Jerome Cohen, a veteran Chinese-law professor at New York University School of Law, called the deal an 'innovative accommodation to China's restrictions on foreign firms' law practice'.

China's World Trade Organisation accession commitments did not include allowing foreign lawyers to practice mainland law, or permit foreign firms to employ mainland-qualified lawyers. Foreign lawyers are only allowed to be 'consultants' to mainland firms.

To get around such restrictions, King & Wood Mallesons falls short of a full merger and instead focuses on co-operation and joint marketing.

'Many Western-based law firms are studying this example, as are other Chinese firms,' Cohen said.

'We should expect similar arrangements between other Chinese firms and international firms. This is another step towards worldwide integration of the major firms that focus on East Asia.'

Helping drive the merger is the booming Sino-Australian resources industry. According to Dealogic, China's outbound acquisition deals in Australia soared from US$1.4 billion worth in 2007 to US$7.7 billion so far this year. Almost 90 per cent of the deals are in the resources sector.

But the arrangement between the two law firms has already attracted scepticism, especially given the cultural differences between lawyers trained in the Western common law tradition and mainland legal professionals trained in Chinese law, a 'civil' type, and which according to many observers is still dominated by Communist Party decree rather than precedent or legislation.

And another King & Wood merger has already fallen apart. The firm combined with Swiss firm S.G. Fafalen in Hong Kong, but the alliance broke down after less than a year due to a failure to integrate operations.

There are higher hopes for the Mallesons tie-up, in which King & Wood will fully merge its Hong Kong operation with that of 179-year-old Mallesons, creating an office with 130 lawyers - roughly half coming from each firm. They will also share the brand King & Wood Mallesons across all of their combined 21 offices.

This combination will create three partnerships, in Hong Kong, the mainland and Australia. On the mainland, the partnership will have over 900 lawyers, the vast majority from King & Wood. Lawyers from the two firms will continue to work under separate offices and management. The Australian partnership, with over 600 lawyers, consists primarily of Mallesons' existing operation.

The combination will be done under the structure of the 'verein alliance', a form of business association seen in some legal and accounting partnerships. Separation is required on the mainland, since regulations there prohibit foreign law firms from investing in and managing mainland law firms. They are also not allowed to form practice associations, share profits or set up joint offices.

Mallesons' managing partner Stuart Fuller, who will become global managing partner of the combined firm to be headquartered in Hong Kong, rejected a suggestion that the combination on the mainland was little more than a marketing exercise. He said the mainland operations, while financially and physically separate, would share one brand and vision, and a joint management committee would sit across the three partnerships to oversee business-plan implementation. Teams of different practices, such as mergers & acquisitions, will have 'co-heads' from the two firms. The firms' top-30 common clients will also be served by 'co-client relationship partners'.

'There is nothing in the [mainland] regulations that says we can't work together,' said Mallesons' chief executive partner Robert Milliner. 'The management committee will co-ordinate how we develop talent and manage client relationships ... so that we can better serve our clients than either firm can do by itself.'

King & Wood has always had international ambitions.

Its decision to adopt a Western-sounding name reflects its long-term plan to become an international law firm. Most of its clients are multinational firms with operations on the mainland, said partner Handel Lee.

It was also the first mainland law firm to expand overseas. After setting up an office in Hong Kong in 2006, it grew by merging with Hong Kong's Arculli Fong & Ng in 2009.

Andrew Godwin, associate director of Melbourne Law School's Asian law centre, who worked as a lawyer for 10 years in Shanghai, said the Hong Kong office would have a key position in the combination.

'The Hong Kong merger is particularly interesting, as it should play an important role in binding the alliance together, and achieving a unity of purpose that might otherwise be difficult to achieve as a result of the different cultures and backgrounds of the two firms,' he said.

'The success of the combination will largely turn on the success of the Hong Kong practice.'

Not long before the combination's announcement, Mallesons lost John Shi, its Beijing chief representative, and Nicolas Groffman - a mergers & acquisitions group partner in its Beijing office - to global law firm DLA Piper, according to a statement by DLA at the end of last month.

Dong Wei, managing partner at a small Beijing-based law firm, P.C. & Associates, said the King & Wood-Mallesons combination would intensify competition and add pressure on mainland firms to enter into similar collaborative alliances with foreign firms.

Such alliances would help mainland firms attract more and bigger clients, as well as raising their professionalism and management know-how, he added.

1,800

The arrangement will have about this many lawyers worldwide, roughly half from each firm