When it comes to negotiating, Chinese companies view American companies as easy marks: impatient, unfocused and too willing to compromise to avoid losing out. Accordingly, Chinese companies often employ the following three negotiating techniques:
1. Wear down the American side down with endless issues. This tactic actually has two variants. In the first variant, the Chinese side raises a series of issues. Once these initial issues are resolved, the Chinese side then raises a series of unrelated new issues. This process never stops, because the list of issues is endless. The second variant is for the Chinese side to make several unreasonable demands and then refuse to address the American company’s concerns at all. Both variants are designed to induce the American side to concede on all major points out of a desire to keep the deal moving forward….
Ed. note: Please welcome our friends from OZY. We’ll be sharing some of their great law-related content in our pages.
International law enforcement is an enticing idea.
There are real villains and real victims. But sometimes an international legal solution is worse than no solution. This is true of a number of popular proposals on the table today for supposedly bolstering our international legal order. Here’s what proponents of those ideas get wrong about international law:
At least once a month, one of the China lawyers at my firm will get a call from someone asking us to form a “China company” for them before they start doing business in China “next month.” The problem with this is that forming a China company typically takes at least four months and after you finish this post you will understand why.
American lawyers often take on domestic company formations as a loss leader because the work tends to be fast and easy and they expect that the firm will get additional legal work once the company is formed. With China company formation, I often joke that the process is so onerous that our client never wants to speak with us again after we finish…
I estimate that 90 percent of U.S. companies doing business in or with China have intellectual property requiring protection from China. Therefore, it is always a surprise to me how many of these companies seem to treat their intellectual property in China as an optional or secondary matter when it really should be one of the first issues they consider when approaching the China market.
Let’s first get clear what I am talking about when I use the term “intellectual property.” IP is not patents, trademarks, copyrights, etc. These are simply tools for protecting intangible assets.
A few weeks ago, China’s police accused GlaxoSmithKline’s former head of China operations of making illegal payments to Chinese doctors to boost GSK drug sales. Last fall witnessed the high-profile trial, conviction, and life sentence of Bo Xilai, the former head of the Chongqing Communist Party, on bribery charges. These two cases send a clear warning: Beijing is cracking down on corruption. Hard.
The GSK case shows that China will not tolerate corrupt activities by foreigners in sensitive industries, especially when such activities result in higher consumer prices. Beijing going after a foreign company for allegedly increasing health care prices is a smart political move, especially since the Chinese web is rife with complaints about exactly that.
But at the same time, it has become clear that Beijing is serious about rooting out corruption. The Party leaders in Beijing know that widespread corruption weakens their legitimacy and they are looking for ways to combat it. The important link between the Bo Xilai and the GSK cases is that they both involve defendants — a political elite and a foreign entity — whose arrests have engendered widespread discussion and sent a strong signal that no one in China is safe from prosecution. While Westerners are mostly complaining about the GSK arrests (multiple GSK employees have been arrested in addition to its former head of China operations), the Chinese internet is mostly loving it.
As a foreign company doing business in China, how should you react to the recent corruption crackdown?
I am writing this from Hanoi, Vietnam, where I have been for the last week, working on legal matters for American companies doing business in Vietnam. Viewing firsthand how Vietnam has responded to this week’s anti-Chinese riots has prompted me to write on the impact those riots and the sentiments that led to them might have for American businesses in Vietnam.
Many American companies doing business in China have what is commonly referred to as a “China plus one strategy.” Such companies will have the bulk of their Asian operations in China, but will also be active in at least one other Asian country to hold down costs or reduce over-dependence on China. The increasing cost of labor (and other inputs) in China has accelerated the number of companies considering this strategy.
If you do a Google search for “China plus one,” Vietnam is listed one, two and three as the “plus one” that specifically mentions another country. It is also the country my law firm’s clients most often mention when considering where to go outside China.
There are three rules for making contracts enforceable in China:
Make the jurisdiction a China court.
Make the governing law Chinese law.
Make the governing language Chinese.
American companies routinely insist on contract provisions that effectively render their contracts unenforceable in China. By their own efforts, they make their contracts worthless, much to the amusement of the Chinese side of the transaction.
It is perhaps a truism by now, but if you are doing business with China, you need to be on your guard against fraud. Recently, an old chestnut known as “the switched bank account scam” has seen a dramatic resurgence, because it has become so easy to perpetrate and so difficult to prevent.
I get at least an email a week from law students seeking advice on what they should be doing to secure a law firm job involving China. This post is my once and future answer to those emails.
Two kinds of firms have a China law practice: mega firms (I began my career at one) and high end boutiques (I founded one). A small number of in-house lawyers also do China work, but nearly all of these lawyers went in-house after working for a mega firm or a high end boutique. Both kinds of firms generally interview only law students with top grades from highly rated law schools.
This means that entry-level China law jobs in the United States are generally limited to only the best students at the best schools. On top of this, most mega firms do not have recent graduates work on international law matters because they believe associates must first master corporate law or tax law or dispute resolution or labor law or IP law or whatever before being tasked with the additional layer of complexity of an international matter.
So what are the options for a law student who wants to practice China law?
Whenever clients ask about filing a trademark in China via the Madrid System, our answer is simple: filing a national application directly with the Chinese Trademark Office (CTMO) is better.
China’s trademark system is complicated and overseen by oftentimes capricious examiners, especially as compared to the one-size-fits-all Madrid application that makes registering a trademark in China seem so easy. All you have to do with a China trademark filing via the Madrid System is check the box marked “China.” This lulls Madrid applicants into a sense of complacency, but all too often the result is a rejection that could have been avoided with a national application in China.
Madrid applications are supposed to be cheap and quick, but fixing Madrid problems after the fact is neither. This “Madrid problem” is exacerbated by U.S. lawyers comfortable filing in Madrid but with no experience filing in China.
Trademark prosecution in China is highly mechanical. For the vast majority of applications, you file an application and then wait 18 months for your trademark to be registered or rejected. (A slight oversimplification, but not by much.) China has no CTMO equivalent to a USPTO office action, no back-and-forth with trademark examiners, and no chance to amend an already filed application.
For this reason, the meaningful work for Chinese trademark applications occurs before you file the application…
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past seven years. You can reach them by email: email@example.com.
Things have changed recently in Korea – a few of our US and UK client firms are looking, very selectively, for a lateral US associate hire. Until just recently, there was not much hiring like this going on in Korea, since US and UK firms started opening offices there. We have already placed two US associates in Korea in the past month at top firms. Most of the hiring partners we work with in Korea do not actively work with other recruiters.
If you are a Korean fluent US associate in London, New York or another major US market, 2nd to 6th year, at a top 20 firm, with cap markets or M&A focus (or mix), or project finance background, and you are interested in lateraling to Korea to a top US or UK firm, please feel free to reach out to us at firstname.lastname@example.org or email@example.com. Our head of Asia, Evan Jowers, was just in Korea recently, and Evan and Robert Kinney will be in Korea in a few weeks. We are in the process of helping several firms open new offices in Korea (a number of which are interviewing our partner level candidates) and also helping existing offices there fill openings.
Professor Joel P. Trachtman has developed a unique, practical guide to help lawyers analyze, argue, and write effectively.
The Tools of Argument: How the Best Lawyers Think, Argue, and Win is a highly readable 200-page book, available for about $10 in paperback or e-book. Chapters focus on foundational principles in legal argument: procedure, interpretation of contracts and statutes, use of evidence, and more. The material covered is taught only implicitly in law school. Yet, when up-and-coming attorneys master these straightforward tools, they will think and argue like the best lawyers.
For most attorneys, time spent managing the books is a necessary evil at best. Yet it is undeniably a crucial aspect of running a successful practice. With that in mind, we invite you to view or download a free webinar by Above the Law and our friends at Clio to learn how to better manage your finances.
Take this opportunity to learn what it takes to streamline your accounting and get the most out of your time. The webinar agenda:
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