Posted in Basics
of China Business Law
A foreign
company client recently asked us to handle what he viewed as a “very
simple” domestic matter for his company. We turned it down, explaining
that we were not experts in that legal area and that we did not feel
comfortable taking on this matter for his company. And then we gave him a list
of excellent attorneys that do such matters pretty much every day.
The client was surprised at our unwillingness to take
on this matter and in response to that, I explained to him (which explanation I
give at least once a month both when turning down work and when pitching work
that many legal matters are “easy” 90% of the time, but difficult the
other 10% of the time and that the tough part is in knowing when the 10%
is in play and how to handle it when it is. Our firm — like most law firms — is
just not willing to fail ten percent of the time.
The point of this post is that when your lawyer begs
off on representing you, take his or her word on it and get another lawyer. We
are in business to do business and when we do not say “no” to doing business
without a good reason. The same is true of our China work. We do certain things
pretty much every day but those things we do not do we almost always refer out.
Just by way of example, hardly a week goes by where we do not tell someone that
we do not 1) represent employees seeking to sue their China employers, 2)
handle China family law matters, or 3) deal at all in China-US estate
planning matters. Note to young lawyers out there: there are incredibly few
international lawyers who take on “personal” legal matters and yet with people
traversing country borders like never before, the need for such lawyers is
exploding.
Our firm recently expanded to Europe by opening an office in Barcelona,
led by an attorney, Nadja Vietz, who joined our firm way back in 2004. We are
starting that office with two lawyers and a Spain Business and Tax Specialist.
Nadja is a licensed attorney in Spain, Germany and the United States. That new
office has already led us to get all sorts of new clients and new work and also
to have to turn down an even greater percentage of “good work” than in the
past, largely because many of potential clients from Europe are not yet
familiar with us or with how the law works in Europe or the United States.
And it’s complicated and rarely clear cut.
I just returned from Germany, where I went to attend an ANTEA event. ANTEA is one of many large associations of
professionals to which law firms often belong as a way of building and
strengthening relationships with law firms and accounting firms from
around the world. Going to Germany also gave me a chance.
While there, a number of accountants and
lawyers discussed my law firm assisting their clients in the United
States. One person wanted us to help his European client set up a business and
a factory in a U.S. Southern State. Another person talked to me about our
helping a client buy office buildings in New York City. I patiently explained
why my firm would not be right for either company and then I emailed both
people with a list of law firms and attorney contacts at those law firms that
would make much better sense.
A recent phone call from a Spanish lawyer we know
provides a great example of that. This lawyer asked us to help his Spanish
client form a US company. Yes, we told him, we can do that, no problem. Then we
started asking more about what the company would be doing and where and we
learned that it wanted to open five restaurants in an East Coast city in a
state where none of our lawyers are licensed. We then had to explain why we
were not the right firm for this client, which was surprisingly difficult
because in Spain such legal matters are handled very differently. Our
explanation was something like the following:
Yes, we can easily form an LLC or a corporation for
your client in xyz East Coast state, but very soon your client is going to need
help with buying or leasing property and with construction contracts and
employee agreements and liquor licenses and vendor agreements and all of these
things will be under the laws of the state in which it is locating. We
could bring on a local lawyer in that state to assist us, but what your client
wants to do is not all that complicated and since our firm would not be
bringing any super-specialized expertise to the matter, your client would do
just as well directly hiring a law firm in that state, without any
involvement on our part. And if in the unlikely event you find you want to
bring us in for our expertise in Spain-US cross border law or for our ability
to explain in Spanish the differences and the similarities between Spanish and
US law, you can always do so.
What made the explanation complicated — and this is
often true of countries in Europe — is that lawyers in Spain operate very
differently than lawyers in the United States, simply because lawyers in
Spain are licensed for the entire country and they generally feel comfortable
operating country-wide. Japan is a classic example of that, where foreign
companies that do business in Japan pretty much always hire Tokyo lawyers for
all of their Japan legal work, no matter where it is. I can remember the first
time my law firm had a litigation matter in Sapporo, (which is just about as
far from Tokyo as you can get while staying in Japan) I was unable to find a
lawyer in Sapporo to take on our case and had to use instead a far more
expensive lawyer out of Tokyo, and we’ve been using Tokyo lawyers ever since. I
dare you to find a foreign company with a lawyer anywhere other than in Tokyo.
China is interesting in that in terms of hiring a
lawyer it is somewhat of a mix between the United States and Spain/Japan. On
most non-litigation matters, Chinese lawyers can and do generally operate
nationwide. A corporate transaction or a company formation or an IP
issue in one city is going to be so similar to that in another, that it
does not usually matter in what city the attorney is based. This though is not
always true of real estate and litigation matters. Take litigation for
instance, where it can be important to line up the language and the culture of
the local lawyer with that of the relevant court or government officials. Just
as you would generally not want to bring a New York City lawyer to handle a
basic tort litigation matter in Biloxi, Mississippi, so too you would not
generally want to bring a Qingdao lawyer to Shanghai to handle a basic business
litigation matter there.
You would be surprised how much of our work
(especially for our existing clients) involves our finding them the right
lawyer. From time to time, we have even been retained by new clients to do
exactly that. In the end, what I always tell people is that the first best
place for them to go to find the right lawyer is to seek help from a lawyer
they already know and/or trust. That lawyer — either on his or her own or by
using his or her existing network — ought to be able to find you the right
lawyer no matter what the location or subject matter.
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