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McDermott Will & Emery said last week that it is entering into an alliance with a Chinese firm aimed at overcoming hurdles that have limited the type of services global law firms can offer their clients in China. For years, international firms have hired local lawyers to work in their offices in China. But those lawyers have had to surrender their licenses; they’re forbidden to practice Chinese law if they’re part of a foreign firm. The McDermott deal attempts to address this dilemma. Since Feb. 1 the firm has been operating under an exclusive “strategic alliance” with a new firm called MWE China Law Office, which was formed by two prominent Chinese lawyers who recently left Shanghai’s Allbright Law Group. The two lawyers, John Huang and Kevin Qian, will be followed by roughly 25 lawyers from Allbright. Huang and McDermott’s chairman, Harvey Freishtat, say the alliance is the first of its kind. Most U.S. law firms with offices in China have loose referral relationships with local firms, but few, if any, are exclusive or cooperate to this extent. The two firms will share joint marketing and training programs. In addition, Huang and Qian will become nonvoting members of McDermott’s board, and McDermott will have nonvoting representatives on MWE China’s board. The two firms will also be treated as one for conflict purposes, according to Huang and Freishtat. But, according to Huang, the firms will remain sufficiently independent that the local Chinese lawyers at MWE won’t have to give up their licenses. “[McDermott] can take us to the next level and enhance the professionalism of our firm,” says Huang. Under Chinese law, the firms may not share profits or revenue. Huang and Freishtat maintain that they have worked out incentives for each firm to help the other, although they declined to give details. Huang, 50, was one of the founders of Allbright, which was specifically modeled after U.S. law firms. Huang and Qian are natives of China who received law degrees in the United States, and Qian, 47, worked as an in-house lawyer for Philips Electronics in Asia before he joined Allbright. “Western-trained lawyers with Western legal experience who are deeply steeped in Chinese tradition are a scarce commodity in China,” Freishtat says. Huang and Qian expect to bring several important clients with them, including Shanghai General Motors Co., 3M Co., and Angang New Steel Co., the second-largest steel company in China. A representative of the Allbright Law Group was not available for comment. As the exploding Chinese economy has attracted U.S., British, and other foreign firms, lawyers have been forced to maneuver around Chinese restrictions. China prohibits foreign law firms from practicing law in that country, and Chinese lawyers who join U.S. law firms must give up their local licenses. Because the MWE lawyers will not have to give up their local licenses, McDermott clients will have access to U.S. lawyers and Chinese lawyers who can practice local law, says Huang. “It would feel to clients very seamless,” says Freishtat. U.S. firms with offices in China typically focus on cross-border transactions that they don’t consider to be practicing law in China. Last April, however, the Shanghai Bar Association issued a harshly worded memo accusing foreign law firms of illegally practicing law and urged the government to regulate and “purify” the foreigners. It doesn’t appear that the bar association or the government has taken any action since then. Huang says his new firm did not need the approval of the Shanghai Bar Association or other Chinese authorities for its alliance with McDermott. He also did not seek an outside opinion that this arrangement complied with Chinese law. “It was our conclusion that it was not necessary to get a legal opinion,” he says, noting that he is well versed in this area of expertise. “This will be the prevailing model adopted by many firms,” asserts Huang. “But we are the first mover.” Not all firms may be eager to jump on the bandwagon. “For firms that are already active in China, this may not be necessary,” says Howard Chao, a partner at O’Melveny & Myers, which has 95 legal professionals in China. “If you’re trying to make a splash quickly, this is what you might try to do.” Benjamin Bai, a partner at Jones Day, which has more than 150 legal professionals in China, says an alliance with one firm can be problematic: “You’re committing each other to exclusivity, which hurts both law firms in the long run. Most Chinese law firms don’t have that much work to send to U.S. firms.” Barry Levin, a partner and former chairman at Heller Ehrman, which has 35 lawyers and consultants in China, adds, “A lot of Chinese firms don’t want to affiliate with a single U.S. firm. It limits their access to other U.S. firms.” Freishtat says the typical friendly but loose affiliation with Chinese firms is fine, but not ideal: “We wanted to develop something more integrated.”
Susan Beck is a reporter for The American Lawyer , the ALM publication in which this article first appeared. She can be contacted at [email protected].

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