One of the largest research projects to canvas the views of Asia-Pacific GCs found local legal teams often have very different agendas from global counterparts. Leigh Dance (pictured, above) reports

A window into the concerns and priorities of senior corporate counsel in China is provided in a new study conducted by the World Law Group (WLG), in conjunction with LexisNexis Martindale-Hubbell and ELD International.

While the senior counsel participating in the Global Counsel Agenda 2012 study come from 30 countries worldwide, nearly 42% are based in Asia, with 20.4% in China (the questionnaire was provided in Mandarin).

Lesser concentrations of Asia respondents are Japan, Hong Kong, Singapore and India – 12% of study respondents worldwide have their company's head office in China (compared with 23% in the US, 9.2% in the UK and 8.3% in Japan).  

The breadth of the WLG study enables us to see how corporate counsel leaders in China and in Asia see their challenges differently to the rest of the world.

In addition, perspective and agenda of general counsel in Asia differs considerably from those in Western economies. For example, far more senior counsel in China (nearly all in GC positions or one level below, with large multinationals) are concerned about "supporting our organisation in a major transaction".

This is a sign of the impact of business growth at home and abroad for Chinese corporate counsel. Far fewer China-based counsel consider the management of compliance challenges as a big concern (31.8% for China respondents compared to 48% worldwide), though they are more concerned than counsel elsewhere in the world to "effectively cover legal risks in emerging markets" and "keep up to date with so much new regulation".

I spoke with colleagues in Asia about their views on the variances. Angell Xi, Asia-Pacific counsel at GE Intelligent Platforms in Shanghai, feels compliance capabilities have become increasingly critical for Chinese companies who want to play in the world arena.

She believes compliance registers lower as a concern primarily because it is still a relatively new field in China and is therefore a lower priority than in the EU and North America, for example.

"Because compliance talent is hard to find in relation to the demand, a counsel with strong compliance expertise and experience is sought after," Xi says.

"The 31.8% figure is actually not bad, signifying that the gap between China and the rest of the world is narrowing. It shows compliance has moved to the top agenda of general counsel and senior management in China."

Among Chinese respondents, the areas of regulatory enforcement taking greatest focus varied widely, with anti-bribery/corruption and competition regulatory concerns significantly lower in China than the rest of the world.

Employment regulation is a major concern in China, as well as financial reporting. Health, environment and safety regulation was a key concern for only 4.7% of China respondents, compared with 21.4% respondents elsewhere worldwide.

International trade regulation concerns legal teams in Asia more than counsel in Europe or North America. Gerald Singham (pictured), partner at World Law Group member firm Rodyk & Davidson in Singapore, does not find this surprising given how vital foreign direct investment is for the development and growth of local Asian economies.

"Anti-bribery may receive less attention from corporate counsel due to cultural and historical circumstances in Asian countries where anti-corruption may not be actively promoted as an enforcement priority," he says.

Legal function priorities

Differences in China, and in Asia-Pacific as a whole, are even greater when it comes to top priorities for the legal function.

Law department leaders appear to focus on improving the technical and teamwork skills of their in-house team to respond to burgeoning demand.

Working together effectively in the corporate legal function, improving contracting management and improving knowledge management capability are the top three priorities.

What is behind the higher focus among Chinese and other Asia counsel on improving contracting management? The likely reason is growth and risk management.

Singham says: "General counsel in Asia have expanding responsibilities in contracting in other jurisdictions and less experience in negotiating fees, alternative fee arrangements, timelines and scope of work, and overseeing compliance.

"Contract management includes monitoring budgets and costs overruns, as well as resolving disputes with other parties in the contract, and these are skills business clients are looking for in their in-house and external lawyers."

AIG's China general counsel Sharon Chen comments: "The study shows that, for law departments in China, both knowledge management and efficiency improvement are high priorities.

"In fact, they are inter-related and connect to the reality for China-based in-house counsel: a heavy workload, limited resources and a profession which, in China, has a far shorter history.

"Knowledge management (KM) is viewed by corporate counsel as a promising tool to increase productivity, and efficiency improvements enable us to do more with less." 

Chen's comments are supported by the study's finding that in-house counsel in China are far less satisfied that their in-house legal function can cover legal needs in emerging and high-growth markets (36% said they are unsatisfied with their ability, compared with 23% of respondents worldwide).

Swee-Kee Ng (pictured), partner with Shearn Delamore in Kuala Lumpur and Asia-Pacific regional director of the World Law Group, agrees that KM is a move for efficiency and better use of resources.

He says: "To cover dozens of countries in the region, all with many new laws and regulations – it's understandable that in-house counsel in Asia see improved KM as essential to meet their companies' legal needs as geographic reach and complexity grows."

Big spenders?

Reducing external costs was a surprisingly low priority, selected by only 3% of China-based respondents as one of their top three priorities, compared to 39% of senior counsel elsewhere around the world.

Xi says: "Most corporate counsel I know are under budget pressure and are trying their best to spend smartly.

"However, perhaps because China is still an investment destination, external legal costs for M&A and many other big deals and projects cost money that companies are happy to spend, and in most cases the budget is covered in other areas.

"Additionally, a number of companies here have limited in-house counsel headcount and so they will send work to law firms."

Matt Barter, GC of Asia-Pacific and Latin America at computer manufacturer Lenovo (a half Chinese, half American company with about $29bn (£17.9bn) in revenues) says he believes China-based corporate counsel continue to look for value when engaging outside counsel.

Barter (pictured), based in Beijing, sees four possible factors at play causing the lower emphasis on external costs:

a) Growth – with rapid growth and more credibility for the corporate legal function, demand for legal support has risen. "This is all the more relevant as Chinese companies increasingly look to expand their business internationally," Barter says.

b) Talent shortage – there is still a relatively limited pool of high-value legal talent (dual-qualified, bilingual, meaningful local experience, etc) in China. Barter finds that if companies cannot recruit such talent in-house, they will rely on law firms that have lawyers meeting these criteria.

c) Evolving legal landscape – "It's difficult to keep up with fast-evolving laws. Since there is still insufficient transparency and consistency in the application of laws in China, corporate counsel may seek additional insight from outside counsel," Barter explains.

d) Relationships are central to Chinese business culture – as local companies increasingly look beyond China to grow, corporate counsel will need international advice on expansion projects (M&A, joint ventures, establishing new legal entities, operations, etc). "They will tend to seek advice through an existing local relationship within an international law firm or network," Barter says.

But perhaps what is most telling about the WLG Global Agenda 2012 study is the extent to which senior global corporate counsel in China and all corners of the world share common concerns and priorities.

It is a compelling sign of globalisation: there are some regional variations when it comes to legal risk management, but essentially we are all in the same boat.

Leigh Dance leads legal services consultancy ELD International. She implemented the Global Counsel Agenda study with the World Law Group and its 52 member firms.