Foreign Law Firms in China: Mind the (Time) Gap

2009-04-03

Tom Chow gives us the news on Loeb & Loeb's new PRC office:

Well, at least the economy hasn’t completely stopped U.S. based law firms from entering into the promised land of China. The National Law Journal published an article today entitled “ Firm Delivers Chinese Practice“. (free subscription required) Seems like Loeb & Loeb has decided to join the party, opening a Beijing office by transplanting one of its New York partners.

Loeb isn’t that large of a firm. Yes, it still qualifies as Biglaw in America, but this is not a huge firm coming into town. Perhaps there is some thought that an international firm with smaller footprint, and hopefully lower rates, can carve out a niche here in Beijing. Most of the other entrants have been pretty large players up to this point. Loeb has 300 lawyers. It can probably discount rates at a level that other firms cannot really compete with.

I have no idea what Loeb's business strategy is/will be in China. I doubt that they will try to compete based on pricing, but I suppose you never know.

It's really important to keep in mind that applications for rep offices of foreign law firms take years to be approved. The Ministry of Justice does not just give the green light to anyone, and they never do it quickly.

I expect that Loeb put in their application when business was excellent and the short/medium-term prospects for expansion in Asia looked amazing. Times are different now, and I think most firms would rather not be opening a new office if they had a choice.

With a rep office, though, it's use it or lose it. Once the application gets approved, you better put someone over here in a hurry or the Ministry of Justice is going to get pissed off.

This is all speculation, therefore, but I assume that the Loeb story is all about the time lag and not about their best-case business scenario.

Tags: China Business & Economy, China Law