnerships said that integration in overlapping jurisdictions often led to clashes, with firms continuing to compete internally despite attempts to integrate practice. “In some cases, the foreign firm ends up attracting lots of business for the Chinese firm but not the other way around,” said one Beijing-based lawyer familiar with the partnerships.

No deal Brexit disastrous for aspiring lawyers, Law Society warn

Disruptive departure could damage UK’s ability to attract and retain world’s top legal talent

A no deal Brexit will be disastrous for those seeking to enter the legal profession, a new report produced by the Law Society has warned.

The professional body, which represents 140,000 practising solicitors in England and Wales, has raised fresh concerns over the impact “Brexit disruption” will have on law graduates and junior lawyers’ moving around Europe.

According to the Law Society’s UK-EU future partnership and legal services report, published this morning, a no deal Brexit could also damage the UK’s ability to attract and retain the world’s top legal talent. It said:

“This has an impact on the attractiveness of qualifying in England and Wales. Their rights to provide services under their home title, to establish and practise in Europe and to requalify in host state law will all become more complex under an FTA [free trade agreement] or in case of a no-deal Brexit.”

The report added: “The prospective candidates from the EU may no longer be attracted to studying in the UK and getting an English and Welsh qualification since they cannot use it in their home country to the same degree as under the current regime.”

Aspiring lawyers wouldn’t be the only ones left worse off from a no deal departure. According to the Law Society’s president, Simon Davis, a crash-out Brexit could cost Britain’s legal services sector an eyewatering £3.5 billion, nearly 10% higher than under an “orderly Brexit”.

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The UK stands as the EU’s largest exporter of legal services. According to Davis, the sector contributed £27 billion to the UK economy in 2018 and produced a trade surplus of £4.4 billion in 2017 — this largely the result of the UK’s access to European markets through directives. Davis continued:

“That is why we are urging the UK government to negotiate a future agreement that enables broader access for legal services so that English and Welsh solicitors can maintain their right to practise in the EU.”

Newly-installed Prime Minister Boris Johnson has pledged to negotiate a better exit agreement with the EU, but maintains the UK will leave on 31 October with or without a deal.

This isn’t the first time the Law Society has shared its bleak Brexit fears. Last year, Chancery Lane’s number crunchers predicted that a no deal scenario could cost the legal market up to £3 billion by 2025, with growth slumping to 1.1%.

Legal services: PwC

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