"Many Chinese place great importance on ‘guanxi’ which, in the legal context, describes the trust and connection built up over time between lawyer and client."
Managing Partner CMS Shanghai
As we expand our footprint globally into new cities and jurisdictions, an awareness of the cultural nuances that define the practice of law in each country is key. Here we look at the differences and similarities between the Chinese and Chilean markets through the eyes of our management teams on the ground.
Shanghai is around 19,000km from Santiago, yet the two legal centres have more in common than you might think. Client loyalty in both jurisdictions is key, with individual connections built up over years often considered more important than the overall brand strength of a particular law firm.
CMS Shanghai Managing Partner Ulrike Glueck says, “Many Chinese place great importance on ‘guanxi’ which, in the legal context, describes the trust and connection built up over time between lawyer and client. They want to get to know and understand you before entrusting you with a transaction.”
A similar culture exists in Chile, which has a far smaller legal community than China yet the same attitude to client loyalty.
CMS Chile Managing Partner Ramón Valdivieso says, “Companies tend to stick with the same law firms they have worked with over time. For new business, it is important that the lawyer who presented to the client is the same lawyer doing the work after they won the pitch. We therefore need to be adept at both.”
Impact of macro-economics
Recently, relations between the US and China, and the possibility last year of a trade war, have impacted business sentiment in both jurisdictions.
Ulrike Glueck says, “Talk of a trade war has affected the Chinese economy and this has impacted our clients’ attitudes to risk and deal-making.”
Ramón Valdivieso agrees, adding that the firm is attentive to the possibility of a trade war and its potential impact on South America. However, he believes that this must be seen in the context of a booming local economy.
He says, “We have seen 4% GDP growth in the past year and a trend for large companies to use Chile as a base to facilitate other investments in the region.”
Influx of foreign law firms
Both countries restrict the ability of international lawyers to practise law. In China, foreign law firms are not allowed to issue legal opinions on Chinese law, but can only advise on the general legal environment and international law, and cannot employ local lawyers unless the latter suspend their Chinese practicing certificates. Foreign lawyers in Chile, meanwhile, can only practice public international law although there is no restriction on international firms hiring local lawyers.
Nonetheless, the influx of foreign law firms into both markets, as well as (in China) the massive growth of local law firms in recent years, has increased competition, leading to pricing becoming a significant factor in both markets.
Ulrike Glueck says, “Before the financial crisis we were rarely required to give fee quotes and work was usually done according to an hourly rate. Now we have to give estimates on everything and clients are more concerned with having legal costs signed off in advance. This is particularly the case for local Chinese clients.”
In Chile, the market is slowly witnessing a similar shift in attitudes towards billing and fee estimates.
Ramón Valdivieso says, “Clients now insist on a fee quote in advance, but the number of lawyers in Chile able to advise on a major transaction is relatively small so we are able to show our value in other ways. Many law firms are entering the market and we have worked hard to position ourselves away from the more routine work and as lawyers who can handle the most complex and important business matters.”
Recruiting top talent
As with all legal markets, the need to attract the best legal talent by offering progressive career structures and a work / life balance has become a top priority in both the Chinese and Chilean markets.
In China, top talent is increasingly willing to go in-house in a bid to achieve a more balanced working life.
Ulrike Glueck says, “It is a major issue for law firms to retain the best talent and it is a big challenge for us to make our lawyers feel they have sufficient work / life balance that makes them want to commit to us long term.”
In Santiago, market consolidation has led to a talent war, with some firms suffering from high levels of associate attrition as a result.
Ramón Valdivieso says, “We are focused on retaining our best legal talent and it helps that we are part of an internationally recognised global brand such as CMS. We offer our lawyers a real career path and this, combined with being competitive on salaries, means we have not experienced the rates of attrition experienced by others in the market.”
Despite the significant cultural and regulatory differences between China and Chile, it is clear that their respective legal markets have much in common. It is not a coincidence that we have recently begun sending secondees between Shanghai and Santiago as we continue to cement the ties and connections that bind us across the world.