Are the legal streets in India and China paved with Gold?

Monday 2 July 2012

The most populous country on earth with over 1.3 billion people and the second largest economy in the world, law firms around the world seem China-bound.  Yet, as Salans recently found out, the Chinese legal streets are not paved with gold.  Over the past few months Salans closed in Beijing, Hong Kong and had to deal with all of their partners walking out of the Shanghai office.  

As Richard Cant, Regional Director of Dezan Shira & Associates told Law and More, big law firms underestimate the competition and difficulties of breaking into the Chinese legal market. He gives three top tips for setting up in China that everyone ignores:

1. Take your time and keep your business sense.  So many firms take decisions in China that they would never make in England, assuming that being a magic circle firm and throwing money in the system will lead to success. 
2. Overestimate the costs.  Success in China depends upon vast amounts of investment which lawyers always underestimate.
3. Do not look at China as one country.  It is immensely bigger than Europe with over 180 cities containing over one million people (compared to the 80 across Europe).  Firms fail to pick a test region and start in one area rather than attacking the whole country.  Opting to start in smaller cities, not the popular Shanghai and Beijing haunts, with lower costs and greater growth is often a better option.

However, if you were thinking that India might offer better prospects, think again.  The latest word in the ‘Voda Tax’ saga suggests that the Indian government will persist in enforcing a retrospective tax (covering the past 50 years) on all foreign companies operating in India.  For Vodafone this means paying a bill of $3.7 billion, for other foreign companies it means making a swift exit as debts mount and even trying to relocate to China, where bureaucracy is seemingly more transparent and less corrupt.

Perhaps the Herbert Smith Freehills merger is the first step in the new legal giant trying to conquer Asia – let’s hope that they have read Dezan Shira & Associates’ Asia Briefings!