Leading German independent firm Haarmann Hemmelrath & Partner has broken new ground by becoming the first Western firm to secure a formal alliance with a mainland Chinese practice.

This month's deal sees the newly-formed four-partner Shanghai practice Hui Heng Partners sign a "long term entrustment agreement" with Munich-based Haarmanns.

The deal will hand Haarmanns guaranteed and exclusive local law coverage in the fast-growing Chinese legal market of Shanghai.

The four corporate partners are Benjamin Bin Zhao, Nuo Ji, Oliver Wijun Yan and Daniel Ye Wei, who list McDonald's, New York Life Insurance and B&Q among their clients.

The practice, which recently left the local office of a larger Beijing-based firm, will work with Haarmanns' own 12-lawyer Shanghai branch, which is currently staffed by French, German and non-practising Chinese lawyers.

The tie-up will be watched closely by rival foreign firms to see if it falls foul of the Shanghai Bar Association, which has traditionally resisted incursions into the local market by foreign firms.

However, Haarmanns believes it will avoid tough practice restrictions as the tie-up falls short of the establishment of a joint legal entity. The two practices will not be able to bill jointly, or share branding or fees.

However, German Shanghai managing partner Bernd-Uwe Stucken said they will "co-operate internally" and use the same law library. They will also operate from the same building.

"The key issue is that other foreign firms will try this once the message has got out. But this kind of structure can only work if there is trust," Stucken added.

He stressed that the deal had taken 12 months to finalise and that other firms would find it hard to develop a similar level of trust with local lawyers.

The Shanghai development reasserts Haarmanns' expansionary credentials, with the German firm so far establishing 23 offices around the world.