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25 Jun, 2014

Greater role for Chinese lawyers emerging in transnational affairs

By Zhang Yan

(China Daily) 2014-06-23 – More Chinese lawyers will be promoted as legal advisers in State-owned companies for transnational business, amid concerns over national and economic security, a senior officer of the All-China Lawyers Association said.

Most State-owned companies have been hiring foreign lawyers and accountants for cross-border lawsuits or transnational transactions, which can potentially compromise national economic security, said Wang Junfeng, director of the association.

“We will encourage more senior lawyers at the national level to serve as counsels and represent some transnational litigations, especially for the 50 major State-owned enterprises, including China National Petroleum Corporation and State Grid Corporation of China,” he said.

Last year, State-owned companies reaped 2.4 trillion yuan ($386 billion) in profits, a year-on-year increase of 5.9 percent. Of that, companies under central government supervision received 1.67 trillion yuan, an increase of 7.4 percent year-on-year, figures from the Finance Ministry showed.

State-owned companies form the lifeline of the national economy.

“If confidential and essential business information is disclosed, it can bring irreparable damage to the enterprises and even threaten national economic and political security,” Wang said.

Some government-invested enterprises may hire foreign lawyers mainly because they think the lawyers boast rich experience and good reputations abroad, and can help win lawsuits or expand their businesses overseas, he said.

With increasing globalization, China is pushing ahead with its opening-up and economic development, Wang said.

More State-owned companies are set to expand their overseas investment and engage in multinational mergers and acquisitions to increase their presence in the global arena. That means they tend to hire foreign lawyers to help with their legal processes, he said.

“Chinese enterprises are expected to deal with lots of documents and materials, some of which could be confidential under lawyer review. That might also bring potential risks to national economic security,” he said.

By getting more Chinese lawyers involved in government-invested companies, they will be able to play larger roles in helping Chinese enterprises avoid legal risks in transnational business, including overseas investment and multinational acquisitions, intellectual property protection and anti-dumping and antitrust issues, Wang said.

Increasing Chinese lawyers’ involvement in the businesses can also help with the development of the legal sector and train lawyers specializing in transnational lawsuits, he said.

In the year ahead, the lawyers’ association will continue to focus on training at least 300 lawyers in cross-border lawsuits, including overseas investment, multinational mergers and acquisitions, IP protection, international finance and securities and antitrust issues, he said.

Ariel Ye, a lawyer from King & Wood Mallesons in Beijing who specializes in transnational lawsuits, said that the move will help Chinese lawyers increase their expertise and reduce the risk of confidential business information being leaked.

According to internationally agreed regulations, Chinese enterprises facing transnational lawsuits are required to hire foreign lawyers to represent them in legal proceedings in the country or region where the cases are handled. But they should also hire Chinese lawyers to serve as project managers and supervise the entire litigation process, she said.

“Chinese lawyers who are proficient in the Chinese language and are more familiar with the clients’ needs can help serve our companies better,” she said. “Apart from this, we should admit that we have some shortcomings.”

“Young Chinese lawyers should be encouraged to attend more international seminars to communicate and share experiences with their foreign competitors, and enhance their business capabilities to narrow the gap.”

“It’s hard to simply make a choice between domestic and foreign law firms. It’s all about the service,” said Victor Ho, a partner in Allen & Overy LLP, an international law firm with offices in 30 countries. “State enterprises have various business needs. They need to find the lawyers with the best expertise to reach their goals,” Ho said.

Chen Mengwei contributed to this story.