Ties That Bind - Bay Area Council Economic Institute

Bay Area-China Trade: Behind the Numbers
Shanghai-born Sandy Calhoun, now with Squire Sanders & Dempsey in San Francisco,
opened Graham & James’ offices in Japan during the 1950s, and arrived in Beijing in 1979 to
help a San Francisco developer, Clement Chan, negotiate a joint venture with the Beijing International
Travel Services to develop a hotel. Calhoun and a partner did not set up as consultants,
but rather obtained visas as university lecturers. China had not yet reinstituted a formal legal
system—criminal and civil cases were decided by the government and the Communist Party. In
the absence of commercial law, contracts—and the relationship and trust between the parties
behind it—precedent determined a loose legal framework for joint ventures until, of course, a
dispute arose or the government intervened. At first, arbitration was permitted but had to be
within China. Over time, Hong Kong and Sweden were allowed as arbitration venues. More recently,
the arbitration venue is left to negotiation by the contracting parties.
Keeping a Lid on Foreign Lawyers
WTO compliance has eased restrictions on foreign law firms in terms of establishing a mainland
China presence, but constraints remain. Foreign firms are limited in the number of offices they
may open and the cities in which they may operate, with a required waiting period to open a
new location.
Foreign attorneys officially practice the laws of their home countries only. They may not represent
clients in Chinese courts or render opinions on Chinese law, nor are they permitted to take
the Chinese bar exam. Chinese lawyers may not join foreign law firms without first surrendering
their Chinese law licenses. Representatives of foreign law firms in China must be attorneys in
good standing with at least three years’ practice experience in their home countries. Chief
representatives must spend at least 180 days of the year in China, bringing them under Chinese
tax jurisdiction.
Law firms initially followed their Western corporate clients into the China market, acting as advisors
on trade and customs issues, contract preparation, intellectual property protection, and formation
of joint ventures. Since China’s admission to the WTO, however, the market for investment-related
legal services has expanded dramatically to include establishment of wholly foreignowned
enterprises (WFOEs), merger and acquisition transactions and related due diligence; real
estate development transactions; and preparing state-owned and private companies for initial
public offerings.
A Different Cultural Landscape
Lawyers are reluctant to talk about specific China cases or clients, but they are willing to share
insights about the overall landscape in which they operate. San Francisco attorney Bruce Quan
has been advising clients doing business in China since 1985. He divides his time among the Bay
Area, Beijing and Shanghai and is both an associate professor of law at Beijing University and an
adjunct professor of law at Hastings College of Law in San Francisco, teaching Chinese law and
legal culture. Since the 1980s he has organized numerous professional exchanges of lawyers and
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