SIPAC Chairman Met with NGL Graduates in Shenzhen

On July 9 SIPAC Chairman Robert Lewis met for dinner with 10+ graduates of the NGL training program in Shenzhen.

Robert noted that Shenzhen and Guangzhou lawyers have been among the most active users/participants in the overall ecosystem that he and his team have been building to support the further development of this generation of lawyers doing cross-border legal work for Chinese clients.  This is consistent with the increasing demand for cross-border legal services for companies in southern China which have increasingly globalized operations.

The group talked freely about challenges and opportunities for 涉外律师 (lawyers doing cross-border legal work), how we can all work together to create more comprehensive resources to support the development of foreign-related legal skills overall, as well as how best to work with lawyers around the world.

With respect to this latter point, some of the attendees reported that they are increasingly taking the lead transaction counsel role in outbound deals, which is consistent with the general trend.  Robert noted that outbound deals consist of three work segments: the China side, the target jurisdiction side and the cross-border part, comprised of deal structuring, main transaction document drafting and deal management.  It is to be expected that Chinese lawyers will continue to extend the scope of their role to include more of the cross-border part, using local counsel in a more traditional local counsel role.  But Chinese lawyers need access to more know-how and training resources in order to be able to step up to true international standard, and this is the vision of docQbot, NGL and SIPAC.

With respect to SIPAC, some of the participants commented that the foreign law firms that are part of the network are all top quality, which is very important, but at the same time wondered if the rates of the foreign lawyers in the network might be higher than what many Chinese companies can pay.  Robert explained that with some exceptions (notably, the US, UK and some other similar countries), the fee rates charged by the top law firms in most jurisdictions are in line with the rates of top Chinese law firms in Beijing and Shanghai, and in some cases even lower.  So in most cases it is not necessary to sacrifice quality when selecting local counsel outside of China – the best firms can provide the best quality of service but at reasonable rates.  This is why SIPAC is very selective to ensure that only top-quality firms are included in the network.

At the same time, even in higher cost jurisdictions, it is still important to work with top-quality law firms, and if the Chinese 涉外律师 are able to frame the question properly, then in many cases, even top-rated law firms in the US and UK can provide outstanding legal advice for a reasonable fixed price.  The role of the Chinese lawyer in such circumstances is critical – many business managers are not able to frame the question properly so the foreign lawyer spends excessive time just trying to understand the instructions, which is frustrating and expensive for both side.  But by having an experienced Chinese lawyer as the intermediary, both the Chinese client and the foreign lawyer can achieve improved communication resulting in improved efficiency and effectiveness. 

Another question discussed at the dinner was how best to work with foreign legal counsel.  Some of the participants noted that they had been required to give a fixed fee quote to the client including for the fees for foreign legal counsel, but then foreign legal counsel charged hourly rates which consumed the full legal budget, resulting in a loss for the Chinese lawyers.  On the other hand, other participants noted that they had provided separate side-by-side legal fee quotes for the foreign lawyers and the Chinese lawyers, and this was done by work segment on a fully transparent basis, which worked well.

Robert noted that it is important for Chinese lawyers to educate their Chinese clients on how legal work is done internationally, and to ensure that if fixed fee quotes are required,  it is better to do so by work segment and also to include appropriate assumptions to limit the work scope, i.e., what is included and what is excluded from the work scope covered by the fixed fee.  One key type of work scope assumption is how many rounds of revisions will be required for the main transaction documents – this is sometimes referred to as the number of “turns of the documents”.  If Chinese clients demand a fixed fee quote without work scope assumptions, then Robert suggested that Chinese lawyers decline to bid for the work, since this carries a very high risk that the lawyers will end up bearing significant losses, and instead let their competitors lose money on those deals!

All in all, it was a great evening with valuable exchanges of best practices.  Robert sincerely hopes to be able to work with all expand the community so we can all learn and grow together for the ultimate benefit of Chinese companies as they expand globally.