This is part two of a podcast interview with China Law Blog’s own Steve Dickinson on Technomic Asia’s Chinese Business Podcast. Today’s topic today is near and dear to my heart: the increasing role of business lawyers in China.
Kent: We will come back to IP here in a second, but you mentioned before the role of lawyers in China — people grabbing a lawyer to go sue, or something. Talk a little bit about the role of the China lawyer. How does it differ from the roles lawyers play in the US and in particular, as yourself, as a foreign lawyer, what are your limitations, things like that.
Steve: Again, lawyers are much more active in business transactions in China than they are in places like Korea and Japan. They are not as active as in the United States, but they are surprisingly active in China, and that’s something that takes Americans who have been here a long time to get used to. Ten years ago, when you went to a business meeting in China, no Chinese would bring their lawyer. Now it’s very common for the Chinese to show up with a lawyer.
Kent: We just had a deal we were doing last year, and the guy showed up with a lawyer, he never said he was going to, and it shocked me for a second until I thought, “Well, good!” I was actually kind of glad.
Steve: It’s a very good thing, but I meet Americans who will tell me, well, Steve, you can’t come to the meeting, because no Chinese would ever bring a lawyer to a business meeting, and I say that’s ten years old, guys, and then they’ll go to the meeting, and then find out there’s a lawyer on the other side, and they don’t have their lawyer with them. But the use of lawyers is still very different in China than in the United States and that’s what gives me a role to play. And this is it: I mentioned that Chinese are quite happy to grab a lawyer and say, go sue somebody. That’s because something has already happened — it’s passed. Now they need to go to the Court to do something about it. What is typical in China is that people will use a lawyer to perform a specific task that the client has already decided needs to be done — executing. What I mean by that is, the client will tell the lawyer what to do. Now in the litigation context, well, that’s pretty simple, somebody harmed me, and now you go get redress and the lawyer says, fine, I’ll go do that. But, even in the business setting, what business people in China tend to do with a lawyer is to say, “here, go do this” and they tell the lawyer pretty specifically what they want done. And Chinese lawyers are used to saying “Yes, sir. I will do that for you” and it will cost you this much — pay me and I’ll go do it. What Chinese lawyers don’t do, and what Chinese business people aren’t used to having lawyers do, is provide advice. Provide counseling. A big problem that foreign companies that use a Chinese lawyer have, is they’ll come in and say, please do this for me. The Chinese lawyer will say, fine I’ll do that. And then a year and a half later, it turns out that was a terrible idea, and the foreign company will ask the Chinese lawyer, “well, why did you let me do that, and the Chinese lawyer will say, oh, I knew it was a bad idea from the very start, but you told me to do it, so I went ahead and did it.” I’ve asked Chinese lawyers why they’re like that, and they told me, Chinese business people don’t like being second-guessed. They like being the boss, and if they tell the lawyer to do it, they better do it, and they don’t take well to the lawyer saying, wait a second, why do you want to do that.
Kent: So the criticism of lawyers in the West, saying they’re always there to say no. Here, they won’t do that, they are always here to say yes, or salute, and go to it.
Steve: Right, it’s the opposite with Chinese lawyers. They won’t say no, they’ll never say no, they will say, yes, fine, I’ll go do that, even if it’s a terrible idea, even if it won’t work. They are trained in a hierarchical way that the client is king and they just do what the client says. So, because of that, Chinese lawyers are not used to providing advice. They are not used to looking at a situation and thinking through, what really is the best way to do it. And they also tend not to understand business very well, they aren’t really even in a position to give good advice in a business setting — they are in a position to give good advice about how to do a lawsuit. They are much more litigation oriented, they are much less business oriented. They have been pushed into business and IP and things like that lately, but they’re generally not good at it, because they’re never asked to really craft a good large-scale scenario.
Kent: I heard from a foreign lawyer in China a couple years ago, who described his role — and I would get your reaction to it — as foreign lawyers in china can’t practice law, but they can give advice. Would you read that statement, amend it somehow?
Steve: Well, here’s what I do. I perform in a lot of ways, the role of communication channel. I know what the American business person wants to know about, and I have the ability to get that information out of the Chinese side, so I work on both sides, just so that they can learn to communicate with each other. But we can give advice. My advice is always based very carefully on what the Chinese lawyers tell me the situation is. But I frequently have to sit for a long time with Chinese lawyers, to get them to give me the right information, because they are just non-plussed at why anyone would want to pursue that.
Kent: Right, why you’re asking for advice? It’s tell me what to do.
Steve: Exactly. So we have to struggle a lot, even in litigation. Litigation in China is conducted very, very differently than in the United States. The U.S. side will expect certain things to happen that are never going to happen in China, and the Chinese side will expect that the U.S. side understands what they want. And the U.S. side doesn’t understand at all what they want and so I go back and forth and provide guidance in that way. On the business side, it is true that I provide advice because I’ve done so many business transactions here in China. For instance, when an American company looking to do business in China asks me what is the best way to enter the Chinese market, I can say, well, from a structure standpoint — not the business standpoint — from a structure standpoint, here are the alternatives, what do you want to do? No Chinese lawyer would ever say, what do you want to do? They would never ask that question.
Kent: In providing options — and I think you’ve seen in the past ten years — and certainly in the past five years, there are more options. There are more options certainly from a business strategy perspective, you could find more partnerships you could find more companies willing to participate with you. And I would imagine from a legal perspective too, as the law matures, as the practice of it matures, there are more options as well.
Steve: That’s exactly right; there are almost a bewilderingly large number of options now. And again, Chinese lawyers really aren’t providing a lot of advice to foreign entrants to the Chinese market, on what those alternatives are. It’s really the foreign law firms and the foreign lawyers here in China that really provide the advice for foreign companies seeking legal advice on doing business in China.
Part 3 will be on common mistakes and misconceptions.