What’s going on here?
Linklaters joins forces with Zhao Sheng law firm after its Shanghai Free Trade Zone joint operation was approved from the Shanghai Bureau of Justice.
What does this mean?
The joint venture combines Zhao Sheng’s Chinese law capability with Linklaters’ well-recognised international expertise. In doing so, the Magic Circle law firm is clearly adding another dimension to its arsenal of comprehensive client services. It will be able to practice Chinese law, whilst providing ‘seamless advice’ to local clients on both inbound projects and outbound investments. Although Linklaters are not the first high-profile law firm to benefit from the Free Trade Zone (FTZ) program, their approach could send shockwaves through the legal community. While other firms, such as Baker McKenzie, launched joint offices in the FTZ with well-established Chinese firms, Linklaters sent its own lawyers to a smaller organisation to become the first global firm to successfully separate itself from the pack. Similarly, Linklaters set a milestone as being the first Magic Circle law firm to establish an FTZ partnership.
Why should firms care?
As Linklaters are one of the first firms to adopt such an unusual business model, other law firms will be keeping tabs on its development. If such a move proves to be a success, international firms may consider implementing a similar joint operation in the future. And when this happens, Eric Liu (managing partner of Zhao Sheng and former Linklaters lawyer) believes that it could potentially redefine ‘the competitive landscape in the legal market’. Thus, commercial law firms may have to begin preparing themselves for great change.
However, a joint operation in the FTZ may not be all sunshine and rainbows. One new way Linklaters are hoping to gain work is by advising on outbound Chinese investment in the UK. Recently, China’s developed a track record of ‘snapping up everything, from sensitive technology to energy grids’. While this looks like good news for Linklaters, in July 2018, a National Security and Investment White Paper (a document proposing future legislation) was put forward by the UK Government to tighten rules on foreign investments in ‘security-sensitive British assets’. The White Paper aims to allow the British Government to amend or put an end to dealings that may compromise national security. Interestingly, these proposals seem to be aimed directly at China. With this in mind, it is clear there may be further obstacles for a law firm when tasked with advising its Chinese clients on their outbound investments in the UK. To overcome these obstacles, they would have to convince the UK Government that these overseas deals are not a threat to national security. Therefore, with new proposed limits, some firms could be less convinced by the benefits in forming a ‘China alliance’.
Report written by Joshua L.
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