APPENDIX 38
Memorandum submitted by Clifford Chance
CLIFFORD CHANCE
Clifford Chance LLP is the world's largest law
firm, in terms of both turnover and number of lawyers. It is a
single, integrated firm formed on 1 January 2000 through a merger
of Clifford Chance, Rogers & Wells LLP and Pünder, Volhard,
Weber & Axster. The firm has 615 partners, 1935 qualified
lawyers and 637 other legal staff. It has 29 offices in 19 countries.
In London, there are 215 partners, 757 associates and 254 other
legal staff. It is a full service law firm, with practice areas
covering finance, corporate/commercial, litigation/dispute resolutions,
anti-trust, real estate and tax, pensions and employment. It enjoys
a broad client base that includes leading banks and other financial
institutions, multinational and national commercial organisations
and other bodies such as governmental and regulatory authorities.
The Clifford Chance Hong Kong office opened
in 1980 and has 137 lawyers and partners. The firm has been active
in China since 1979. Clifford Chance offices in the PRC were among
the first to be licensed there. The Beijing Pünder office
opened in 1985 and has 10 lawyers and partners and the firm's
Shanghai office opened in 1993 and has 11 lawyers and partners.
Clifford Chance has over 40 China specialists firmwide. The firm
also has close ties with PRC law firms for the provision of local
advice, employs translators located in Hong Kong, Shanghai and
Beijing for production of documentation and translation at meetings,
and produces newsletters for clients as well as maintaining an
information bank on Chinese laws and regulations.
Clifford Chance has been at the cutting edge
of PRC legal developments such as holding companies, telecommunications
revenue sharing transactions, B and H share offerings, joint venture
insurance companies and limited recourse project financing. It
advises on all forms of foreign investment in China, state-owned
enterprises, cross-border re-organisations, China funds, regulatory
matters, intellectual property, dispute resolution, tax, projects
and finance.
FCO ROLE
The FCO performs a useful role in supporting
British businesses in China through provision of broad-brush briefings
and general diplomatic support. Its day-to-day relations with
the British Business community in Beijing are valued by that community.
The arrangements made by FCO staff supporting high-level UK government
missions to China and similar Chinese visits to the UK, which
are important for maintaining good relations between the two countries
at government level, provide and enhance business opportunities
for UK companies.
UK BODIES PROMOTING
TRADE AND
CULTURAL RELATIONS
WITH CHINA
In addition to the various government departments
with a China interest, such as the DTI and DFID as well as the
FCO, there is also a proliferation of quasi-governmental and non-governmental
organisations promoting business and cultural relations with China
and administering exchanges and training programmes between the
UK and China. Clifford Chance is a member of several of these,
including the UK China Forum, CBBC, British Invisibles and GBCC.
Although in some areas there is a distinction between the functions
of such organisations, there is also considerable overlap between
them and it can be difficult for businesses new to China trade
to know which organisation is the most appropriate to their needs,
certainly when making initial approaches.
CBBC provides valuable background information
and seminars, business facilities, and introduction to prospective
Chinese partners for newcomers to China business, and opportunities
to meet relevant Chinese visitors to those already engaged in
China business. British Invisibles has focussed attention on issues
relevant to companies in the financial sector and has, for example,
co-ordinated lobbying for greater opportunities in China for British
insurers. The exact role of the recently established UK China
Forum is perhaps a little unclear but it is hoped that it will
produce some concrete results as well as furthering mutual understanding
between the UK and China. The FCO will have a role to play in
the success of the Forum, which is administered through GBCC,
an organisation long involved in Sino-British relations.
FUNCTIONS OF
VARIOUS BODIES
IN RELATION
TO UK-CHINA
RELATIONS
As mentioned above, there is a proliferation
of bodies involved in promoting British interests in China. In
view of funding difficulties and overlap of functions, it may
be considered necessary to review the terms of reference of the
various organisations to clarify the roles that each should play.
In addition to those mentioned above, the British Council is also
involved in cultural exchanges, and organisations such as BTI
(now Trade Partners UK), the British Chambers of Commerce in China
(BCCC), The Royal Institute for International Affairs, to name
but a few, all provide advice and information on Chinese matters.
In addition, there are private organisations such as the Economist
Intelligence Unit, which can provide expert economic, political
or market analysis, or other specialist consultants, such as law
firms with offices in China, who can advise on technical matters
in relation to China.
As far as the governmental and quasi-governmental
bodies are concerned, the work they do in promoting British interests
and providing introductions to Chinese counterparts and in educating
prospective British investors in China is very valuable in creating
opportunities and in facilitating positive results. There is a
need to ensure that such agencies are co-ordinating efforts and
striving for a common goal, pooling resources where necessary
and making the best use of available expertise. However, it is
not reasonable to expect that bodies such as CBBC or GBCC or embassy
or consular staff should be able to advise on all manner of technical
investment issues, legislation, accounting or other such matters,
unless funding is available for them to employ a sufficient number
of highly qualified specialist staff, especially since such advice
is available in the private sector.
The strength of organisations such as CBBC,
GBCC and FCO staff lies in their personal contacts and ability
to provide the general background knowledge so important to those
embarking on China business and exchanges. They also have an important
role in bringing together British and Chinese with similar interests.
The FCO can provide unique insight into political prospects and
assist in the formation of long term policies and outlooks.
WTO AND THE
LEGAL PROFESSION
Since the conclusion of the WTO agreement between
China and the European Community, law firms look forward to some
relaxation of restrictions on the provision of legal services
in China, although the EU negotiations appear to have obtained
relatively few concession from the PRC in this sector. At the
moment, there are restrictions on the number of offices that may
be opened in China by a foreign law firm, the hiring of Chinese
legal practitioners by foreign law firms is not permitted (a PRC-qualified
lawyer must give up his licence if working in a foreign law firm),
and advice on Chinese law by non-PRC qualified lawyers is not
recognised by the Chinese so that representations and legal opinions
must be given by PRC-qualified lawyers only.
For litigators, there is a need to establish
the principle of "mutual legal assistance", which includes
enforcement of judgments as well as service of foreign proceedings
and the collection of evidence for foreign proceedings. To establish
the principle of mutual enforcement of judgments, and in particular
the enforcement of foreign judgments in China, will require continued
negotiation with China as well as further training for Chinese
judges, but once obtained, the ability to enforce judgments would
enhance business confidence in contracting with Chinese organisations.
Establishing the principal of mutual legal assistance would, for
example, enable contracting parties to nominate London as a neutral
centre to be selected as the forum for dispute resolution in Sino-foreign
finance and investment contracts.
Priorities further to WTO for the legal profession
include lifting of the prohibition on employing PRC-qualified
staff, relaxation of rules restricting the number and location
of offices that may be opened in China by a foreign law firm,
freedom to form joint ventures with or enter into special relationships
with Chinese law firms, mutual legal assistance and enforcement
of judgements.
Reciprocity in the field of legal services is
the ultimate goal but will not be achieved in the near future.
DEVELOPMENT OF
LEGAL SERVICES
IN CHINA
Since reform began in 1979, the Chinese legal
profession has been expanding very rapidly, as has been the legal
framework in China. The Chinese have been sending legal personnel
to various countries to explore different legal systems to see
how best to develop their own. Clifford Chance has been participating
in that development by advising on the drafting of legislation
and by offering training opportunities to Chinese legal practitioners.
Clifford Chance has been hosting and training
Chinese lawyers since the mid-1980s. Such lawyers include those
the firm has hosted as part of the Practical Training Scheme for
Lawyers administered jointly by the PRC's Ministry of Justice
and the Law Society of England and Wales, Chevening scholars,
secondees from CIETAC (the China International Economic and Trade
Arbitration Commission) and from PRC law firms. Clifford Chance
has also placed its own lawyers on secondment in Chinese law firms.
The firm also receives at its London office
visiting delegations from China for whom it arranges short seminars
on topics of special interest to them. Most recently the London
office has given talks for Chinese visitors on globalisation issues,
e-commerce, law firm management, criminal law and developments
in alternative dispute resolution (ADR). In addition to visitors
from Chinese law firms or by Chinese judges, recent delegations
have visited the Clifford Chance London office from CIETAC, the
Shanghai Bureau of Justice and several have come from the Ministry
of Justice, including a delegation led by Minister Gao Changli.
Needless to say, a reliable and effective legal
system in China is crucial to the success of economic development
and foreign investment there, and practitioners of English Law
(which is one of the two recognised systems for international
business) should be playing an active part in encouraging the
development of important legal principles and the training of
Chinese legal practitioners and drafters of legislation.
LEGAL SERVICES
AND BRITISH
BUSINESS IN
CHINA
Well-informed and well-connected lawyers are
essential to the success of UK business investment in China. Lawyers
can advise on pre-contractual matters, identify and minimise risks,
structure transactions and draft effective documentation. The
UK legal profession's penetration of the international market
is increasingly seen by commentators, by government and by others
as evidence of a dynamic approach which makes a significant contribution
to UK competitiveness and overseas earnings.
Lobbying for liberalisation of the legal sector
in China will not only benefit UK and other foreign investors
but will also improve the general investment climate in China.
This is an area in which FCO activity could be helpful.
NEEDS OF
BRITISH BUSINESS
The Committee will have received input from
various sectors of British business so this submission will restrict
comments on this area to noting that different types of company
have differing needs, depending on the length of time they have
been involved in China business, the sectors they are involved
in, and relevant conditions in the Chinese market. For example,
the initial needs of an SME with little experience in China may
be met through an introduction to Chinese partner or by a hand-holding
exercise by CBBC or BCCC, a company operating in a sector for
which a licence must be issued by a Chinese authority may benefit
from lobbying assistance from government, a company "piggy-backing"
on other foreign investment may require technical assistance from
private sector experts, a company bidding for a project may need
export credit guarantees or the support of "soft loan"
facilities.
An understanding of the Chinese market and business
needs is crucial—we have learned from our 19th century predecessors
that we will not be able to sell what the Chinese do not want
to buy. Sometimes business opportunities arise through long-term
relationships; sometimes there is a particular need which is met
perfectly by the product but where there is no historic relationship
between the parties. Fostering relationships and looking out for
opportunities are both vital to the success of British business
in China.
AREAS IN
WHICH BRITISH
BUSINESS COULD
CONTRIBUTE TO
PRC DEVELOPMENT/ISSUES
OF PARTICULAR
CONCERN TO
PRC
At the moment, the Chinese are facing the need
to make changes in the administration and regulation of their
economy and business structures. In particular, there is a need
for training and support in sectors such as financial services
(including insurance and stock markets), environmental protection,
legal reform and drafting of legislation. The Chinese have suggested
as topics for the UK China Forum meetings to be held in Beijing
in October this year environmental issues (with a focus on air
pollution), intellectual property issues and corporate affairs.
These are areas in which UK business can support the Chinese,
by providing both expertise and investment funding. Other topics
of particular relevance to the current situation in China and
to its economic development include infrastructure development
and privatisation, which are also areas in which British business
can provide expertise and investment funding.
ROLE OF
FCO FOR THE
FUTURE
Funding permitting, the FCO could draw on its
special diplomatic role to provide more opportunities for interested
British businesses to meet relevant Chinese counterparts and to
participate in such meetings where diplomatic presence can lend
weight or give "face" to those attending. Perhaps pro-actively
inviting appropriate PRC figures to the UK to introduce British
expertise in areas of particular interest to the Chinese is an
area worth exploring. The research and analytical skills of FCO
staff will continue to be a valued part of their service to the
British community. Continued consultation with the various interested
parties to ensure that promotion of British interests is prioritised,
targeted and co-ordinated effectively is another vital function
of the FCO. The lobbying and diplomatic strengths of the FCO should
be maintained and used to their full potential.
CONCLUSIONS
The FCO should continue to promote the interests
of the UK in China within the context of the needs of the PRC
to develop its economy, to improve the quality of life of its
citizens, and to participate as an important and responsible player
in global affairs. Its research, analytical and diplomatic skills
should be exploited to the full in searching out, supporting and
developing opportunities for British business in China. The FCO
should continue fostering the strong ties it has with both the
British community interested in participating in China matters
and with their Chinese counterparts, in diplomatic and business
arenas, strengthening, the UK's bilateral relationship with China
to the mutual benefit of both countries.
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