When Will Chinese Firms Start Investing in Their U.S. Offices?
Many are little more than "window offices"—a liaison point for client relationships. But to become a truly global player, Chinese firms will need to change that.
March 10, 2020 at 12:00 PM
4 minute read
The original version of this story was published on The American Lawyer
In January, King & Wood Mallesons hired the entirety of U.K. firm Mishcon de Reya's legacy New York office. The nine-lawyer team is one of the largest group hires the Sino-Australian firm has ever made for its U.S. operations; it's perhaps also one of the largest ever made in the United States by a Chinese firm.
While the expansion may be new, King & Wood Mallesons has been in the United States for nearly 20 years. Legacy King & Wood opened a Silicon Valley office, its first outside of China, in 2001. The firm launched its second U.S. office in New York in 2008. And, of course, King & Wood wasn't the only one.
In 1993, only four years into its existence, JunHe launched the first overseas office of any Chinese law firm, in New York. The firm's Silicon Valley office was opened in 2010 in Palo Alto. Another major firm, Zhong Lun, followed suit much later. It opened its first U.S. office in New York in 2013. In 2016, the firm took over the legacy San Francisco and Los Angeles offices of Dacheng as the latter combined with Dentons.
Despite a long history, Chinese firms' U.S. operations remain relatively invisible. In fact, many are often described as "window offices"—those that primarily serve as a liaison office or point of contact for client relationships. Like other overseas offices, U.S. offices are usually complementary to a firm's home base in China. Traditionally, they are staffed by U.S.-qualified lawyers, but few are actually practicing U.S. law. Partners based in the United States often work on matters handled by domestic Chinese offices; sometimes they help Chinese clients find other U.S. lawyers; and they occasionally need to be in the United States for personal reasons, immigration-related or otherwise.
On the other hand, around the time of JunHe's New York launch, China started allowing foreign law firms to set up representative offices. Nearly 30 years later, despite the various sizes of foreign firms' China operations, it's safe to say that they have had a bigger influence than most Chinese firms' U.S. offices. This, of course, has many causes, chiefly the disparity in the roles of the Chinese and American legal professions in the world.
Chinese firms are cautious about investing in the United States. They have increased investment in Hong Kong in recent years, but U.S. offices still seem one step too far. Opening a physical office on either coast isn't hard, but finding the right people is. Most Chinese firms have made significant financial improvements, but their rates and compensation are still a far cry from the top tier of U.S. firms.
Having a successful U.S. practice could be essential to many firms' goal of becoming truly global players. In the cross-border matters Chinese firms handle, they would no longer need to share work with a U.S. firm.
Before taking over the Mishcon team, King & Wood Mallesons had already been making a noticeable push in its U.S. practice for more than a year. Compared with the more general cross-border expertise evident at many Chinese firms' U.S.-based lawyers, King & Wood has made more targeted hires.
In late 2018, following the Trump administration's move to restore sanctions against Iran, the firm recruited a former Manhattan assistant district attorney who specialized in prosecuting sanctions law violations. After the administration pushed through its tax reform bill, the firm recruited a tax partner from Cahill Gordon & Reindel. The most recent hires, which include several patent litigators, came as technology and intellectual property took center stage in the never-ending bilateral trade dispute between China and the United States.
Others will be watching. If King & Wood Mallesons is successful, more will follow suit.
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