Opinion | 23-02-16

Which path to choose? Partnership in an international law firm or a Chinese law firm?

We regularly speak to partners trying to decide between an international law firm and a Chinese firm. In this article our consultant Shawn Chen presents the arguments on both sides. 
The lateral partner legal recruitment market in China has been witnessing significant changes over the past three to five years. While there is still a steady stream of partners moving from Chinese law firms to international platforms, we are also starting to see a trend in the opposite direction, with an increasing number of senior lawyers exiting international law firms and joining domestic practices. Are international law firms in China really starting to lose ground to Chinese firms in their pursuit of the partner level talent? Why do PRC firms find it difficult to secure star partners and top fee-earners? When considering a move, where should a partner in China look to go, an international firm or a PRC firm, in order to maximise their success and secure the best future? 
Chinese law firms – the advantages 
Many Partners considering a move to a PRC firm may not be aware of the way that these firms are run and have never considered the advantages that these platforms present: 
(a) Autonomy:  Partners in most PRC firms are not required to commit to rigid office hours as long as they generate reasonable deal flow. Indeed many of these partners would frown upon the various operational policies found within large international law firms. In addition, they generally have the authority to make their own decisions on most business and operational matters, including practice areas, client pitching, pricing, staffing and finance.  They enjoy the privilege of autonomy. 
(b) Higher income: A partner in a PRC firm with self-sufficient business may receive as much as 50% or even more of their client billings as income. Although some of their client base and deals may not be as high profile as those in top international law firms, this higher income rate plus the lower and flexible tax arrangements offered to PRC firms and their partners (in contrast with the much stricter tax policies and higher tax rates applied to international firms and partners) could easily generate a much more attractive and secure income than if they were to work in the China office of an international law firm.
(c) Business potential: It is widely accepted that foreign direct investment activity into China, particularly the large scale deals, has been diminishing in recent years. In the past these deals were one of the main incentives for a Chinese partner to work in an international partnership. Over the last 10 years or so, many senior Chinese lawyers have honed their legal skills and nurtured strong business relationships to compete well with their international firm peers for the same FDI work. In addition these local firms with their diversified practices are able to handle certain legal matters which international law firms are either not permitted or lack the required skills to do.
(d) Career prospects: With the pricing flexibility and much larger partnerships, a Chinese partner in a well established and fast growing PRC law firm is able to foresee a more sustainable career and thus it may be a more attractive prospect in the longer term.  These partners do not need to be worried that their business is remotely directed and tightly governed by US/UK headquarters, nor is their career progression (in their view) unfairly assessed and hindered by a group of expatriates. Arguably these partners feel more ‘at home’ working in a PRC firm. 
International law firms – the advantages
Partners not keen to move into a PRC law firm or choosing to join an international law firm are aware of the above benefits but they still argue that an  international platform is a better choice because:
(a) Mature operations system and support: Although a domestic law firm partner can decide on the majority of operational and business matters, the compromise that these partners have to make for enjoying that level of autonomy is the lack of support – in terms of administration, marketing, IT, finance and various other operational functions which can easily distract and frustrate a partner with a busy fee-earning schedule. In addition, the breadth of expertise in a leading international law firm still exceeds the Chinese firms, given the short history of China’s currently viable legal system, which was constructed during the 1980s. That said, an international law firm partner’s work, particularly in a large scale sophisticated transactions or litigation, is supported by the firm’s existing know-how, different niche practice teams and established senior practitioners.
(b) Top associates and stronger execution: A key problem that causes regular and persistent headaches to an ambitious and capable partner in a Chinese law firm is the difficulty in hiring and retaining a top quality associate team. This is mainly due to the significantly lower compensation compared with an international law firm. The leading Chinese law firms have been established for only 10-20 years, similar to the emerging Chinese economy. Consequently, these law firms are still pursuing aggressive expansion plans (i.e. firm revenue and partner profit), which in the first instance brings quantity rather than quality. They focus more on a numbers game rather than offering better mentorship and career progression for associates and rendering consistent and top quality service to clients. It is almost impossible to persuade a Chinese firm’s partnership to devote a large share of their cash for as long as it takes to recruit and build a team of first rate associates.
(c) Quality business and wide consistent network: Although China inbound investment activities have diminished enormously in recent years, there are still quite a few industries, sectors and practice areas where an international law firm is still preferred by clients to a Chinese law firm. The work from these industries and sectors (such as life sciences, TMT, entertainment, energy) and practices areas (such as international arbitration, cross-border litigation) usually requires more sophisticated expertise, more specialised skillsets and more integrated international teams. Generally, many international law firms still outperform the Chinese law firms in these areas although a couple of leading PRC firms are catching up quickly. In addition, the well established and managed overseas network and offices of an international law firm are undoubtedly more attractive and helpful to Chinese clients investing outside China.  
(d) International career: Working in one of the top 10 UK headquartered international law firms or one of the top 20 US headquartered international law firms means progressing with a global, high quality and promising partnership within a structured organization. These firms are way ahead of not only the PRC firms but also most of the other international peers in terms of internationalisation, network building and integration, branding, management planning, partnership renovation and sustainability. In contrast, working in a PRC firm frequently presents major changes and too much uncertainty for many partners;  an international career can often more easily be found at one of these top international law firms. 
Comparing these two arguments, it is clear that there are pros and cons for both; for example, a Chinese law firm partner enjoying great autonomy would be questioned about the level of support by an international law firm’s partner; and while a Chinese law firm partner may take home high net income, likely to be much higher than his peers in an international law firm, they would be challenged on the quality of their associate team and services by an international partner.  Unfortunately, all the advantages do not co-exist in one single platform. However, both sides have been trying recently to bridge the gap and create a hybrid (international Chinese law firm), such as the (FTZ) Joint Operation Office between Baker & McKenzie China and Fen Xun Partners.  
In addition, at different career stages, the same partner may view the advantages and disadvantages differently. For example, an established partner in an international law firm may not regard the firm’s support and operational systems as an important factor as their practice grows more independent and stand-alone. Gradually they may begin to long for the level of autonomy offered at a domestic law firm and finally choose to move over. Similarly, a more junior partner who has been benefiting from the pricing flexibility and better tax arrangement in a PRC law firm, may start to care more about the quality of service as their career progresses, motivating this partner to move to an international law firm. 
So, which platform is the best for you? To answer this question you need to consider your current career and what you need most to boost your business to the next level. For more information about making a move between an international law firm and a PRC firm or vice versa or to discuss current opportunities please contact Shawn Chen on +86 21 6103 7331 or via email [email protected].