Free Trade Zone, Shanghai, China. Photo: Tomohiro Ohsumi/Bloomberg.

Herbert Smith Freehills has formed a joint operation with a Chinese law firm, becoming the sixth global firm to gain access to a local law practice under the Shanghai Free Trade Zone (FTZ) programme.

The firm has been given regulatory approval for a tie-up with Shanghai-based Kewei Law Firm. The two firms, while legally separate, are able through a joint operation office in the FTZ to interact with clients as one team and integrate Chinese and international law advice.

In addition to Herbert Smith Freehills, Linklaters, Ashurst, Hogan Lovells, Baker McKenzie and HFW are currently in association with Chinese firms under the FTZ scheme.

Kewei currently has 23 lawyers, including three partners – founder Xu Wenbao, corporate partner Gavin Guo and capital markets partner Stanley Xie. Guo was most recently a Shanghai-based shareholder with Minnesota firm Fredrikson & Byron. Earlier in his career, he practised with Herbert Smith for seven years.

Xie specialises in securities offers related to the Hong Kong Stock Exchange. In 2017, he advised the underwriters of China New Higher Education Group Ltd.'s $95.5 million Hong Kong listing. He moved to Kewei last year from Herbert Smith Freehills, where he was most recently a senior consultant.

Both firms have already collaborated on matters in corporate transactions, international arbitration and antitrust issues. Herbert Smith Freehills' Greater China managing partner May Tai, who led the efforts for the international firm, said a key benefit of having Kewei as a partner firm in China is that it helps improve operational efficiency while working with Chinese co-counsel on matters.

Foreign law firms are barred from giving Chinese law opinions and are required by law to work with local counsel on matters concerning Chinese law. Tai said that with Kewei, Herbert Smith Freehills is able to be a trusted adviser to its clients on more matters. She noted a recent Hong Kong arbitration matter in which a client also wanted to initiate arbitration in mainland China and was suddenly in need of Chinese counsel.

"We were able to get Kewei on board overnight and they are good to go in the morning," she said. "With ad hoc co-counsel, clients would never be as comfortable."

The responsiveness and efficiency also helps Kewei. Guo cited a recent antitrust mandate in which a client, in addition to Chinese competition law matters, also raised issues of antitrust regimes in Hong Kong and Korea.

"We engaged Herbert Smith Freehills' offices in Hong Kong and Seoul and were able to provide one-stop-shop service to the client," said Guo. "Kewei didn't have that kind of international network. We wouldn't haven't been able to help with the client's other needs had we not had the partnership with Herbert Smith Freehills."

Kewei has also successfully represented one of Herbert Smith Freehills' longtime clients, a German automobile company, before Chinese courts in a product liability case. The Chinese firm also recently worked on Chinese law matters for the global firm's London office in an M&A deal in China.

Partnering with Kewei also helps Herbert Smith Freehills improve offerings to Chinese clients, especially state-owned enterprises. Both firms are currently working on China State Shipbuilding Corp.'s FTZ-based project to build China's first cruise vessel.

In addition to collaborating on traditional legal services, both firms will integrate their low-cost alternative services arms. Eight Kewei lawyers are part of a team that handles standardised high-volume documentation work such as due diligence and contract drafting for in-house legal departments. The team adds Chinese law capability to Herbert Smith Freehills' own alternative legal services (ALS) centres in Shanghai and Beijing.

Guo said the two ALS teams have completed more than 10 projects already and have recently landed a mandate from a global hotel chain operator to review franchise agreements in China. According to Tai, the combined ALS offering is the most popular request among clients.

In addition to the three partners, Kewei has recruited lawyers from premium Chinese firms, including King & Wood Mallesons, Fangda Partners, JunHe and Jingtian & Gongcheng since last year. Guo said Kewei is planning to add more lawyers during the next six to 12 months and expand collaboration areas, including capital markets, data privacy and financial services.

"We are very ambitious for our China practice," said Hebert Smith Freehills' Tai. "Kewei has [Herbert Smith Freehills'] support to grow. We have no plan to keep it a boutique."

Related Stories:

Linklaters Becomes First Magic Circle Firm to Gain Access to Chinese Law Capability

Herbert Smith Freehills Launches Alt Legal Services Center

Is Linklaters' China Alliance a Game Changer?