Much has rightly been made of the trade and investment opportunities expected to flow from China’s one belt, one road, or OBOR, initiative. But every deal, whatever the sector, only happens once all the relevant legal issues have been identified, addressed and resolved. And that, in turn, explains why major law firms with a Hong Kong base and an international reach are gearing up to handle the advisory work, contract negotiations and different complexities that will accompany the expected push by companies and contractors into new markets in Central Asia. “We are positioning ourselves for OBOR as part of a long-term strategy,” says Fang Jian, China managing partner for Linklaters. “We don’t see it simply as a source of immediate deals, but believe the OBOR region could potentially become a core market for global law firms. Already, we have completed a significant number of related transactions which, typically, are complex and multijurisdictional.” Where necessary, the firm is preparing for an “uptick” in OBOR and outbound mergers and acquisitions activity by mainland heavyweights over the next 12 months. One aspect of that is having the sector experience and technical expertise to advise specific clients on individual deals. Another, though, is taking the steps to engage extensively with various stakeholders. These range from the Chinese government and its think tank to other international institutions and industry bodies which, in their respective spheres, are now tackling OBOR-related policy issues, as well as new legal and commercial challenges and the potential roadblocks and risks. “Cross-border transactions of this kind can involve multiple layers of local regulations for financing, contracts, and environmental considerations,” Fang says. “In addition, many of the OBOR countries have yet to develop mature legal systems, so more work is required on the legal documentation to address ‘deal and operational’ uncertainties and the financial risks for Chinese investors. Also, since many investments will be made in developing markets, the factor of political risk, and compliance issues such as corruption, cannot be ignored.” Ultimately, Chinese companies and their lawyers will have to be able to adapt to local conditions as we do anywhere else and formulate good practices to suit the local markets Fang Jian, China managing partner, Linklaters Transactions already completed by Linklaters were based on international practice. However, it is recognised that local players in Central Asian countries may not always accept international norms. “Ultimately, Chinese companies and their lawyers will have to be able to adapt to local conditions as we do anywhere else and formulate good practices to suit the local markets,” Fang says. Carolyn Dong, head of energy, China (finance and projects) for DLA Piper, notes that with 65-plus jurisdictions along the OBOR route, there will be no shortage of challenges in helping governments reduce barriers and clients put together big-ticket cross-border investments. Legal expertise will be needed for everything, from structuring agreements to build infrastructure and install technology to concluding pacts on trade liberalisation, easing customs and quarantine processes, and setting up free trade zones. Besides that, there will be all the work entailed in such diverse endeavours as negotiating sales contracts, forming joint ventures, arranging syndicated loans, or clarifying tax obligations. “Cross-border transactions are inevitably more complex than local deals largely because of the need to account for legal, regulatory, cultural and sometimes language difficulties,” Dong says. “Moreover, issues may arise in one jurisdiction which you would not necessarily find in another.” Examples could include the extent of rights and consultation requirements under national labour law, the filing and approval process with local regulators, and rules governing competition and foreign investment. “Therefore, it is crucial for lawyers to understand and work within local contexts and practices,” Dong says. “Each jurisdiction along the OBOR route has its own unique legal, political, economic and social communities. For the successful implementation of any project, these must always be respected.” She adds that, with a large portion of China’s future foreign investment and trade growth expected to take place in OBOR countries, major law firms can position themselves to benefit.