The Rise of the In-House Legal Counsel Role in China

China arguably shows the greatest progress among all the BRIC countries, with an economy that’s now the second largest in the world. Chinese businesses continue to level the playing field with Western companies with new products and ideas.

Yet from bureaucracy to cultural differences, the challenges of operating in China are well known. In order to stay competitive and address the global needs of customers, both Chinese businesses and foreign companies operating in China are rushing to develop sophisticated corporate legal departments.

The Emergence of In-House Legal Counsel

Traditionally, Chinese companies have not viewed in-house lawyers as integral to business strategy. However, this view has changed as domestic companies conduct more cross-border deals and adapt to extra-territorial laws and regulations. Cost is a factor as well; companies are moving away from the high expense of delegating work to law firms and instead cultivating strong in-house teams that can handle the work.

Following the 1980 “Provisional Law on Lawyering,” which officially recognized law offices and regarded lawyers as state legal workers, the legal landscape in China changed dramatically. By the late 1990s, a substantial number of lawyers from overseas were working in Chinese corporations and managing in-house legal teams. Over time, more Chinese lawyers have come to occupy in-house roles, though a foreign qualification—typically American—and U.S. Bar admission remain a common requirement.

Particularly since China’s accession to the World Trade Organization in 2001, Chinese in-house lawyers with experience working at multinational companies have become increasingly valued by both foreign companies entering the Chinese market and Chinese enterprises seeking to increase outbound investment.

What Corporations Look For

Due to the nature of the growing Chinese economy, lawyers with expertise in intellectual property rights, compliance, employment and the Foreign Corrupt Practices Act (FCPA) are most in demand. When considering a candidate for an in-house legal counsel position, Chinese corporations tend to seek a wide array of qualifications, including experience working in an international law firm, a top Chinese law firm, or a multinational corporate department. Typically, a candidate must also be a fluent English speaker, possess a People’s Republic of China qualification, have experience working with governmental organizations, understand domestic and international compliance, and, preferably, have overseas work experience.

Finding lawyers with all of these attributes is no easy task. The small talent pool has resulted in high demand and high salaries. However, some lawyers who obtained handsome salaries prior to the 2008 global financial crisis are finding that they have priced themselves out of the market. These lawyers likely face an atypical salary decrease when moving to another role.

Common Pitfalls in Hiring

For multinational corporations, hiring in-house counsel in China is not without its challenges. Years of work experience do not always translate to well-developed soft skills or the same qualifications one might expect from a U.S. lawyer. Chinese lawyers are brought up in a rote learning culture where the focus is on memorization of rules and laws. Couple that with a system operating under rule by law (as opposed to rule of law) and the resulting experience and mindset of Chinese lawyers are fundamentally different than U.S. organizations are used to.

Companies then often wrongfully assume that Chinese lawyers are less costly than U.S. in-house counsel, though salaries for Chinese lawyers tend to be just as high, if not higher. Average salary for mid-level counsel (5-8 years’ experience) in China can range from $94,500 to $190,000 USD, while senior-level counsel (9-15 years’ experience) typically earns $140,000 to $267,000, and salaries for GCs with 15+ years of experience start around $200,000 and continue on up.

Retention Strategies

For multinational companies operating in China, attracting and retaining the best in-house counsel comes down to providing lawyers with a sense of value and belonging. Title and status are very important to Chinese candidates; having a “General Counsel” title holds a great deal of prestige, even if their responsibilities are not equivalent to those of even a standard legal counsel in the U.S. As with most industries, flexible work hours and performance-related bonuses are common retention strategies valued in the market, but Chinese legal talent is increasingly looking for involvement in major decision-making.

GCs also play a role in retaining Chinese in-house counsel through their influence in shaping the legal team culture. The GC sets the tone for how the legal function is viewed throughout the organization and to what extent legal counsel is seen as a valued member within the team.

At the end of the day, the significance of the in-house counsel function depends on the company and its country of origin. Generally, U.S. companies will involve the legal function at the early stages of a deal or seek out counsel to advise on strategy, whereas some European companies still view the legal function more as support and not part of the strategic discussions. Overall, companies in China are recognizing the value of having a sophisticated, well-developed corporate legal department.

Over the last 15 years, Chinese lawyers working within multinational companies have helped to shape internal policies, business practices and, increasingly, commercial strategies in the Greater China region. This trajectory will only continue over the next decade as China’s market continues to grow and senior lawyers take on more strategic roles, becoming an integral part of every business.

 

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Read more of this article in law.com

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Jack McDouallJack McDouall is a Consultant in the In-House Practice Group of Allegis-BN, China affiliate of Major, Lindsey & Africa. Jack assists multinational companies in identifying and hiring talented lawyers throughout Asia. He does this through his extensive network of contacts in the Asia legal industry.

 

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