Hong Kong companies still have a role to play in growing cross-border affairs HONG KONG LAW firms will maintain their classic role as a go-between for the mainland and the rest of the world, a role that they have perfected over many years of facilitating mergers and acquisitions and capital debt raising, according to lawyers involved in the growing cross-border legal business. But just being an old China hand or a fluent Mandarin speaker is not enough to win business anymore. Mainland firms are becoming more established and capable in their own right in areas that Hong Kong firms might have previously entered into on behalf of clients - such as joint venture establishment procedures, operational issues and advice. Hong Kong firms which practise only locally and do not have broader international experience are finding the areas where they can compete with the mainland firms becoming smaller, some lawyers claim. 'The quality of the local firms, particularly in bigger centres like Beijing and Shanghai, is improving at an extremely rapid rate,' said Seamus Cornelius, a Shanghai-based partner of law firm Allens Arthur Robinson.'So where there might have been opportunities five years ago in a broad range of areas, they no longer exist for local Hong Kong firms.' Like many Hong Kong-based international firms, Allens Arthur Robinson has taken significant steps since it established an office in China to ensure it has the skills on the ground, lawyers with in-depth knowledge of mainland and Hong Kong law, and international practices and expectations. It also carried out a deliberate strategy of deploying specialists on the mainland several years ahead of changes to the law to be ready for the development of certain markets. Matthew Barnard, one of the firm's Hong Kong-based partners, said: 'Take the complex warrant, option and derivative market that is established in several other places in the world. 'That will also happen in China and, when it does, we will need somebody who has worked in those other international centres, has the business skills and has also been in China for a number of years so knows how the system has developed there. 'We think that those specialist skills that are embedded and put on the ground in China are going to be what clients look for in future business development terms.' Mainland lawyers are bringing a lot of skills and knowledge to the table. As well as the legal knowledge that comes from academic study, they have an understanding of how the system works and where opportunities exist between the law as it is written and as it is implemented. According to Paul Starr, partner at Mallesons Stephen Jaques Asia in Hong Kong, it helps to have mainland Chinese lawyers work alongside foreign lawyers in a law firm. 'We have very senior mainland lawyers in our practices in Shanghai and Beijing. They helped teach us in Hong Kong about the local practices in China, what is acceptable to certain regulatory authorities, [and] which courts you go to when you have a problem. 'It helps to have that inside knowledge as a Hong Kong lawyer as you go further into China,' Mr Starr said. Over the past 10 years, Hong Kong's reputation as an international legal centre has continued to grow. Phenomenal property development and construction in the territory before the Asian economic crisis gave rise to significant arbitration business, which is one of several areas that Hong Kong-based firms are watching develop in China. Mr Starr said that the Closer Economic Partnership Arrangement and similar initiatives were giving firms greater access to mainland-based arbitrations as clients across the border recognised the advantages that Hong Kong and international experience had to offer. The mainland's most important arbitration body, the China International Economic and Trade Arbitration Commission (CIETAC), which handles more arbitrations a year than all the other main arbitration boards in the world put together, amended its arbitration rules at the start of last month to bring itself more in line with international practices. Mr Starr and one of Mallesons' other partners have been appointed to sit as non-Chinese foreign arbitrators on the CIETAC panel, a move which Mr Starr attributes to a determination on the part of the commission to operate on a level playing field with the world's other international arbitration bodies. 'Increasingly, parties in China recognise the arbitration experience of international and Hong Kong law firms. 'We have greater access to help conduct those arbitrations in China and this is going to provide major growth in the next few years,' he said.' Another area of business that is developing involves the overseas expansion of mainland companies. 'People often fail to appreciate the amount of outbound investment ... and the role of Hong Kong law firms in bringing mainland companies into Hong Kong to establish their businesses here and to publicly list their companies,' Mr Starr said. It is difficult, if not impossible, to put a figure on the value of this business. Five years ago it would have been difficult to find any significant overseas investments by mainland companies. But according to Mr Cornelius, such business is now happening 'all the time' and is a significant part of Allens Arthur Robinson's practice. 'We are working out of our China offices for significant Chinese entities that are investing in a number of places worldwide,' he said. 'We aim to bring a perfect understanding of both sides, what the western party's target expectations are plus the hesitations and expectations of the Chinese party. That remains a significant skill set which you will find in international and Hong Kong firms, which are used to playing that role.'