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Alibaba.com Corporation’s headquarters in Hangzhou, China, looks like it was imported straight from Silicon Valley. Caf� tables and comfy sofas dot the reception area, just like at a Starbucks. Slabs of concrete and exposed pipes line the hallways. And twenty-somethings in jeans and T-shirts fill every nook and cranny, looking like they’ve stepped out of a Gap ad. It’s all so hip and high-tech � except for the tea ladies: elderly women in blue pajamas, armed with big metal kettles. Every few minutes they mill about the computer stations, filling teacups with a fresh supply of hot water. These days China is full of Silicon Valley wannabes, but Alibaba is way ahead of the pack. In a headline-grabbing deal last August, the company acquired Yahoo! Inc.’s China business (it now operates the Yahoo brand in China), plus a $1 billion investment from the venerable internet company. Now a $4 billion privately held concern, Alibaba is best known for its business auction site (the company claims to be the leading Web site for business-to-business trade in the world), and Taobao.com, a consumer auction site that’s giving eBay.com a run for its money in China. Alibaba has another measure of success: It now has 14 lawyers among its 2,000-plus employees. And the company plans to add at least another six in-house counsel, including a new chief legal officer, in the next year or so. Most of the new hires are Chinese bred and educated. While a dozen-plus lawyers for a company with $200 million in revenue is hardly startling, consider this: Just over a decade ago, in-house lawyers in China were almost nonexistent; most legal needs were outsourced to firms. Alibaba’s burgeoning legal department is an example of how much has changed in the in-house bar in just a few years. It also underscores the point that companies in China � both domestic and multinational � are no longer rushing to costly international law firms for help every time a question comes up. Increasingly, they’re grooming their own legal team to compete in the heated China market. “We literally review thousands of contracts a year,” says Peter Schloss, the chief legal officer of TOM Online Inc., a Beijing-based wireless Internet provider, which has ten in-house lawyers. “We could double our legal department. We’re that busy.” What’s igniting this phenomenon is China’s business boom. In 2005, the country’s gross domestic product was $1.79 trillion, making it the sixth-largest economy in the world. In 2006, China is expected to land in fourth place, surpassing the economies of the United Kingdom and France. What’s more, China is cranking out more laws and regulations to govern all that business activity, especially in the media and Internet sector. “We spend a lot of time just answering inquiries from governmental authorities,” says Joseph Tsai, Alibaba’s CFO and acting general counsel. The result is an unprecedented demand for talent. “We see a huge increase in in-house jobs,” says Hong Kong � based recruiter Andrew Pringle of Major Lindsey & Africa. “The market is red-hot.” So hot that Pringle reports at least 15 � 20 openings in China at any given time. Besides the manufacturing and financial sector, Pringle sees demand for in-house lawyers in banking, private equity, hedge funds, and distressed debt. “Everyone � law firms and companies � is looking for a Mandarin-speaking securities lawyer,” Pringle says. “It’s a headhunter’s nightmare.” But even though multinationals and elite Chinese companies are eager to fill these jobs, many businesses are trying to decide which skill set best fits their needs. The legal talent pool in China has never been stronger: Bilingual lawyers with top law firm experience, particularly those Westerners who landed in China or Hong Kong in the early nineties, are now seasoned dealmakers, ripe for top in-house legal jobs. At the same time, there’s a whole new generation of China-educated lawyers versed in the ways of capitalism (including some who have garnered experience with Western law firms and companies). But there are pros and cons to hiring each group. While, generally speaking, bilingual Western lawyers often have the requisite communication skills and international experience, few can claim to have the real inside track to Chinese bureaucracy. And while the Chinese bar is young, many of these lawyers already know how to talk their way through the bureaucracy and how to obtain the myriad licenses necessary for businesses to operate in the country. However, some of the Chinese-educated lawyers lack international experience � a drawback for companies headquarted in Europe and the United States. For now, bilingual American lawyers with international law firm experience are the hot tickets for U.S. companies, according to interviews with more than a dozen in-house lawyers in China. St. Louis � based Emerson Electric Co.’s Asia Pacific division in Hong Kong is headed by American lawyer Sara Yang Bosco. A former partner at Baker & McKenzie’s Hong Kong office, Bosco left the firm for a partnership at Perkins Coie before landing at Emerson, a longtime client, last year. Born, raised, and schooled in Indiana, Bosco is a midwesterner of Chinese descent. And though she speaks and writes Chinese, Bosco says, “Culturally, my perspective is 100 percent American.” Another American lawyer, Kenneth Tung, a Coudert Brothers alum, serves as the legal affairs director of Pacific Asia for The Goodyear Tire & Rubber Company in Shanghai. Just two months ago Tung was the assistant general counsel of Honeywell International, Inc.’s transportation and specialty materials division in the region; before that, he was GC of Eastman Kodak Company’s China operation. Yet another American lawyer and Coudert alum, Albert Wang, acts as the legal director, China, of Dell (China) Company Limited. Big U.S. corporations favor these lawyers because they speak the same language � literally and figuratively. Tung says that many American corporations want to send an attorney over from the U.S. who has worked with the company for years and already carries a high profile within the business. But it’s not just American corporations that are seeking American talent, especially for top legal jobs. Peter Schloss, for example, is the GC of TOM Online. Schloss says that he is the only non-Asian among the telecom company’s 1,300 employees. An old China hand � he is also a former GC of IBM China/ Hong Kong Limited and Satellite Television Asian Region Limited (Star TV) � Schloss calls himself one of the legal pioneers of China. Though he’s lived in China for 20 years and speaks Mandarin, Schloss says, “I’m [at TOM Online] because of my American perspective.” Some Chinese companies prefer the rigor of American legal training, as opposed to the more informal Chinese way of approaching a problem, explains Alibaba’s Tsai, who is himself a graduate of Yale Law School: “A U.S. lawyer would think about the source of a law and the logic behind a legal position, whereas a Chinese [educated] lawyer might just call up a government official to see what the law is.” The problem with Chinese lawyers, says Goodyear’s Tung, is that they tend to be “overly respectful” of Chinese authority. Emerson’s Bosco also suggests that American lawyers are trained to exercise independent judgment. “Businesspeople push us all the time,” says Bosco about the hard-driving corporate environment in China. “You need to make legal calls without being influenced by businesspeople, so you need a strong personality to draw the line.” The differences, however, are mainly cultural, says Tsai, adding, “It’s more of just a difference in approach.” American-trained lawyers also tend to have a greater familiarity with the Sarbanes-Oxley corporate governance reforms. That’s a skill that Chinese companies � with an eye to an overseas stock market listing � need. “Sarbanes-Oxley occupies a tremendous amount of my time,” says Schloss, adding that TOM, a Nasdaq-listed company, “must be in compliance by year end.” He’s had a tough time teaching employees about the merits of SOX, he adds, because SOX is “uniquely American; there’s nothing like it in China. . . . Code of conduct rules, antifraud provisions, and whistle-blower programs are all new stuff for Chinese companies.” But even for corporations that are not required to comply with Sarbanes-Oxley, American governance rules reign as the gold standard. That’s especially true for local businesses with bigger ambitions. “Someday we’ll do an IPO in the States, so we use U.S. standards in accounting and governance,” says Guangjie Yang Hopton, Alibaba’s corporate counsel in Hong Kong. “We want to be a good Internet company, not just a good Chinese Internet company.” American lawyers may be sitting in the regional GC chairs in China, but indigenous Chinese lawyers are also gaining in status and responsibility in corporate legal departments throughout the country. In fact, Chinese lawyers fill the majority of the legal staff positions in American and Chinese corporations in China, according to Goodyear’s Tung. He heads up the Shanghai In-House Counsel Forum, an informal group of in-house lawyers in that city. Chinese lawyers provide two key functions, he explains: They maintain the day-to-day contact with local bureaucrats, who can make a big difference in the company’s everyday operations, and they field and interpret the endless stream of regulations from Beijing and local authorities. In fact, American in-house counsel in China are the first to admit that local lawyers possess a skill that they can never achieve, no matter how long they live in China: being Chinese. “Even after 20 years [in China], I’m still dealing with a different culture,” says Schloss. He says the company wouldn’t be able to function without his Chinese counterpart, Fu Tong, and her team: “She deals with regulators, government relations people, and peculiar Chinese licensing requirements. She can navigate the Chinese system; I can’t.” Fu says that she and Schloss work as a team. “We consult with him whenever there’s an international matter,” she says. But Fu adds that Schloss “is not familiar with internal Chinese affairs.” Local officials govern almost all aspects of business in China, explains Dell’s Wang, noting that that their authority extends to everything from real estate sales to hiring and firing employees to intellectual property. Companies have to answer to the most local of local authorities, such as the police department, and Chinese-born attorneys tend to be particularly adept at handling these matters, he says. More often than not, compliance in China comes down to getting barrels of licenses. “The Chinese government has more regulations over the Internet than most businesses,” says Yahoo! China general counsel Jayne Zhang, who now reports to Tsai. “If you’re a portal, you’re treated as a media company, which means you have to get all sorts of licenses,” she says, adding that in addition to her contracts and other work, a big part of her time is spent obtaining licenses whenever Alibaba introduces new services. But, as the in-house scene grows, the bright line between U.S. lawyers leading the department, and Chinese lawyers working at the staff attorney level, will blur. Until then many companies are trying to find a perfect blend of skills. The ideal GC is “someone from China, but with U.S. law firm knowledge,” says Tsai. A former Sullivan & Cromwell associate, he’s been the acting chief legal officer since Alibaba’s founding seven years ago. It’s a role that Tsai inherited by default � and one he seems anxious to shed. Although Tsai says he’s been searching for a new GC, and expects to hire one by year’s end, the ideal candidate has so far proven elusive. Maybe Tsai is just very picky. But he isn’t alone. Tung, who’s been in China since 1994, says it’s still difficult to find a Chinese attorney with significant international experience. “The Chinese bar is still young,” notes Tung. “The most senior lawyer has no more than 20 years of experience.” But this state of affairs is probably only temporary, predicts Schloss. “The skill sets on the local side are better than ever,” he says. His colleague at TOM Online, Fu, might be a case in point: A Chinese-trained lawyer who’s never set foot in the U.S., Fu says her lack of on-the-ground Western experience has not held her back. “We are valued because of our local expertise,” she says in Mandarin (she also speaks some English), adding that she gets calls from headhunters “every two months” for senior attorney positions in American companies. She adds, “I am very happy here. I prefer working for a Chinese company because I don’t have to spend a lot of time explaining things to American executives.” Homegrown or not, what’s clear is that the in-house lawyer has finally arrived in China, and is playing a key role. The bet is that the ranks of the in-house bar will only continue to swell. Having lawyers on staff has even become a sort of status symbol. “The Chinese see that the American and the British companies bring their lawyers to the negotiation table, so now there’s the perception that they need their own lawyer too,” says Emerson’s Bosco.

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