By Meredith Mandell, Special to Big Law Business
Not many western law firms have been able to break into the Chinese market as fully as they would like.
In 2015, Baker & McKenzie formed a first-of-its kind joint operation with FenXun Partners in the Shanghai free-trade zone — a move that Hogan Lovells would like to emulate.
In an interview this week with Big Law Business, Patrick Sherrington, regional managing partner for the Asia Pacific and Middle East regions for Hogan Lovells, said his firm is actively seeking to partner with a Chinese law firm. He even likened such an association to “The Holy Grail” — a metaphor that suggests fairly long odds.
Sherrington explained: About 50 percent of his firm’s total billings come from the Americas, another 43 percent from London and Europe, and about seven percent are from Asia and the Middle East. Those numbers reflect an untapped potential given the size of China’s $11 trillion economy, he said.
“Based on macroeconomic projections that is pretty imbalanced,” said Sherrington. “We recognize we have to be strong in markets of the future.”
Indeed, foreign investment in China reached a record $126 billion in 2015 — a potential boon for law firm billing. The problem is how to tap that potential: Many law firm leaders say restrictions on foreign law firms’ operations has stymied their expansion.
One 2015 study published in the American Bar Foundation’s Journal of Law and Social Inquiry noted foreign law firms are prohibited from representing clients in court or before certain government authorities. The regulations require that Chinese lawyers who work for foreign legal firms temporarily surrender their Chinese law licenses.
That’s why Sherrington is thinking about the Shanghai Free Trade Zone, a government-backed pilot liberalization initiative to introduce a series of economic and social reforms. Some restrictions on law firms already have loosened there, such as when Baker & McKenzie in 2015 became the first law firm to receive a license from the Chinese government to operate jointly with the Chinese law firm FenXun Partners.
Sherrington says Hogan Lovells has about 30 to 40 attorneys in Beijing and Shanghai who currently serve both Chinese clients as well as foreign clients — mostly from the U.S. and the U.K.
He shared his hopes for China in an article published in Legal Week, which also noted Dechert, Linklaters and other firms have the same interest in forming an association with a Chinese firm. Sherrington said it would allow Hogan Lovells to better vet Chinese attorneys it works with.
“You do not want to rely on a total stranger — so having an association where you can develop lawyers, including Chinese lawyers, is potentially attractive,” he said.