americanlawyer.com FEBRUARY 2011

COUDERT, HELLER RISE TO SUE AGAIN ■ ALIEN TORT TERRITORY ■ THE $7.2 BILLION SETTLEMENT LAWYERCOUDERT, HELLER RISE TO SUE AGAIN ■ ALIEN TORT TERRITORY ■ THE $7.2 BILLION SETTLEMENT LAWYER

KING & WOOD’SMEG UTTERBACKIN SHANGHAI

GOING NATIVE

THE LATERAL REPORTTHE LATERAL REPORT

PLUS:

■ Ten-year low for lateral partner moves

■ Partner compensation findings

■ Star laterals of the year

PLUS:

■ Ten-year low for lateral partner moves

■ Partner compensation findings

■ Star laterals of the year

A growing number of Western

lawyers are fi nding their future

at Chinese law fi rms.

A growing number of Western

lawyers are fi nding their future

at Chinese law fi rms.

56 February 2011 | americanlawyer.com

JUST A YEAR AGO OR SO, Mary “Meg” Utterback, then the head of Pillsbury Win-throp Shaw Pittman’s Shanghai office, had a litany of responses for clients when they asked why they should pay as much as 40 percent more to hire an international firm, like Pillsbury, for China work instead of a local one.

The quality of Chinese firms could be inconsistent. They had a different con-ception of client service. Chinese lawyers only focused on narrow issues and didn’t think outside the box. Some were all too willing to take ethical shortcuts.

“We have this international mind-set, fed by people like me at international firms, that says, ‘You really have to have a Western firm overseeing things. You’ve got to have me involved in this,’ ” Utterback says over cof-fee in Shanghai’s trendy French Concession neighborhood.

But things are different—now that she’s at a Chinese firm her-self. “The notions and concepts I had turned out to be dated by at least three years,” says Utterback, who last summer joined the Shanghai office of China’s 800-lawyer King & Wood. “I caution a lot of my friends at international firms now to be careful forming opinions until they’ve walked both sides of the street.”

A growing number of her peers are willing to do exactly that. Though associates, especially those of Chinese origin, began switching sides years ago, the past several months have seen a new wave of partners and other senior lawyers making once-un-thinkable moves from Western to Chinese firms. In May, Robert Lewis, Beijing man-aging partner for the former Lovells, left that firm to join Shanghai-based Allbright Law Offices. Around the same time, leading Beijing corporate partner Rupert Li left Clifford Chance, where he was a member of the firm’s partnership council, to join King & Wood as international managing partner [see “The New Mandarin Class,” page 60]. A month later, DLA Piper partner Ghislain de Mareuil also made a move to Allbright. In November, Jun He Law Offices recruited corporate lawyer Stephen

More and more, Western partners are making the once-unthinkable jump

to Chinese firms. Call it the ultimate expat experience.

BY ANTHONY LIN

“I SAW THE WRITING ON THE WALL,” SAYS MARY “MEG” UTTERBACK, WHO MOVED FROM PILLSBURY

TO KING & WOOD LAST SUMMER. “I’M A LOT BUSIER NOW THAT I’M AT A CHINESE FIRM.”

T H E

L AT E R A L R E P O R T

P h o t o g r a p h B y D A N I E L E M AT T I O L I

F RO M T H E I N S I D E

58 February 2011 | americanlawyer.com

ER

IC P

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Wozencroft, the former co–managing partner of Arthur Marriott & Associates, a Hong Kong–based firm affiliated with Dewey & LeBoeuf. Last year, Jun He also recruited two counsel from Baker & McKenzie: trademark lawyer Paul Schmidt in Beijing and labor and employment spe-cialist Jeffrey Wilson in Shanghai. In the United States, Jun He lured James Zhu from Perkins Coie and King & Wood hired Matthew Seiden from Arnold & Porter.

Their numbers are still relatively small, but that such moves are taking place at all illustrates how far leading Chi-nese firms have moved up the practice food chain in recent years. Interna-tional firms originally poured into China—and continue to do so—large-ly to represent multinationals invest-ing or operating there. But increasing-ly those multinationals are turning to local firms for such “inbound” China work. Last year Pfizer Inc. turned to King & Wood to get its $68 billion merger with Wyeth through China’s new antitrust regulations. Jun He is advising The Dow Chemical Compa-ny on a $10 billion joint venture with Shenhua Group Corporation Limited, China’s largest coal mining company.

For Chinese firms, bringing aboard experienced Western lawyers is a way to deepen and expand relations with multinationals. And for many Western law-yers, moving to a local firm may represent their best chance of preserving a vibrant China practice. While their old firms carefully danced around restrictions barring them from local law practice, they now find a plethora of once-forbidden as-signments close at hand. Those who felt forgotten in small branch offices now work in humming headquarters with scores of colleagues.

But there are new challenges, too. Routine functions like marketing, training, or even billing may not be routine at all. And practice restrictions haven’t gone away completely: Lawyers who are not Chinese nationals, even those working at Chinese firms, cannot be admitted to the bar in China and therefore still cannot sign most documents or make court appearances. How big a professional obstacle that proves to be is just one of many questions these Western lawyers will face in navigating their new Chinese careers.

AT BASE, THERE’S A SIMPLE REASON why Western lawyers are joining Chinese firms. It’s where the work is. “There’s definitely a large segment of the market, both among do-mestic clients and multinationals, that has decided they only want to work with local firms,” says Lewis, who works in Allbright’s Beijing office. Although he declined to name clients on the record, he mentions a global luxury hotel chain, an international professional services firm, and a well-known American brand as recent clients—and recent converts to local firms.

King & Wood’s Utterback says she’s seeing the same trend. “I saw the writing on the wall [with my clients],” she says. “I’m a lot busier now that I’m at a Chinese firm.”

That wasn’t always the case. When international firms like the now-defunct Coudert Brothers and Baker & Mc-Kenzie came to China in the late 1970s and early 1980s,

there were no Chinese law firms. Expat lawyers were really the only ones who could guide multinationals like The Co-ca-Cola Company or General Motors Corporation into the China market through the country’s newly drafted foreign investment laws. Just a few years ago, despite practice restric-tions introduced in the early 1990s, it still seemed that for-eign firms would continue to dominate China practice. But, step by step, the relatively new Chinese firms made inroads.

“Starting from 2000, I started to see a lot of the plain-vanilla [foreign investment–related work] start to move,”

recalls Allbright’s Lewis. “By the 2005 time frame, when we were starting to see significant activity in inbound M&A, I thought that was going to be a safe harbor for the foreign firms, something of a protected market. But what we’ve seen over the past several years is that market has also moved to a significant degree.” Though their place-ment in league tables varies year to year, Chinese firms are frequently near the top in mergermarket’s Greater China M&A ranking by both volume and number of deals. In par-ticular, 2009 was a banner year, with Chinese firms taking four of the top six slots.

Now Lewis sees a lot of private equity and venture cap-ital work going to Chinese firms too. Shanghai’s Fangda Partners regularly represents The Carlyle Group, Bain Capital LLC, The Blackstone Group, TPG Capital, and others. “A lot of those clients are quite comfortable work-ing with local firms,” Lewis says. “The start-up tech firms now making acquisitions in the China area also quite will-ing to give consideration, if not priority, to local firms.” Despite the rise of large domestic Chinese companies as a new client base, major Chinese firms like King & Wood and Jun He say multinationals account for more than half of their revenues.

Price is clearly driving a lot of the movement. Though the rates of domestic firms have gone up in recent years, they are still considerably lower than those of interna-tional firms. Allbright’s Lewis estimates that his hourly rate dropped by over 40 percent by moving to a Chinese firm. Meanwhile, Chinese firms have brought on more Chinese lawyers who studied at U.S. law schools and worked at inter-national firms. King & Wood says a third of its 200 partners have previously worked at international firms—usually as associates—and half have earned law degrees abroad.

Foreign firms, Lewis believes, will continue to have an edge when it comes to the highest-end cross-border work.

Allbright’s Robert Lewis says he used to think

that inbound M&A was “a safe harbor for the

foreign firms, something of a protected market.”

Not any more.

The American Lawyer | February 2011 59

“If it’s outbound, and it’s a billion-dollar deal,” he says, “you’re going to see a major international firm on that because everybody needs that comfort. But if it’s down at [the] $100 million level or below, that’s a toss-up.”

EVEN WITH THE CHANGED economic realities, it still takes a particular kind of Western lawyer to join a Chinese firm. There are performance expectations, of course. “I am not just a token laowai,” says Utterback, using the Chinese term for foreigner. “ . . . King & Wood did not hire me just be-

cause I am a Westerner. Like any other firm, King & Wood brings on partners because of their overall value, including book of business.”

One of Utterback’s longtime client relationships illus-trates that value proposition. Dallas-based Dresser, Inc., a maker of equipment for the energy industry, has around $500,000 to $1 million a year in China-related billings. Linda Rutherford, Dresser’s general counsel, is pleased that King & Wood’s rates are lower, but adds: “We wouldn’t have [switched firms] just for a rate change.” Utterback was

the real draw: With a relatively small on-the-ground presence in China, Dresser was more comfortable work-ing with someone like Utterback, who serves as the company’s general lawyer for all China work, including licensing, investigations, and litigation. “Meg is really one of the best lawyers I’ve ever worked with,” says Rutherford. It is still not clear how Dresser’s pending acquisition by General Electric Com-pany will affect its legal operations, Rutherford says. But GE is already a King & Wood client, and the firm—and Utterback—are working on the China antitrust filing.

Most of the Western partners now joining local firms are fluent Chinese speakers with long experience in the country. (Foreign lawyers who can’t read or speak Chinese are probably not cut out for Chinese firms, says Jun He’s Wilson: “It’s simple things, like the operating system on your comput-er’s in Chinese, so you need to be able to read that. You don’t want to have to call someone for help every time you log into your computer.”) Allbright’s Lewis, for instance, has worked in Bei-jing for 14 years, both at Lovells and as Asia general counsel for telecom equipment maker Nortel Networks. Jun He’s Wilson, who spent time in China before going to law school in the United States, practiced at Taiwan-ese firms for almost a decade before joining Baker & McKenzie in main-land China. “For me, [moving to Jun He is] not this big sea change,” he says.

But for those accustomed to ex-periencing China from the remove of an international law firm or a mul-tinational corporation, a local firm can seem a bigger leap. “Before, I was knee-deep in China,” says Lewis. “Now I’m neck-deep in it.” Says Ut-terback of her move to King & Wood: “I did a lot of due diligence first.”

Money isn’t the issue. Though asso ciates and other junior lawyers are paid sharply less at Chinese firms than at most U.S. firms, partners can fare

60 February 2011 | americanlawyer.com

quite well. King & Wood, for instance, says it had around $200 million in revenue in 2009 and, in its highest-yielding Beijing, Shanghai, and Hong Kong offices, profits per part-ner comparable to those at many Am Law 100 firms.

“In my experience, comp is at [the same level] or higher, or we would not move,” says Utterback.

Western lawyers’ hesitancy stems more from the sort of issues that get taken for granted in large Western firms. “To have a foreign partner come in, when not all the systems and procedures are similar to where they came from, that’s diffi-cult,” says King & Wood’s Handel Lee, who came from Vin-son & Elkins in 2005. “It’s one of the reasons you haven’t seen more foreign partners make these kinds of moves until now.” Utterback says recent modernization efforts at King & Wood, including the introduction of a computerized billing system, helped put her mind at ease. “A lot of my concerns centered on things like a billing system, a conflicts check, a decent en-gagement letter—the mechanics of working with clients,” she says. “I had friends at local firms and, at the end of the month, they’re typing their own bills. I couldn’t work like that.”

The way Chinese firms are organized can make imple-mentation of firmwide systems difficult. Most operate as collections of rainmakers leading relatively self-contained, highly leveraged practices. Communication among these groups can be scant, and top partners are loath to pay for things that benefit the firm, rather than their own practices.

“There’s much less consensus about the need to spend money on things like marketing, recruiting, training, and infrastructure,” says Lewis. He joined Allbright largely be-cause it had ambitious plans to expand beyond its Shang-hai base into Beijing. Yet the past several months have seen slower progress than expected. The firm’s gleaming new Beijing offices are still around 80 percent empty, except for Lewis and a handful of associates. “It took them four months to put me on the Web site,” Lewis says.

He acknowledges that such issues are likely less present at the bigger Chinese firms such as King & Wood and Jun He. The former moved to a partial lockstep compensation system years ago and continues to look at ways it can cre-ate a more integrated partnership.

Utterback says her fears about how Chinese firms oper-ate have largely proved unfounded. “People told me Chi-nese firms don’t cross-market,” she says, “but I’ve cross-marketed more since I’ve been at King & Wood than I did in five years at international firms.”

ONE OF THE ADVANTAGES that foreign firms routinely claim over Chinese firms is their greater resources and practice sophistication. But many Western lawyers who’ve crossed over say it’s just not so anymore.

Utterback points out that most foreign lawyers work in relatively small branch offices, so the resources immediately available to them can actually be quite limited. Mark Schaub, one of the first Western lawyers to join King & Wood, says the feeling of being on his own in China was one reason he left the German firm now known as Taylor Wessing for King & Wood in 2000. “I was acquiring most of my clients myself, so I just felt there was a disconnect between people in Germany telling me what to do and the fact that I was doing everything myself,” says Schaub.

Utterback notes that Chinese firms have a critical re-source that foreign firms lack: practicing Chinese lawyers. Though foreign firms have taken advantage of a loophole that allows them to advise clients on the “Chinese legal en-vironment,” they are still not allowed to directly employ any Chinese lawyers. Local hires must surrender their law licenses for the duration of their employment and work as “legal consultants” or paralegals.

“It’s wonderful to have experienced Chinese lawyers to help me,” says Utterback. “Some of them are former judges,

Li, a former top corporate partner at Clifford Chance and member of that firm’s partnership

council, is one of the biggest names to

have made the move from a Western to

Chinese firm.

➜ Rupert Li

❨ Moved to ❩

King & Wood

Seiden, a former intellectual property

partner for Arnold & Porter in Washington, D.C.,

last summer became the first

U.S. lawyer to join King & Wood’s

New York office.

➜ Matthew Seiden

❨ Moved to ❩

King & Wood

Wozencroft led Hong Kong corporate

practices for Denton Wilde Sapte, Barlow Lyde & Gilbert and a Hong Kong affiliate of Dewey & LeBoeuf

before he joined Jun He in Hong Kong

in November.

➜ Stephen Wozencroft

❨ Moved to ❩

Jun He

An IP specialist, Zhu was Beijing

managing partner for Perkins Coie before he helped launch a Silicon Valley office for Jun He in May.

➜ James Zhu

❨ Moved to ❩

Jun He

THE NEW MANDARIN CLASS

When King & Wood announced last May that it had recruited Rupert Li from Clifford Chance, the news set off shock waves in the

China market. His high-profile move was followed by other prominent hires at his new firm as well as at Jun He.

New York • Washington • Paris • London • Milan • Rome • Frankfurt • Brussels

in alliance with Dickson Minto W.S., London and Edinburgh

is pleased to announce that

Keila D. Ravelo

Wesley R. Powell

and

Matthew S. Freimuth

have joined the firm’s

Litigation Department and Antitrust Practice Group

in the New York Office.

Ms. Ravelo and Mr. Powell join the firm as partners

and Mr. Freimuth as of counsel.

Correction

In the December 2010 issue of The American

Lawyer we erroneously ran an incorrect logo

above the professional announcement for

Willkie Farr & Gallagher LLP.

Willkie Farr & Gallagher LLP announced that

Keila D. Ravelo, Wesley R. Powell and

Matthew S. Freimuth joined the firm’s Litigation

Department and Antitrust Practice Group in the

New York Office. Ms. Ravelo and Mr. Powell joined

as partners and Mr. Freimuth as of counsel.

so they can tell you exactly how things are going to be inter-preted. I don’t know how you’d access that kind of knowledge at an international firm.” Jun He’s Wilson says that advantage is all the greater because China’s legal system is still devel-oping. “Chinese cases aren’t reported, so when you have a colleague that’s actually argued these cases, that makes a huge difference,” he says.

But Wilson still can’t go and argue that case himself. Practice restrictions still apply to for-eign lawyers, so while those at Chinese firms now have coworkers free to go to court, file documents, and deal directly with regulators, they still cannot perform these tasks themselves.

“It’s a hurdle,” says Utterback. “It’s hard to know right now how much of one it will be. I’ve obviously managed to get by with-out doing those things before.” Such re-strictions were one of the reasons she gravi-tated more toward arbitration, where there is no clear prohibition on foreign lawyers, rather than litigation. Many of her matters involve outbound in-vestments by Chinese companies elsewhere in Asia.

“But even if [the inability to join the Chinese bar is] an impediment,” she points out, “it’s a lot bigger impediment at international firms that don’t have a bunch of active, ex-perienced Chinese lawyers down the hall.”

There will no doubt be other impediments ahead, as well as opportunities. Lawyers like Lewis and Utterback are still pioneers. Despite the recent spurt in their numbers, West-ern lawyers are still relative rarities at Chinese firms. Even at

King & Wood, which has most actively courted non-Chinese lawyers, Schaub counts only “four or five foreign faces.”

“I think some of the Chinese lawyers are really enthu-siastic about us being here, and some wonder why the firm

bothered,” he says. “Most probably don’t even know about it or think about it.”

Indeed, anyone who has worked in China over the past couple of decades has become accustomed to novelty, and the tumult which often accompanies it.

“I think people who are in China for a long time, they get accustomed to the chaotic environment,” says All-bright’s Lewis. “You stay for a while and you get addicted to the chaos. I guess I needed to up my dose.”

E-mail: alin@alm.com.

Western lawyers at Chinese firms still

can’t go to court themselves.

But now they have colleagues who can.