How to Choose a Law Firm in China

- Dr. Lefan Gong, Zhong Lun Law Firm

How should a foreign investor approach retaining legal counsel in China?

Companies should not rely on the name of the firm. In China, having a globally-recognized brand does not ensure quality legal service. Regardless of whether a law firm is Chinese or foreign, it can have partners who are too new to China to understand it; conversely, it can have partners who are China dinosaurs and who lack the knowledge and skills to execute cutting-edge deals. Thus, investors should focus on the individual attorneys who will deliver the work. The attorneys should be experienced, energetic, articulate, and current on developments. It is best to start by getting recommendations, rather than looking at firm brochures and websites. Before making any decisions, investors should thoroughly interview several different attorneys.

Should foreign investors retain Chinese law firms?

Foreign firms are often better suited for complex, cross-border transactions. Transactions that significantly involve multiple countries call for global networks of offices and experts. Many foreign investors begin engaging Chinese law firms only after they have spent a few years in the China market. Anecdotally, many of these foreign investors later feel that they should have looked at Chinese law firms when they initially entered China. They likely could have saved money without sacrificing quality, and possibly could have received better service.

Over the past decade, many Chinese law firms have climbed the learning curve to the point where they compete head-to-head with foreign firms in a number of areas. Sometimes, the foreign firms seem to even be lagging the Chinese firms in keeping up with the market. Regardless, both foreign and Chinese law firms can have excellent lawyers for servicing multinational clients. These days, it is often not possible to carve out areas in which Chinese firms are more suitable, or areas in which foreign firms are better. It depends on the client, the particular firm, and the individual attorney. However, it does make sense to at least consider retaining a Chinese law firm in many situations.

What should clients consider when looking for law firms in China?

Regardless of jurisdiction, the selection of law firms depends on whether the client is seeking a specialized service or expertise, such as construction, structured finance, or intellectual property. Outside of special needs, clients should look at quality, resources, and cost.

How does one judge the quality of legal services in China?

“Quality” in China means a combination of legal and communication skills. The key word here is combination. Such combination does not have to solely reside in one individual; it can be spread throughout a team or firm. It can also be a combination of a foreign law firm and a local law firm for cross-border transactions or litigation.

The main issue with legal skills is whether the attorney has the sophistication to deal with the complexity of the documentation and transaction. In this regard, Chinese firms, and partners within the same firm, can vary widely in quality. However, foreign investors face a similar issue at foreign law firms in China. At foreign firms, practice standards may not be uniform among individual attorneys.

Communication with multinational clients goes far beyond the service provider’s English proficiency. One weakness of many Chinese firms is in communicating with clients. Client might tolerate some random grammatical mistakes, but often cannot live with the individual service provider’s failure to articulate key issues, manage the client’s expectations, and anticipate needs.

How do a firm’s resources affect its delivery of legal services in China?

“Resources” partly refers to whether the firm has the breadth of expertise to handle the issues involved in a client’s transaction. With regard to multi-issue transactions, large Chinese firms have somewhat of an advantage. When the law is unclear, past experiences and insights from other lawyers in the same firm can become extremely helpful in resolving clients’ problems. All other things being equal, the more brains you can tap into for solutions and alternative approaches, the better off you are. For instance, the litigation department’s insights are sometimes instrumental for corporate lawyers who have to resolve critical issues in structuring, negotiating and executing deals. Few foreign law firms in China have experts in Chinese taxation, Chinese employment law, or Chinese litigation (among other areas). Foreign firms tend to have far fewer employees in China than their Chinese counterparts do. It is therefore difficult for them to have experts in niche practice areas.

Resources can also include the firm or attorney’s network of relationships. Chinese law firms are generally better able to take advantage of relationships with local officials. Having relationships with the right officials can speed up processes, and allow you to obtain better information. Firms that have offices in your investment destination are going to understand the lay of the land better than firms that do not have local presences. Foreign firms generally concentrate in Beijing and Shanghai. Chinese firms are likely to have wider office networks, and are more likely to cooperate with local firms in places in which they do not have offices. It is important to caution that it is difficult for foreigners to judge one’s “guan xi” (connections). China is a large place, and it seems that everybody knows somebody with an impressive title. Moreover, guan xi is no substitute for practice skills.

What are the secrets of fees?

“Cost” should really be thought of as “cost-effectiveness.” It is dangerous to only compare relative billing rates. Partners of foreign law firms could charge from $500 to more than $1000 per hour as going rate, while partners of Chinese firms would charge from $300 to $500. But the hidden costs could make some foreign law firms even more expensive. By charging hourly, attorneys can effectively shift costs to clients that they are not supposed to pay for. I categorize the major ones as “self-education” costs, “legal literature” costs, and “English editing” costs. Clients incur self education costs when they engage an attorney who claims to be expert in an area, but really is not. If the attorney bills the client for time spent reading and studying, the client is essentially paying for the attorney’s continuing education credits. “Legal literature” costs arise when a given legal issue is unclear (which is common in China), and the client receives a lengthy memo that provides little in the way of practical advice. A 20-page memo could cost $50,000 or more if it involves extensive research and drafting. Sometimes, a 30-minute phone call to the client would instead suffice. “English editing” costs result from having senior attorneys edit junior Chinese attorneys’ English. Law firms in China are able to hire native speakers who are recent college graduates for $1,000 to $2,000 per month. However, some firms instead bill clients $300 to $600 per hour to have attorneys edit documents.

Lefan Gong ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) is a Partner in the Shanghai office of Zhong Lun Law Firm. He has advised large multinational and U.S. Fortune 500 companies and other clients in a wide range of transactions, including cross-border mergers and acquisitions, private equity deals, venture investments, joint ventures, and inward investments in China. A frequent author on China law-related topics, he is admitted to practice in New York and in China. He received Science Juris Doctor and LL.M. from the University of Michigan Law School.

Other articles by Lefan Gong (ZhongLun Law Firm):

• Choosing the Right Forum for Business Disputes in China
• Five Legal Tactics to Reduce Employee Disputes in China
• Effective Ways to Hedge Against the RMB

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