Siemens: How To Succeed In China

Wednesday, November 20, 2013 - 16:56

The Editor interviews Robert SikellisExecutive Vice President & General Counsel for Northeast Asia, Siemens.

Editor: Tell us about your background and what caused you to be interested in China.

Sikellis: My background is likely not the typical background of a general counsel of a major multinational. I started out as a criminal prosecutor for the Attorney General’s Office in Massachusetts, where I prosecuted a wide range of crimes, from narcotics violations to organized criminal activities. I eventually became head of the Attorney General’s Special Criminal Investigations Division, where I also launched the High Technology Crime Division, one of the first of its kind in the United States.

I then, like most government prosecutors in the U.S., went into the private sector, where I was deputy general counsel for a large U.S.-based consulting firm, while at the same time holding a position at Boston University School of Law, until I joined Siemens in 2008.

Many factors, both professional and personal, contributed to my interest in living and working in China.  From a professional perspective, China is an extremely important region for Siemens, as it is for most large multinational corporations (MNCs). It has tremendous growth opportunities and as a result gets a lot of attention from our senior management. Working in such an important, fast-paced and exciting environment is a tremendous opportunity.

From a personal perspective, China’s remarkable history, rich culture and wonderfully friendly people were a major draw for my family and me.

Editor: As executive vice president and general counsel for Northeast Asia of Siemens, what are your responsibilities, and where is your office located?

Sikellis: The vision of Siemens’ legal department is to enable Siemens to achieve its goals by protecting the company’s reputation for integrity, mitigating risk and capturing opportunities by exploiting the potential of law to create sustainable value. My work centers around making sure our talented lawyers are fulfilling this mission. One of my major responsibilities is to ensure that the operational activities of Siemens in China fully comply with the law. My other responsibilities include contract and claim management. My office is located in Shanghai, and I travel very often between Shanghai and Beijing, where we have another office.

Editor: How extensive are Siemens’ business and production activities in China?

Sikellis: For more than 140 years – since Siemens entered China in 1872 – the company has pioneered in cooperating with the country with its solutions, technologies and products, and has been known in the country for its quality, reliability, technological excellence and innovation. Nowadays, Siemens focuses its business in the areas of industry, energy, healthcare, infrastructure and cities. With nearly 32,000 employees, 19 R&D hubs and 76 operating companies across China, Siemens is one of the largest foreign-invested companies in China and has become an integral part of the local economy and society.

Editor:  What outside counsel do you use both in China and in other countries?

Sikellis: In China we use both local and international law firms, depending on the nature of the matter. Globally, Siemens has set up a panel of international law firms that we use. In China, we have also established a panel of top-tier local firms that we use as needed.

Editor: Is your company wholly owned by Siemens, or does it have local partners? If so, does this present problems, or does it make Siemens’ products even more attractive to its customers?

Sikellis: Siemens Ltd., China is wholly owned by Siemens AG, our parent company in Germany. As Siemens’ investment company in China, Siemens Ltd., China has set up quite a number of joint ventures with local Chinese partners in various fields. For example, at the end of 2011, Siemens and Shanghai Electric sealed the agreement to set up two joint ventures in China to better serve the world’s largest wind power market. One joint venture is engaged in R&D and production of wind turbine equipment for the Chinese market and for Siemens’ global supply network, and the other is responsible for wind turbine equipment sales, marketing, project management and execution as well as service in China. Siemens is thus continuing with the regionalization of its wind power business in key markets, and Shanghai Electric is further improving its core competitiveness. This is indeed a win-win scenario.

Editor: Is the quality of education in China sufficiently high so that talent is available to take on challenging assignments?

Sikellis: The quality of the education of the lawyers in our legal department, all of whom (except for me) are Chinese, is exceptional. We try hard to add to this as well: To fuel the company’s profitable growth, Siemens initiated its People Excellence initiative in 2010, which uses a holistic approach to ensure that the quality and quantity of people resources meet our business demands. Thus, Siemens has raised investment and attention in talent acquisition with the aim of attracting potential candidates earlier and acquiring the right talents in a timely manner. To give you a figure here, over 85 percent of Siemens Ltd., China’s employees hold bachelor and above degrees.

For legal professionals, legal education in China is a basic requirement. Many of our colleagues also have received overseas legal education.

Editor: Are you limited with respect to bringing skilled employees from Germany, the U.S. and other countries?

Sikellis: In big MNCs like Siemens, it is common for employees to include international delegates for some cross-country projects and international programs, etc., not only from Germany or the U.S. to China, but also from China to other countries. But for legal, it is more difficult for lawyers qualified in other jurisdictions to work on Chinese law matters. However, we do have internal personnel exchanges between Siemens China and other Siemens entities to enhance the collaboration and knowledge-sharing between headquarters and regional companies.

Editor: Do you export products from China, and are there any problems in doing so?

Sikellis: Siemens China’s business scope includes exporting products to other countries and regions.  We have not experienced problems in this area largely because we strictly adhere to existing export control laws. 

Editor: On the import side, do you encounter issues with respect to importing equipment and raw materials?

Sikellis: We are facing the challenges of dealing with increasing importations every year and the much more advanced internal requirements of being compliant with China’s Customs’ requirements.

We have a strong internal Export Control and Customs Compliance Team and ICP (internal control program) to control all related potential risks of the import/export business in order to ensure consignments and related operations are in compliance with China’s Customs’ rules and regulations.

Editor: Are there tax issues of concern?

Sikellis: China has apparently made significant progress in the construction of a sound tax regime over the past decades after the “opening-up and reform.” The country’s accession to WTO further enhanced compliance with international standards and globally acknowledged practices in the fields of fiscal and taxation affairs. However, as a foreign-invested company operating in China, we expect further improvements will be made to bring more certainties in execution of policies, clearer stipulation and standardized implementation of tax regulations, and more simplification of administrative procedures.

Editor: Concerns have been expressed with respect to the protection of intellectual property in China, particularly with respect to intellectual property developed in China. Have these concerns been addressed?

Sikellis: We have noticed that Chinese patent applications have grown tremendously fast over the past 10 years.  This reflects the great efforts and progress of IP protection made by the Chinese government and Chinese enterprises. In parallel, however, we also have seen quite a number of low-quality patents, in particular utility models. These low-quality patents would have a negative impact on the Chinese innovation community. As for IP enforcement, we are happy to see the Chinese judicial system has put IP enforcement high on its agenda. We would, however, like to see more serious penalties for IP infringement. Building up an effective IP protection system must include a reasonable compensation scheme against IP infringement.

Editor: How important is building good relationships with government officials?

Sikellis: In China’s changing economic dynamics, the Chinese government is a key stakeholder as it not only defines the country’s development strategy, but it also regulates industrial policies and rules, which in turn direct market size and the growth of industries and sectors. As a global manufacturing and infrastructure solution provider, Siemens’ business portfolios and competencies complement China’s economic growth needs. With over 140 years in China, Siemens has witnessed, and contributed to, China’s incredible success.  In short, we have become an integral part of China’s economy. Maintaining an open and transparent dialogue with the Chinese government is critical to continuing to achieve a win-win result for both parties. 

Editor: Do you feel that your company is competing on a level playing field with state-owned enterprises (SOEs)?

Sikellis: There are many rapidly emerging local “Chinese champions.” We welcome the competition in a healthy and fair market environment. This is how Siemens, over the course of its 160-year history, rose to the status it has today. Strong competition on a level playing field makes for a very attractive market and benefits all competitors and the country as a whole.

We fully share the Chinese government’s goal of building an even stronger and more innovative nation. Siemens in China is also willing to contribute to this course and expects to compete with SOEs on similar business terms.

Editor: Do you feel comfortable that controversies will be resolved in a fair manner?  

Sikellis: In general, most of our disputes are subject to arbitration, either in China or outside China. So far, I am comfortable with such a dispute resolution mechanism.