A Roundtable with Leading In-House Counsel in China

 In the second of a series of podcasts recorded before a live audience in China, John is joined by three in-house lawyers from major Chinese and multinational corporations: Victor Shen, Chief Legal Officer of Henkel China; Liu Zhen, Vice President Legal Department of Xiaomi; and Li Hua, senior legal counsel of a Fortune 500 energy company.  They discuss intellectual property, regulatory and compliance issues in China as well as the evolving legal market. Non-practicing entities (NPEs) or “patent trolls”, which do not share the interests that patent owners and implementors have in maintaining a sustainable IP ecosystem, are a problem in China just as they are in the West. Building a strong legal strategy for IP involves maintaining inter-disciplinary teams that combine legal talent with key scientists within the company.  IP disputes increasingly involve proceedings in both the U.S. and Europe.  Antitrust issues do not arise in IP cases nearly as much in China as they do in the U.S. Regulatory compliance issues, especially regarding U.S. export controls, sanctions, and data security laws, are very hot topics in China. Foreign investment restrictions and lengthy review processes in multiple jurisdictions have forced companies to abandon deals. In-house lawyers need to be mentally agile and proactive.  Effective legal teams must also develop strong internal compliance frameworks and maintain close relationships with regulators.  Western law firms have withdrawn from China because of reduced foreign investment,  the increasing capabilities of Chinese firms, and the need to retain local Chinese lawyers to represent clients in court or before regulatory agencies.

Podcast Link: Law-disrupted.fm
Host: John B. Quinn 
Producer: Alexis Hyde
Music and Editing by: Alexander Rossi

Transcript

LD_FROM CHINA TO THE WORLD _ LIVE EP 2

JOHN QUINN: [00:00:00] We'll be joined by Victor Shen. Victor Shen is the Chief Legal Officer of Henkel China Investment, overseeing legal and compliance matters across greater China and Korea. He has 20 years experience managing legal affairs and compliance for multinational corporations. His career spans leading a Hong Kong, uh, red chip mobile communications company.

A multinational cosmetics brand and a world class retail conglomerate. He's been at Henkel for over 17 years. He's a very successful author, has written books on the general counsel's handbook, among other things. Uh, we'll also be joined by Liu Zhen. Uh, who serves, currently serves as vice president of the legal department at Xiaomi Group.

where he oversees legal compliance and [00:01:00] intellectual property matters for the company and its subsidiaries. Liu Zhen has a bachelor's degree in computer science. He began his career as a computer programmer, as lots of techie lawyers do these days, at the Beijing Municipal Commission of Commerce. His interest in law led him to get a master's of law degree from Renmin University of China in 2007.

He then joined the Dragon Intellectual Property Law firm as a patent agent. An IP attorney. He later joined the Grendel Law Firm where he rose to the position of partner, and then in 2013, he transitioned to the Xmi Group as manage as general manager of the legal department and was subsequently promoted to vice president.

Notably, he led Xmi successful lawsuit against the United States, uh, department of Defense. Which resulted in the company's removal from the quote, communist Chinese military company list. Interestingly, we now represent [00:02:00] DJI in the same case, a similar case. We're trying to follow in your footsteps against the U.

S. Department of Defense, and we hope to get as good a result as you did. So, Mr. Liu has been instrumental in resolving high stakes domestic patent disputes and navigating critical legal challenges during Xiaomi's IPO process. Including major patent and trademark infringement cases brought by pool pad, among others.

And we're also joined, uh, by Li Hua, who currently serves as, uh, senior legal counsel at a leading fortune 500 Chinese energy technology company. Where she brings to her job decades of legal and compliance experience to support its global operations. She boasts a very distinguished educational background in 1981.

She was admitted to the University of International Business and Economics, where she earned a bachelor's degree in economics and a [00:03:00] master's degree in law. In 1999, she graduated from the prestigious École Nationale d'Administration ENA in France. With a master's degree in public administration, and later in 2009, she obtained a Ph.

D. in antitrust law from U. I. B. E. Uh, her career spans diverse fields and institutions. After a master's degree at U. I. B. E., she joined the Ministry of Foreign Trade. In economic cooperation. In 1999 after return, after returning from ENA, she transitioned to private practice where she joined the leading French law firm, Ette Noel.

Were you in France or here, or 

LI HUA: ette? Noel 

JOHN QUINN: here in China, or my French pronunciation is terrible. Yeah, yeah. 

LI HUA: In Beijing. 

JOHN QUINN: In Beijing, yeah. 

LI HUA: Yeah. 

JOHN QUINN: Uh, and there. So she specialized in antitrust law and provided legal counsel to multinational corporations. In 2014, she became a partner at this one. I know I can pronounce.[00:04:00] 

LI HUA: Yeah. 

JOHN QUINN: Squire Patent, patent Box. Boggs. 

LI HUA: Yeah. , 

JOHN QUINN: uh, a US based international firm. 

LI HUA: Yeah. 

JOHN QUINN: Uh, in 2021, interestingly you joined, she joined Brunswick Group, which is a very well known strategic, uh, communications firm based in Washington DC I think. Is that where you were, were you in Washington with Brent or you were here in Beijing.

Okay. 

LI HUA: In Beijing. 

JOHN QUINN: Um, and in 2024. Uh, she joined the, uh, leading, a leading, uh, Fortune 500 tech company, energy company, where she oversees legal and compliance matters. So obviously, with this group, there's a very wide range of issues that we could discuss from the standpoint of in house counsel, relationships, partnering with outside counsel, cross border disputes, and the like.

I mean, I hardly I don't know where to begin, but, uh, why don't we begin, um, with intellectual property, [00:05:00] perhaps, and perhaps with you, Liu Zhen. Uh, in the U. S., you know, there used to be, uh, specialty intellectual property firms in the U. S., but as we began to understand the importance of intellectual property capital, And how much money was at stake in intellectual property?

The major law firms basically swallowed up those practices. There's a lot of firms that used to exist. It just simply don't exist anymore. And it's a function of the realization of the importance of intellectual property capital. We've known about it. It was important for years, uh, and it's now, uh, kind of staring us in the face.

I think since the pandemic, the value of intellectual property, what is your perspective on the development here in China and internationally from the standpoint of Xiaomi of the importance of intellectual property to your business, uh, protecting your intellectual property and also, unfortunately, being on the [00:06:00] receiving end of, uh, intellectual property claims.

Some of them utterly meritless, but some of them we're seeing increasingly being brought by operating companies on operating companies, not just the trolls, as we call them, the non practicing entities. Uh, I actually think in recent years, we've been, we've been seeing more operating company on operating company disputes between actual operating companies who do you see their intellectual property as very important to their business.

Uh, what, what has been your experience at Xmi in that regard? 

LIU ZHEN: Uh, I, I, I think actually, uh, I have a different, uh, observation. I think still the, uh, the most of conflicts are between, uh, uh, patent owners or mps, uh, with, uh, implementers, not implementers against implementers. So, uh, speaking of X's philosophy of ip, firstly, uh, we definitely would.

Uh, [00:07:00] keeps developing a strong patent portfolio to protect his, uh, innovation. So now we are, uh, one of the top 10 SEP 5G SEP, uh, owners, uh, in the world. And, uh, we, we are, uh, having more and more strong patents annually, but, uh, still, uh, having a strong patent portfolio, uh, portfolio. It doesn't do a company any good, uh, uh, with a defending self from MPs.

JOHN QUINN: For those who don't know, NPEs non practicing entity also sometimes referred to in the U S as a troll. And these can be like, uh, they can be lawyers who go out and buy up portfolios and just bring claims because bringing claims can create leverage. 

LIU ZHEN: Exactly. Exactly. I think basically, uh, nowadays, uh, in the IP ecosystem.

There are [00:08:00] basically three camps. The first one is, uh, uh, implementers. The second camp is consist of, uh, patent owners, uh, is especially those, uh, uh, companies, which doesn't make, which don't make, uh, products like, uh, IDC and some other companies. And the second, the third camp is consisted of MPs. I think for the first two camps, uh, these companies would like to have an sustainable ecosystem.

Because these, the companies, uh, in these two camps, uh, are trying to operate in the long run. So they would like to have a sustainable, uh, ecosystem. But for mps, they don't care about the ecosystem. They care about how to generate as much profit as possible. And because those companies don't real, really operate.[00:09:00] 

They don't have any weakness. So having a strong patent portfolio cannot defend yourself from 

JOHN QUINN: MPs. It's just a question of how do you get rid of the case at the least expense. 

LIU ZHEN: Okay. So I think the first thing definitely is to work with best law firms, like Queen Manning, right? And I think the second thing is how to make the most of your resources and time.

Because most of MPs are backed or some of MPs are backed by private funds and, uh, some other entities. So the weakness of those MPs are they need to generate money in a limited time. So for an implementer, you need to know how to spend the resources to, to survive the, the time, which [00:10:00] in which. The MB MPs have to make money.

So I think, uh, so basically I think time and resources are the, uh, the major weapons for implementers. To defend themselves from MPs. 

JOHN QUINN: So Xiaomi does business in how many countries? 

LIU ZHEN: More than a hundred countries. 

JOHN QUINN: And is this NPE phenomenon basically a US phenomenon, or do you have to deal with this in other countries as well?

LIU ZHEN: I think in Europe mostly. Europe also? Europe, yes. 

JOHN QUINN: So, Ms. Li, how about you? Does this, in your company, do you think about intellectual property issues and strategically? Uh, growing your portfolio as well. And what types of issues do you face of an intellectual property in nature? 

LI HUA: Yeah, in my company, I think it's a little bit different since I'm in the legal and the compliance department, and then we have another IP [00:11:00] department, they in charge of all cancer.

I P litigation disputes. So it's beyond to my competence. Yeah. So, but, uh, generally speaking, I think, uh, for the technology training company and the IP is always very critical and, uh, I think it's the priority of the priority of the company. So we have, um, more than 20, 000, uh, engineer and a scientist who.

Did the study and for the IP issue. So, uh, so that's why I think more and more litigation, not only in China, but also outside of China. That's why also we approach your firm and to see any potential opportunity to cooperate with your, your firm. Yeah. In the future, 

JOHN QUINN: we don't we don't wish disputes on anyone we're here to help, but we don't wish these kinds of problems on your company or anyone, [00:12:00] but you have a background and an expertise in antitrust and sometimes there's an intersection between intellectual property and competition and antitrust law because.

Basically, a patent, an intellectual property right, is a government granted monopoly. And sometimes that monopoly is misused and that can result in claims, at least under U. S. law. I don't know if that's true here in China as well. Is there kind of an intersection between antitrust law? An IP law here, 

LI HUA: I think, theoretically speaking, it happens, but in practice, I think in China and concerning the competition law and abuse of IP in practice is not so common.

And, uh, practice and also, uh, the implementing of, uh, antitrust law and the regarding I. P. I think, uh, the practice and also the [00:13:00] series not as well as developed in U. S. In China. So, uh, in practice, I think the abuse of, uh, IP rights and, uh, regarding of the anti-monopoly law, uh, conception, and, uh, it's is not yet, yeah.

It's not yet happened. Yeah. 

JOHN QUINN: What types of, uh, compliance issues. Our top of mind for your company now, 

LI HUA: I think the U. S. export control and the sanction issue is a big issue for the company. Yeah, and also data security. Cyber security is to two sectors. I think it will be the big challenge for the company, especially for the outbound investment.

Yeah. . Yeah. So since, uh, US always have some intention and to, to put the company on the sanction list, so that's why, uh, we are very, [00:14:00] very, uh, sensitive in us and even when we pre visit, uh, in last October, and, uh, we, we are not going to pay visit any lobby firm. Okay. It's a very sensitive moment for the company.

So that's why I'm sorry to not disclose the name of the company. I have no, no rights to do that at this sensitive moment. Yeah, I think the sanction and the export control and also. Data security and F. S. R. in Europe. I think it's a subsidiary issue. It's very sensitive at this moment for the campaign's development and the outbound development.

Yeah, 

JOHN QUINN: so there's so much uncertainty about what the future holds. We don't know either, by the way. 

LI HUA: Yeah. Yeah. And there was a Trump. Version two, and we don't know what happened, and we hope, as mentioned by Mr. Gao, [00:15:00] and in future, and we hope the relationship will not be broken, and then, uh, just competitor, and it's okay, but enemy, I, I think we, we should avoid it, yeah.

JOHN QUINN: I mean, that must present a lot of challenges to, where there is so much uncertainty. Yeah. Uh, to give advice. I'm very practical terms to give advice to your client. What's the right thing to do? What's the most prudent course? I mean, does this does the uncertainty create a chilling effect on business and trade?

What do you think, Victor? Do you have a sense? 

VICTOR SHENG: I want to say that working as general counsel, we need to stay well prepared for. Always the dynamic word in terms of the regulatory environment in terms of the pop up crisis. So, I think, uh, back to our [00:16:00] practice as a house lawyer, we needed to stay agile that I want to say, John, just, uh.

Uh, to give you some example, uh, to the colleagues here as well that. Okay. Nowadays, general concert cannot sit in the office. You must when during the working day, you need to run to different team members to catch up everything to get update. So, uh, back to your question, John, I want to say that, uh, despite how big the challenges is, as long as you stay agile and great.

You will conquer most of the challenges. 

JOHN QUINN: Stay agile. 

VICTOR SHENG: Yes, stay agile. I mean, 

JOHN QUINN: you have, you have kind of a different position, uh, than our colleagues, uh, here in that you're, you represent, uh, you're an advisor to a, a German company, an international company. You've been at similar positions with other Western companies here in China.

You're kind of an interpreter [00:17:00] going in the other direction, helping to explain. What's going on in China to headquarters back in the West that must present its own challenges. I mean, you must see you must experience similar uncertainty because I assume it's not always predictable. What's going to happen here?

VICTOR SHENG: And I want to say to start with, I want to say the general counsel must be here with strategic thinking. Strategic thinking means that you are the commander in chief of your army of your in house team. And as a result of this strategic thinking, you need to set up, you need to map out and develop your ecosystem.

For example, within a global organization, such as the Hancock, you need to develop, you need to identify who are the most important stakeholders. For example, for me that, okay, my boss in the headquarter is the most important stakeholder. He's my bodyguard. He's my supporter. [00:18:00] And also in parallel to these legal work streams reporting line, you also need need to develop the layer working with different build units, the big parts of different build units, and also the key person of different build units.

For example, for the ip, you need to set up the collection and collaboration with, uh, most important chemist. chemists in our R& D department and, uh, strategic thinking ecosystem. And third one is collaboration. Collaboration means that you need to describe, update your headquarter, your regions, different regions.

What is happening? What is really happening in China? Why? Try to be proactive as much as possible, because I want to say, I'm sorry to say that if we don't do such a communication work, [00:19:00] our foreign colleague will rely on the official media from China, such a media information in many cases could be very misleading.

This is a very dangerous and also in parallel of your proactive coaching or brainwashing to the headquarter to other regions, even in the US. You also need to adapt to, you also need to learn their way of thinking. Even in some cases, you need to learn their legal system. So that's the reason, John, to be quite frank, that, uh, one decade ago, when I discussed with my boss that to recruit some fresh blood into my team, my boss told me, Victor, now our business operation is already very global.

We must hire the people who receive not only the legal education in China, But the legal education in the US and also the UK, because this will ensure the seamless [00:20:00] collaboration among our global law group. So, uh, the third one is a communication, mutual communication, and try to create more time for the face to face interaction.

I can give you one example in our global law group. Every year we will send several of our team members to work at Germany to the US. Vice versa. And even in my last Asia, for example, in this April, I will invite one new hire from Tokyo to join my team, working together, collaborating with each other, because I want to say the practice of law.

is a kind of a job leading, leading professional skills. No doubt about it. But more important is chemistry and trust 

JOHN QUINN: because we are working as a team. But so, I mean, you're all international involved in international businesses. [00:21:00] I mean, how do you deal with. Identifying and navigating legal risk in a global business, 190, uh, different countries and they're in this super competitive business, uh, energy company, uh, on cut with cutting edge, uh, technology and the techno, the challenges that you face from a regulatory standpoint, from a competitive standpoint.

From a cultural standpoint around the world, how do you manage that legal risk? Any, any, uh, any thoughts come from a compliance standpoint or for an intellectual property standpoint? I 

LI HUA: think for the time being for the Chinese company, uh, to do business globally, uh, it's very challenging. Yeah. And the first of all, uh, is the foreign investment to restriction from every country, for instance, in us, the examination, the review of a [00:22:00] seafares and to in Europe is the FD, FDI, foreign director investment to, uh, scrutiny and to.

This kind of, uh, uh, review or examination, uh, make the Chinese company not to, uh, even gave up the U. S. market. Okay. For the seizures. Uh, yeah. Uh, examination. I have a case for instance, uh, we have done almost for 1 years for the seizures, sir. Filing at the last moment, we discover the main stakeholder has some background of the military service when he was young and then the target of the.

Ma it's near a military location. So that's why. And at the end, after one year we gave up this deal. Yeah. So that, that's the real case. And we feel [00:23:00] so disappointed after one years of work at the end since the sea arc, uh, CV from this, uh, stakeholder. Okay. And the shareholder. And then we provide this, uh, cv.

And at the end we give up this, it's, I think it's a little bit re ridiculous. Okay. And the second thing is, uh, uh, for the antitrust, uh, review and the merchant review and for the big deals, we need not only to give the filing the, the merchant filing to US government, to EU government, and to Chinese government and the all.

All the different country concerned. So sometimes it's a five or six different country. So we need to wait sometimes for one year and a half for, for the clearance and after approval. So such kind of a risk can make the outbound investment more and more complicated and long. 

JOHN QUINN: And your deal [00:24:00] could be, uh.

Stymied or stopped by something that was completely unpredictable 

LI HUA: that 

JOHN QUINN: you could not have foreseen. Yeah, 

LI HUA: yeah, yeah. And also now there's more scrutiny. It's not only from the government side, but from the different organization, labor organization, and labor union, and also environmental organization, and even some, a case very, um, yeah.

Very interesting. And we, we needed to, to open a plant in Germany, and then the green organization come to see us and to, to tell us, there's, there's some birds, very rare birds. They have some. They have their home there. And so we cannot begin the, the work and, uh, for the plant. So that's why we, [00:25:00] we spend several weeks and, uh, with the, with this organization and at the end and one worker and just move the, the home of the birth and to, to the other place.

And then the problem has solved. Solved. 

JOHN QUINN: That's great Lawyering. Congratulations. 

LI HUA: So, so that's why I think, uh, the geopolitical tension and also legal and social and et cetera, all kinds of, uh, obstacles and, uh, yeah. I don't know about you, this 

JOHN QUINN: conversation is a little bit depressing. I mean, it's amazing to me, anything gets done.

Give us some good, give us some good news from Xiaomi. How do things get done? Are you facing the same kind of obstacle? I mean, it's one thing if you tell a lawyer, there is this legal problem. You need to solve this problem and you can do your deal. A good lawyer can deal with that, right? But if it's this [00:26:00] morass of issues and we can't tell you and then birds pop up or, you know, somebody, somebody lives near a military installation, something you can't predict.

It's kind of discouraging. 

LIU ZHEN: I think it's a hard thing for every company. Uh, uh, I think, uh, one way to solve it too, is to build up a, uh, a comprehensive team within the company, because, uh, I think nowadays every issue we're facing is not only about law. It's about public relations, it's about the GR, GR affairs, and it's about technology and it's about economy.

So, uh, in most of our major litigations and major compliance, uh, uh, projects, uh, we have a comprehensive team, including, uh, uh, uh, members from different teams. I think the first [00:27:00] thing is to understand the culture and then the political environment. The third thing is about the law. So, so it's never about to get a deal done.

I think, uh, firstly, we need to identify what's the, the long term effect or impact of this matter, uh, uh, to a company. So I think this is the different, uh, this is the difference, uh, between now and maybe 10 or 20 years ago. 

JOHN QUINN: So true, especially the communications part, the communications part around.

Disputes, I mean, major cases that we're involved in, there's very often a crisis PR firm, they're PR firms that, uh, as you know, uh, you used to work for one that, uh, work with lawyers and, and very much help position the case of the dispute. In the public marketplace of ideas, uh, to make sure you [00:28:00] get your message across.

And, uh, Victor, is this an issue that's, uh, you regard as important as well in your business? 

VICTOR SHENG: Uh, I want to say regarding the ident identifi identification of legal risk, I want to say that's started with internally. Uh, the first we need first we are commercial lawyers. We are proud. To our being commercial lawyers, but the 1st question we need to ask ourselves are we do we know our good bill is enough to do we know our bill is good enough.

I can for each and newcomer to my team I will. Ask her or him or her that. Okay. Could you please describe there are six key flows in any commercial company, the flow of goods, the flow of technology, the flow of service, the flow of money, the flow of people, the flow of data.[00:29:00] 

Put a piece of paper, map out all these flows, and then you can identify the more resources. For any flow, if the company put more resources, that's the high risk of compliance. So, this is the internal. External, I want to say for different industry sectors, the different regulatory authority will pose different regulatory risks.

So, for example, for our company, who is in the fine chemical industry. You need to be very careful about, uh, uh, different regulations concerning safety production, chemical registration, et cetera, et cetera. So, I want to say that, uh, internal, external, this is the foundation. On top of that, Please, please make yourselves stay informed of the latest development in relevant jurisdictions.

Because we are not talking [00:30:00] about, in terms of my turf, I'm not only talking about China. I'm also talking about Korea and talking about Japan. So I want to say that for Japan, everybody knows now Japan is cheap, super cheap. But now the Japanese government is introducing some legislature to increase the wage and increase the price.

But for a multinational company, some of your practice, such as sourcing practice, may face some challenges. So I want to say that, uh, you need to stay informed, and also As a key member of C suit, you need to keep your CEO low, informed in advance. The most CEO hate that when there is something pop up, they, they fail to get the alert from the general counsel.

JOHN QUINN: No, no CEOs like surprises. Yes. Right. Yes. [00:31:00] So, um, you all work with outside law firms. I, I assume you do. Ms. Li, how, how do you. Uh, this audience, a lot of lawyers, would be lawyers, law students, they'd love to be hired by somebody like you. I mean, how, how can, what do you look for, uh, when you look for law firms that you're going to work with?

How do you make decisions? 

LI HUA: Okay, that's really a difficult question. Yeah. Uh, since I just joined the company since six months, uh, yeah, before I, I used to be working in the law firm too. So I used to be selected by the, by the company. So, uh, now we are just to begin to prepare our Panelist. Okay. And to meet a different law firm and to, uh.

First of all, we need [00:32:00] to setting up of our standard. What's the standard to select the law firm? Yeah, okay. And the second thing, and we should really, really have the like the trust. I think the lawyer is based. On the trust. So sometimes through the first meeting and if you have the trust on the team or no, that's very important.

And the third thing is that between the, uh, the spirit of the corporation, between the teams member of the law, law, very important

law firm.

Cooperation between the team member is really not so good, and even each one is a very good lawyer, but together we feel some the atmosphere was not so [00:33:00] good for us. And then after meeting, we put in our panelists to say we excluded this law firm. Okay, and we will prepare a long list and the short list and for the short list, and then each time, maybe we will select 3 or 4 law firm and to have a bidding procedure for the big, big, uh.

Amount, uh, of, uh, transaction. Yeah. But for the small one and, uh, maybe it's easier. So I think, uh, uh, the trust is the first thing. And second thing of, of course, the, the knowledge of the law and also the expertise and the experience and the in the sector is also very important for us. Yeah. 

JOHN QUINN: Jen, how about you?

What do you look for in law firms that you retain? 

LIU ZHEN: But first I would like to share, uh, how am I defining my role [00:34:00] as a near house? Yeah. So I think, uh, in a high tech company, I think, uh, I'm taking three rows. Uh, firstly, I'm a product manager. Secondly, I think I am a project manager. And third thing is I am the quality control manager.

So, uh, speaking of my first role, I think I need to, uh, collaborating with outside councils to, to, to defining the work scope of a project, just like making a card. We need to know what kind of card we want, and, uh, it mostly is not only about the winning or losing of a single case. It's about how to defend the company or ensure the benefits or interest of the company in the long run.

And the second thing is, uh, we need an efficient attorney, outside attorney, to make sure the project is going on according to the schedule. [00:35:00] And the last thing, of course, is how to make sure we have the, the, the right outcome. In a litigation and also in a very cost efficient way. So I think these are my three major roles as an outside attorney.

If an outside attorney is going to help me to, to fulfill my obligations, I think this one will be the one for me. 

JOHN QUINN: Makes sense. I mean, we're seeing, uh, at least in the West, we read about changes. In the legal market, uh, in China, we read about Western law firms, uh, closing their offices, uh, uh, and leaving. Um, not Quinn Emanuel, by the way, we doubled down and opened an office here in Beijing, which we're very, very proud of.

Um, Why is this? Is it because the marketplace and demand has changed? Is it [00:36:00] because the Chinese law firms have gotten better their competition? The local domestic competition, uh, has significantly improved, so it's harder for Western firms to compete. What do you think? What's your perspective? What accounts for this?

Victor, do you have a view on this? 

VICTOR SHENG: And this is a very hot and also very interesting topic, but, uh, you know, we are the commercial lawyer. Maybe sometimes we can, we can get some learnings from the bearers. So, for multinational company in China, if they are successful, one of the success factor must be good localization, but keeping global perspective.

Thank you. But I want to say back to this legal market, uh, legal market. Many international law firms, they enjoy the. Good market in the past, but they failed [00:37:00] to adapt to the new development in the China's legal service market. For example, with due respect that to all of them that okay for the US law firm, many US corporate law firms still apply global pay, but the clients are becoming more and more sophisticated and they are more and more challenging in terms of billing rate in terms of responsibilities.

But, uh, from my understanding, limited observation, they fail to adapt to the client's new requirement. So that's the reason I want to say that. Okay. It's no wonder they will, they have to leave. And, uh, in comparison, the U. S. Legal service market because I heard this from my US peers that okay, the US legal service market is so hot.

And so from the headquarter point of view, if I cannot succeed in China, but I can still make a lot of money in the US close down back to the US. And so, but, uh, [00:38:00] for. If, but I still, I still believe that the international law firm have their advantages or competition age, if they optimize such age, what 

JOHN QUINN: are the advantages you think international firms have?

VICTOR SHENG: I want to say that, uh, first of all, in terms of the international experience. You are more, you are much more experienced or more, much more sophisticated. So this is the first point. The second point is that, okay, in terms of drafting all hard skills of lawyers, you are still enjoying the advantage. But the key point is, John, that, okay, how to optimize, how to fuse the local expertise and the global perspective.

And. Experience. This is very important. So for this, uh, I think I give you, I want to give you a bigger credit that [00:39:00] you find and who are the receive very good degree education China as well as in, in us. Each one. Yeah, yeah, yeah, yeah. You know, that, uh, very local, localized team members, local leadership, but uh, with global perspective.

That's a fantastic combination. That's the reason, in my opinion, maybe, may not be very holistic that, okay, that's one of the reason why QE opened the second office in the U. S. They are 

JOHN QUINN: unicorns, and by the way, you can't recruit them. They're very, we treat them well. I hope. So you, uh, Ms. Li, you spent some time at law firms here in China.

How are you seeing the market? From a law firm, legal services standpoint, changing in the recent past. 

LI HUA: Okay. Yeah. Maybe my opinion is slightly different than Victor's. Okay. [00:40:00] And I think the, the first reason is the. Macroeconomic is not so good. The situation changes significantly in 2000 and the revenue of a single French from global revenue is was equal to all the revenue of the old Chinese law firm in Beijing.

But today, the situation changed significantly. That's the first thing. I think second thing, the foreign investment decreased and reduced significantly in China. So, before, the foreign law firm, their main client is multinational company. It's not Chinese company. Okay. Today, uh, few multinational company, or majority of multinational, Multinational company, uh, company.

They also [00:41:00] rely on the domestic law firm. Why? Since the top domestic Chinese law firm, their service, the qualities, uh, of their service gap between the international law firm and the Chinese one decrease significantly. Even the foreign law firm, their services are not unique today. So that's why, uh, but their fees is still higher.

Then the Chinese and the domestic law firm, why multinational company or Chinese company still use, yeah, and foreign law firm. Okay. So that's the 2nd reason. And the 3rd one, I think, uh, I In the litigation, and for the regulatory [00:42:00] constraints, okay, the foreign law firm, they have no rights to defend the client before the court, and even for the antitrust filing, they are not qualified to submit the filing directly, they need to always hire another Chinese law firm, and the cost increase, so.

Two, yeah, since you need to have two firms, why the foreign company do not hire the domestic Chinese law firm directly. So, but I. I cannot say the foreign law firm, they do not have any advantage, but for the cross border transaction for the international litigation actuation, and the foreign law firms still have some advantage.

Yeah, so that's why the situation changes significantly today and compare with the years. I just to join the foreign law [00:43:00] firm. Yeah, so even I know, uh, several, uh, foreign law firm, I know they already closed their office in Beijing or in Shanghai, et cetera. So it's sad to see such kind of thing happened, but, but it's the reality.

Yeah, I am less optimist than Victor. Sorry to say that. Yeah. 

JOHN QUINN: Victor, are you really such a pessimist? Uh, 

VICTOR SHENG: I want to say that the general contract should be selective prudently, selective that, uh, John, I, I want to say if there is some bigger high profile dedication in the US or cross border application, definitely just follow Ms.

Ms. Uh, comment. I will tend to the big name mm-hmm. In the circle, such as Uhu. Mm-hmm . Because within the company. There is some office politics, if I don't attend 

JOHN QUINN: office, [00:44:00] 

VICTOR SHENG: the key point is that, okay. If for, if for such a high profile case or very complex cross border deal, if I, if the general counsel doesn't attend to big names.

If there is some fallout, the general counsel will receive very high pressure. So sometimes when you try to pitch some people, pitch some client, I would suggest you distinguish, you identify what kind of work you want to deliver or what kind of service is this service to be delivered a very important for this company.

If that's the case, you can increase your billing rate a little, no worry. But if it is a routine case, I think you need to be reasonable, follow the market benchmark. And, uh, and I want to say that, uh, Regarding the local law firms, I want to say, in terms of regulatory challenges, in terms of [00:45:00] communication with the different stakeholders, I want to say, in terms of language, in terms of culture, the local firms have real advantages.

This is a fact. And so, at the Board of General Counsel, we are, we are combining both. Law firms, uh, advantages and disadvantages were in place in a very balanced approach. Yeah. 

JOHN QUINN: Any final thoughts? Uh, Jan? Ms. Li? 

LIU ZHEN: I just want to add one thing, uh, on this matter. Uh, I think, uh, one of the reasons for this phenomenon is the growth of Chinese companies.

For example, for Xiaomi now, uh, we have more than 60, uh, members across the world. So if we have an litigation in Europe or other countries, we prefer to skip the Chinese offices of Xiaomi. Foreign law firms to work directly with their law, their offices in Europe or other countries. So I [00:46:00] don't think, uh, uh, foreign, uh, law firms are losing, uh, uh, uh, clients from China just because the top Chinese companies are growing.

So they don't need, maybe they don't need Chinese offices to be a facilitator for them. So we just, uh, skip Chinese offices. So that's my understanding. 

JOHN QUINN: That's interesting. Let me share with you, uh, a kind of an interesting fact. I've never made this public before. And maybe my partners are gonna, huh? Can I talk about Can I talk about our second largest market?

So, um, we have uh, 36 offices around the world. Uh, 1, 200 lawyers. Our largest market is, surprise, surprise, the U. S. Our second largest market is a country where we don't have a single lawyer on the ground. [00:47:00] We have 125 lawyers in London. And we do more business in Korea than we do out of the UK. It's kind of remarkable.

And to your point, we deal with, we represent 7 of the top 10 chaebols, Samsung, Kia, Hyundai, etc. We asked them, do you want us to have a local office here or should we, you know, they said, no, we don't care. We know where to find you. Uh, they are like you all extremely, uh, sophisticated. They know what law firms to use for what type of problem.

Around the world. Uh, and so we just haven't seen the need to have a, an office there. And it's, it's been very successful. I hope that doesn't mean the direction China is going to go. Uh, I think we have a very special offering here. But, um, look, thank you very much for, uh, joining this discussion. [00:48:00] It's been very, very interesting, such an honor and pleasure to share this podcast with you.

Thank you.

for listening to Law Disrupted with me, John Quinn. If you enjoyed the show, please subscribe and leave a rating and review on your chosen podcast app. To stay up to date with the latest episodes, you can sign up for email alerts at our website law disrupted. fm or follow me on x at jbq law or at Quinn Emanuel.

for 

tuning in.