Editor: Would each of you say something about your background and professional experience?
Johnson: I was qualified as a lawyer in England in 1986 and moved to Hong Kong the following year, where I qualified to practice before the Hong Kong courts. In 1993 I became a partner at Herbert Smith and in 1996 the head of the Asia dispute resolution group. That practice covers China, Japan, Singapore, Bangkok and Jakarta. My particular area of expertise is with respect to securities matters, in particular shareholder-type disputes and what your American readers would term SEC work. I am also engaged in a considerable number of disputes with a cross-border component.
Meng: I graduated from Beijing University in 1984, following which I obtained a doctoral degree in France and pursued an academic career. I went into private practice in 1990, and in 1991 I went to New York to study for a year, during which I qualified at the bar. After qualifying in France, I moved with Cleary, Gottlieb, Steen & Hamilton to New York, then Hong Kong. I was doing security and China FDI work until 1996, when I moved to Freshfields and started focusing on projects work. I joined Herbert Smith as a partner in April 2000. My specialty is infrastructure projects, as well as foreign direct investment with a specific focus on natural gas, electricity and real estate. For the past two or three years I have been increasingly involved in cross-border mergers and acquisitions and joint ventures in China. In October of last year I moved from Hong Kong to Shanghai to expand the firm's practice there.
Xiao: I completed my undergraduate study work at Zhejiang University in 1981and went on to law study at Beijing University. I did not complete the degree course and left Beijing University in 1983 for the London School of Economics. This was followed by a Master of Law degree at LSE and a PhD in law at King's College, London. I was with Slaughter and May in London and Hong Kong for about seven years and then Johnson Stokes & Master for nearly two years in Hong Kong, and I have been a partner at Herbert Smith since 1996. My practice is a general company and commercial one, with a focus on debt and equity issues by PRC issuers in international capital market and mergers and acquisitions work.
Editor: Please tell us about the factors that led to Herbert Smith's presence in China.
Johnson: We first moved to Hong Kong in 1982. That was part of an effort by the firm to internationalize its practice. One of the important factors for us as an English law firm - in addition to our recognition of the importance Hong Kong has in the economy of East Asia - was that our lawyers had an automatic right of admission to the Hong Kong bar at the time. That gave us a competitive edge over lawyers coming from other jurisdictions, who were required to qualify and sit for examinations to become members of the Hong Kong bar. Over the past 20 years the office has grown significantly and, of course, its work has grown and changed considerably. Over time, with the dramatic increase in China-directed investment, much of that work has come to be focussed on China and its capital needs. Related contract and dispute work has evolved along parallel lines.
Xiao: As China-oriented work in our Hong Kong office steadily increased, the idea of opening an office in Beijing or Shanghai became imperative. At the time, unfortunately, the government permitted each overseas law firm to have only one office in the country. We were engaged in a considerable amount of privatization work, and since the major decisions were made in Beijing, that was our choice. That office was opened in 1999. We prepared an application for a Shanghai office, however, and three years later - when regulations governing foreign law offices were liberalized - we were able to open a second office there.
Editor: Does each of these offices have a particular focus?
Meng: Our Hong Kong office is a full-service office. The Beijing office has a particular focus on corporate finance, direct investment and mergers and acquisitions, in addition to finance and banking and dispute resolution. The Shanghai office works closely with Hong Kong and Beijing in relation to corporate finance, foreign direct investment, projects and commercial matters. The Shanghai office is also advising both international corporations and Chinese enterprises.
Editor: And the lawyers at the three offices?
Xiao: In Hong Kong, most lawyers are members of the Hong Kong bar, and a substantial number are English-qualified as well. In Beijing and Shanghai we have a diverse group of people: of 14 lawyers in Beijing, one is qualified in Singapore, four in Hong Kong and England, one in the U.S. and the rest in the PRC; in Shanghai, one of the lawyers is qualified in France.
Editor: Please tell us about the clients.
Meng: The Shanghai office has a very diverse group of corporate clients, including English, French, German, Belgian and Amearican. There are also Hong Kong companies and, increasingly, Singapore and Indian companies among the client group.
Johnson: In Hong Kong we have a very strong client base which includes, as you would expect, a number of major Hong Kong publicly-listed companies. We also work for a number of multinationals, and in particular for most of the major U.S. and European investment banks.
Xiao: The Beijing office works for many of the major multinationals as well, including the principal investment banks. There is also an increasing volume of work from large domestic Chinese corporations.
Editor: Has China's accession to the World Trade Organization had an impact on the firm's Chinese offices?
Xiao: Yes, but it is the case that prior to China's accession to the WTO Herbert Smith was already engaged in a considerable variety and volume of China-related transactions. Since accession, the pace has picked up, and it is moving in both directions. There are more multinationals involved in foreign direct investment projects now, there is an increase in Western-style mergers and acquisitions work, and there is a great deal of outgoing investment activity on the part of PRC companies.
Editor: What about the resolution of disputes? Do your attorneys have recourse to Chinese courts in, say, the interpretation or enforcement of contract provisions?
Johnson: In Hong Kong we have the ability to advise on local law and to appear before the local courts. Elsewhere, in common with all international law firms operating in China, we cannot advise on PRC law or appear before the local courts. We will work with a local firm, typically, where we have a client engaged in a dispute proceeding through the court system.
Editor: Do your attorneys utilize arbitration and mediation as a means of resolving disputes?
Johnson: Yes. Many of the contracts that we advise on have arbitration clauses, and sometimes those clauses entail arbitration in China. This is usually before CIETAC, the China International Economic and Trade Arbitration Commission, but it might also take place under the aegis of the Hong Kong Arbitration Center.
Editor: Can you tell us something about China's progress in protecting intellectual property rights?
Meng: Enacting and then enforcing regulations for the protection of intellectual property is a way for China to show its willingness to comply with international standards. That is taken very seriously by the Chinese government, and there has been considerable progress in this area in recent years. There is more work to be done.
Xiao: Herbert Smith represents a considerable number of international enterprises in China. Much of our work, accordingly, concerns the protection of their intellectual property. The climate for this is improving, although slowly.
Editor: Textile duties are about to be lifted in the U.S., and there are efforts underway to impose new restrictions on the import of textiles. This is obviously a major trade issue for China.
Xiao: Over the past two decades duties on the importation of textiles - on the part of both the U.S. and the European markets - has been a major issue for China because the textile industry is such an important part of the country's economy. This is a sufficiently important matter for everyone, both exporters and importers, that I think a way forward will be found. If negotiations were not to lead to some sort of acceptable resolution of the matter, a whole range of trade disputes might ensue. No one wants that.
Editor: Please give us your thoughts about what the future holds for China as it takes its place in the global economy.
Johnson: Over the next few years I think we are going to see an increasing number of Chinese corporations investing and operating in countries all around Asia, even across the world, in a manner similar to the way in which Japanese corporations acted in the 1960s, 70s and 80s. As these corporations compete with their U.S., Japanese and European counterparts, there is bound to be an increasing volume of legal work. The integration of China into the world's markets is going to have a dramatic and, I believe, very positive impact on all sectors of the global economy.
Meng: Another aspect of this development is that in perhaps twenty years China might be one of the strongest economies in the world, along with India. It would be similar to the U.S., which is an economy with a large domestic market but one that is fully integrated into the global economy at the same time.
Editor: India has freed itself from state control of the economy and now is beginning to compete on the global stage. Does this represent a competitive threat to China?
Meng: I do not see the two countries as competitors. In its English-language background and its adherence to the English law system, India brings certain advantages to the global competition. China's strength, however, lies in the diligence and productivity of its 1.2 billion people in all areas of economic life. India does not possess that, at least at the moment. I envisage the two countries investing in each other's economies but not competing against one another in the global arena.
Editor: And Herbert Smith? What are your hopes for the firm's Chinese presence in, say, five years?
Johnson: From Hong Kong's perspective, we look to serve an increasing number of Chinese clients, both domestically and overseas.
Meng: Our Shanghai office was opened 18 months ago with one partner, three associates, and two Chinese paralegals. Today we have two partners, eight foreign-qualified lawyers, five Chinese lawyers, one trainee and one legal translator. In five years I do not think it is too much to anticipate an office of 30 to 40 lawyers ranking as one of the principal references for projects, FDI and corporate finance work. Our Beijing office will certainly enjoy the same growing pace if not faster.