Text|Xiaguang Society Feng Ye.After spending half a year in Mexico, Lin Yaochang is getting more and more comfortable with the rhythm here.Edit|Liu Jingfeng.
Although he had to get used to the 14-hour time difference, as well as the different diets and cultures, he still felt satisfied. He believes that in addition to completing his own work, the biggest gain is to broaden his horizons, "Your eyes are open, and you will know what the world is really like." ”
As a lawyer assigned to Landing Law Firm in Mexico, Lin Yaochang mainly serves Chinese companies in the Latin American market, especially in Mexico. The driving force behind his move to Mexico was the rising demand for foreign-related legal services.
In recent years, with the transfer of the domestic manufacturing industry chain, Mexico has been hailed as the next "world factory", and Chinese companies represented by the automobile and manufacturing industries have bought land and invested in Mexico, hoping to better connect with North American business and open up the global market.
The growth of legal demand driven by enterprises has attracted law firms and legal talents to come to the layout. Randy, where Lin Yaochang works, is one of the first law firms to have an office in Mexico. Lin Yaochang observed that in the past six months, more and more law firms have expanded their business in the Mexican market, "although there are not many permanent here, the business demand is growing, and now there are many people who understand Spanish to do legal services." ”
Randy's expansion in Mexico is just a microcosm. From the perspective of the global market, the pace of Chinese law firms going overseas is accelerating.
As of September 2023, Chinese law firms have set up 180 overseas branches in 35 countries and regions, according to the Ministry of Justice and Nihon Keizai Shimbun. Of these, the number in 2023 increased by 47 compared to 20185%。According to the data, the number of branches outside China has increased by nearly 50% compared to the end of 2018.
Similarly, as of November 2023, the number of foreign-related lawyers in China has also increased by more than 4,800, an increase of 678%。
Law firms are expanding into more and more overseas markets, especially emerging markets such as the Middle East, Latin America, and Southeast Asia. Related to the previous wave of enterprises going overseas in Southeast Asia, Wang Yunqing, senior partner of Landing Law Firm and head of the Latin America Practice Group, told Xiaguang Agency, "In Southeast Asia, Chinese law firms will face greater competition, there are many local law firms that can provide Chinese services, and there are relatively many branches of Chinese law firms going overseas, so corporate clients have many choices." ”
It seems that law firms are only an extremely subdivided field, but law firms going overseas is an inevitable trend in the wave of going overseas - Chinese companies have sailed into the Age of Discovery, and it is inevitable that they will "not adapt to the local conditions" in the face of overseas legal differences, compliance policies, and political risks. "Chinese foreign-related lawyers can provide enterprises with cross-language, cross-time zone and cross-jurisdictional services, which is exactly what the headquarters of Chinese enterprises operating in multiple countries need when they face different compliance risks in overseas operations in each investment destination country. Wang Yunqing said.
Looking back, since joining the WTO in 2001, Chinese law firms have had more exposure to international business. However, at that time, foreign law firms that had been developing for hundreds of years were the first choice for enterprises, and the living space of local law firms that were still in the early stage of development was squeezed out.
However, 20 years later, with the rapid development of Chinese law firms represented by the red circle and the gradual improvement of the legal talent training system, Chinese law firms have also embarked on a new journey of internationalization.
01 When it comes to going overseas, lawyers who need to understand Chinese enterprises talk about why they go overseas, and Lin Yaochang said frankly, "The competition in China (law firms) is already very fierce. ”
According to the Ministry of Justice, in 2016, the number of practicing lawyers in China exceeded 300,000, and by the end of 2022, the number has doubled to 650,000.
The state also has a policy that requires the number of practicing lawyers in the country to reach 1 million by 2025, tripling within ten years. Now that the pass rate of the law exam has also become higher, more and more people are pouring in, and the competition in the entire industry is intensifying. Lin Yaochang told Xiaguang Society.
At a time when domestic competition is intensifying, going global has become a way for many law firms to seek a growth curve.
Peng Shuai, founder of Mr. Law, a global legal services collaboration platform, said, "When the pressure of survival reaches a certain level, lawyers will look for a new way out. In the past, I went out to do increments, but now, the pressure may be approaching a critical point, which will force everyone to seek more exploration. ”
Existential pressure is the driving force. Another major reason is that the demand for foreign-related legal services in the era of going overseas is growing vigorously.
The background is that China's industry is expanding overseas, and more and more companies are going global, but because there may be communication problems with foreign law firms, clients are more willing to hire Chinese law firms. Lin Yaochang said to the Xiaguang Society.
Another interesting phenomenon is that Chinese companies and Chinese law firms share the same roots, which also makes them more adaptable to each other's working styles. "In Mexico, for example, if a client works with a local law firm, they will find that they can't find a lawyer as soon as they leave work. However, Chinese lawyers work hard and cooperate very well. Lin Yaochang added.
Specifically, the legal needs of overseas enterprises usually "follow the business", and "in essence, law firms still do the same services as in China, such as document drafting, due diligence, etc." However, this market has shifted to foreign countries, but it needs to be done in different economic environments and models to adapt. Fangda Law Firm Bu Rui told Xiaguang Agency.
Taking the construction of factories in Mexico by Chinese enterprises as an example, the demands of enterprises are more concentrated in labor disputes, land transactions and other fields.
In Mexico, buying land alone can break down more than a dozen steps. This includes, but is not limited to: finding land, verifying the seller's information, contacting a notary office, applying for a purchase permit from Mexico***, and appointing a notary office to conduct a real estate valuation.
Among them, every link has the possibility of burying "mines".
Wang Yunqing has been working in the Latin American market for more than a decade, and the clients she has served have encountered land disputes in Mexico, and their factory operations are also at great risk.
The company's factory in Mexico, which had been running smoothly for many years, suddenly received a local court summons that claimed ownership of the land and demanded that the company return the land. Wang Yunqing said.
The reason behind this has to do with Mexico's land policy and the volatility of reforms. "In fact, there is nothing wrong with the formal requirements of the client's land purchase procedure, but the village community also has its legal basis. This is a big hidden danger, if the case is lost, does the customer have to move out immediately? Among them, the relocation of the factory has a great impact on operating costs, the stability of the first chain and the cost of labor. ”
If enterprises can entrust a professional law firm to conduct sufficient due diligence before purchasing land, they can better investigate and confirm the ownership issues in the history of the land and avoid hidden dangers and risks.
With the acceleration of Internet companies' overseas expansion, the demand for foreign-related legal services related to pan-entertainment industries such as games and social networking is also gradually increasing.
Since 2016, Zhu Junchao, a partner at Kenting Law Firm, and his team have been focusing on foreign-related legal business in the field of Internet pan-entertainment. With the gradual expansion of the scale of China's pan-entertainment overseas market, the legal needs of enterprises have become more diversified.
Zhu Junchao and his team's lawyer Pan Kaiwen told Xiaguang that taking games as an example, the legal requirements received by the law firm will develop and evolve along with the entire life cycle of a game product.
In the issuance stage, law firms need to help manufacturers control mandatory requirements, such as the review requirements of channel parties such as App Store and Google Play. In the specific operation process, enterprises will have demands to prevent the risk of infringement or fall into negative public opinion, and need to control the compliance of advertising materials and the risk of intellectual copyright disputes in game content design.
In addition, there are in-app purchase mechanism design, data privacy, and even legal issues involving the protection of minors.
We have also done a lot of user complaints, and many big R (high paying players) will cite the relevant laws on consumer protection to appeal to demand when the game revenue does not match their expectations. Pan Kaiwen said.
From a macro point of view, the scale of the foreign-related legal service market is considerable. "My approximate estimate is that in Southeast Asia alone, the legal service market that Chinese lawyers can participate in will be at least 10 billion US dollars. Peng Shuai told Xiaguang Society.
For the more than 600,000 Chinese lawyers, overseas is indeed a blue ocean worth exploring. To sum it up in one sentence, it is "a vast world, a lot to do." ”
02 The biggest obstacle to globalization: When it comes to concepts and cognitions, most people imagine that domestic law firms will "go global" to open branches, like cross-border e-commerce and game manufacturers, in Europe, America, the Middle East, and Southeast Asia.
But that's not the case. Previously, law firms have tried various models such as the Swiss alliance structure and overseas direct investment branches, but at present, the model of "domestic law firms docking business, foreign law firms cooperating in execution" is more mainstream. This is related to the development stage of foreign-related legal services.
China's lawyer system has been restored since 1979, but before the 90s, China's foreign investment and exchange were not much, and lawyers rarely had the opportunity to contact foreign-related legal business. It was not until the late 90s, when lawyers who had studied abroad or worked abroad returned to the mainland to develop their careers, that the law firm began to undertake foreign-related legal business.
China's accession to the WTO was an inflection point. The wave of "bringing in" and "going out" has driven the growth of demand for foreign-related legal services, and the demand for overseas mergers and acquisitions, foreign direct investment, and first-class disputes has increased significantly, and Chinese law firms have begun to compete in the global market together with Chinese-funded enterprises.
Since 2010, Chinese law firms have begun to try to go overseas and use the "Swiss alliance structure" to establish cooperation with large foreign firms.
The term "Swiss Union structure" means a structure established in accordance with Swiss law. This structure allows law firms to operate under the same brand, marketing and operational strategy, while retaining the independence of profits, costs, and partner compensation in each region.
For example, in 2011, King & Wood Mallesons, a red circle law firm, formed a close alliance with the Australian law firm King &Wood Mallesons; In 2015, Dentons signed a merger agreement with Dentons LLP.
The "Swiss alliance structure" has the advantage that the member firms can maintain their pre-merger operating systems and have access to common brands, internal strategies and technologies. However, due to the inevitable conflict of interest and the limited number of partners, it is impossible to provide more accommodation space for small and medium-sized law firms, and the "Swiss alliance structure" has not become the mainstream of going overseas.
The model of "overseas direct investment branch" began in 1993 when the Red Circle Junhe established a branch office in New York, USA. According to the analysis of industry insiders, compared with "business going overseas", the model of setting up branches is more inclined to expand the international brand effect - this is effective in the early stage, but in order to really do a good job in local business, there is still a competitive gap compared with the British and American law firms that dominate the global legal service market.
A lawyer also expressed the same view to Xiaguang Society, "At present, all the branches in China are large law firms, but few people can really do overseas local business, and foreign law firms are very mature, so these overseas branches still play the role of a façade or a liaison station." ”
On the whole, the development of foreign-related legal services in China is still in its early stages. "The development time of American law firms is 120 or 30 years, and the accumulation of all aspects is in place, and we are only a few decades, and on the whole, it is still a long road. Bu Rui said.
Wang Yunqing also believes that "in terms of service capabilities, law firms have served these Chinese enterprises on a large scale in recent years. ”
Based on the background of the development stage and the competitive situation, compared with spending a lot of money to set up branches, going overseas in the form of "domestic law firm + foreign local law firm" is a more flexible and lightweight way that is more in line with the actual situation.
Generally speaking, domestic law firms need to take on more communication, confirmation and other work to establish connections. On the one hand, it is to align the demand with Chinese enterprises, and on the other hand, it is to pass on the demand with local law firms abroad.
The legal, linguistic and cultural differences of different countries and regions are testing the professional capabilities of law firms. Taking translation as an example, not all the countries where Chinese companies go overseas use English, and there are many small language countries in the Middle East, Latin America, Southeast Asia and other regions, and lawyers need to convey the content of documents accurately and rigorously, but this is only the most basic work.
You also have to think about the clash of cultures, and the local lawyer can get what it means. The in-house counsel of many companies have reported that 'money is not a problem', and the most important point is that you (the local lawyer) can understand what I say, and can give me practical and specific advice, and give first-hand information. Yang Xiaoli, a senior partner at Tian Yuan Law Firm, said.
It's not just about translation. Wang Yunqing believes that Chinese law firms have undertaken the difficult task of bridging the huge gap in legal systems and perceptions between Chinese and foreign law firms.
In fact, we provide services across languages, time zones, and jurisdictions. The time difference between Latin America and China is about ten hours, and our team meets with the headquarters of Chinese companies during the day and with the local lawyer team at night, but if the company directly connects with the local area, it is difficult to achieve synchronous and timely communication. In addition, you will need to understand the differences between the legal systems of the two countries, as well as the cultural differences. The language of the local lawyer and the local legal system cannot be accurately understood and conveyed by adding an assistant and translator. Only professionals who have a deep understanding of the laws, business practices, and languages of both countries can handle problems effectively, otherwise it is easy to make mistakes. Wang Yunqing explained.
In addition to the challenges encountered in the legal system, language, and culture, several lawyers told Xiaguang that the current major difficulties in foreign-related legal services are related to the slow change of corporate concepts.
Many companies don't realize that after going overseas, the domestic set is no longer feasible, especially in terms of labor and employment, and the workers here are all leaving at the point. There are also some enterprises that start work in full swing after arriving overseas, thinking that they can do it first and then talk about it, but this will lead to many legal hidden dangers and risks. A lawyer said.
For example, companies going overseas in Mexico need to meet the requirement of "90% local and 10% foreigners", but so far, many companies have not met this standard. "This is a big potential problem that can lead to fines, and the fines are not one-time and may continue to accrue depending on your adjustments. ”
If a company wants to really do a good job, it needs to change its mind and change its previous way of thinking. Lin Yaochang said.
03 "As a lawyer, you can't be numb" The period when Chinese law firms first got involved in cross-border business was also the stage when foreign law firms entered the Chinese market on a large scale. At the beginning of the 21st century, the living space of Chinese law firms was once squeezed.
When I first graduated, many of my classmates worked in foreign companies, and I also worked for the representative offices of foreign ** institutions in China, but their headquarters executives did not seem to need Chinese lawyers to provide legal services or decision-making advice. No matter how good your foreign language is, he doesn't trust you. He only trusts the branches of foreign-funded firms brought by foreign headquarters, and Chinese lawyers have no chance. Wang Yunqing recalled.
But now, with the rise of Chinese law firms, especially in the red circle, foreign law firms' market share in China has become smaller and smaller.
According to data from the Ministry of Justice, there has been a significant trend of European and American law firms reducing their business in China, with the number of foreign law firms in China falling to 205 at the end of 2022, showing a downward trend for five consecutive years.
Perhaps now is the best time for Chinese law firms to expand and switch positions with foreign law firms.
For law firms, the first task is to grasp the legal needs of Chinese enterprises going overseas; After that, it is possible to consider reaching out to the business of overseas local enterprises. "You have to serve the overseas enterprises well before you can get foreign customers. It's an industry that takes a long time to build, but I think it's worth doing. Bu Rui said.
From the perspective of market segments, some industry insiders believe that Chinese law firms can start with Hong Kong, which is based on the common law framework, and gradually expand to other Asian countries, and then open up the international market.
There are many law firms that are already "on the road". According to the Nihon Keizai Shimbun, a large law firm with 6,000 lawyers, Kyoshi Law Firm announced in November 2023 that it would open offices in Japan, South Korea, and North Korea, and announced that it would "work with local groups to build a strong platform to help Chinese companies expand their business."
For lawyers, going overseas is a broader proposition.
One aspect is to enhance the capacity of foreign-related legal services. Lim said about the reason for working in Mexico, "I think about it from the perspective of personal growth, which is a trend. For young people, there are not many opportunities to overtake in corners. Foreign involvement is a unique entry point, and it can also be invested in for a long time. Even if I didn't make any money, at least I saw a different world. In the future, I may also explore the Middle East, Central Asia, Africa and many more. ”
In addition, compared with the improvement of professionalism, domestic lawyers are also paying more and more attention to one issue:
As professionals based in the field of social sciences, how can they better see and understand the world?
Peng Shuai launched the "1,000 Chinese Lawyers Overseas Program" at Mr. Law, which is committed to helping Chinese lawyers to study, exchange and cooperate around the world. It started in late 2015 when he saw and heard about it in Syria.
At that time, the civil unrest in Syria was very serious, and I accompanied the refugees to the north, from Turkey to Greece, to Macedonia, to Germany and other places, to a total of eight countries. Peng Shuai said. He saw the family smuggled into three groups, and witnessed the pain of refugees who could not reach their homes after the bombing of Syria.
Another father fled with his daughter, telling Peng Shuai that in order to avoid possible harm during the journey, "I gave my daughter a long-acting contraceptive injection", and they could only choose between dignity and life.
At that time, we were thriving, but we needed to see everything in the world. As a lawyer, you can't be numb. Peng Shuai said.
At the moment, more and more law firms and lawyers are going out. It is foreseeable that with the new starting point of serving Chinese enterprises going overseas, the global strength and international service network of Chinese law firms will gradually increase.
Whether from the perspective of professionalism, cost, or even from the perspective of excellence, the competitiveness of Chinese law firms is strengthening, and enterprises going overseas are more inclined to find Chinese law firms. Bu Rui said.
Peng Shuai believes that "Chinese lawyers can only form influence when they go international, but this is not just a matter of influence. Chinese companies are going overseas, and Chinese lawyers need to protect them and stand with Chinese companies, which is a historical responsibility that must be completed. ”
This also seems to point to a trend - that is, Chinese enterprises have passed the stage of going alone, and now, it is "going to sea together". Not only the products and businesses go overseas, but also the professional services in the business chain will also go overseas with the enterprise.
It is destined to be a difficult but correct path.
References: 1] "Chinese Law Firms Follow the Footsteps of Enterprises to Expand "Going Global"", Nihon Keizai Shimbun.
2] "Law Firms Go Overseas, Which Way Can Go Further?" Zhihe.
3] "20 Years of WTO Accession: The Vicissitudes of China's Foreign-related Legal Business", Zhihe.
4] "China's Big Firm, the Road to Sea is Not Easy to Walk", Mr. Law.