Globalization of Anglo-American Common Law vs. Strong Nation State: Evidence from the Use of Legal Counsel in Cross-Border Business Transactions Involving China

• Author: Jing Li
• Pages: 383-415

Globalization of Anglo-American Common Law

vs. Strong Nation State: Evidence from the Use

of Legal Counsel in Cross-Border Business

Transactions Involving China

J

ING

L

I

*

Large international law firms are an important pillar of globalization.

1

By

adopting an entrepreneurial approach, law firms proactively seek to exploit

new market opportunities for legal services and develop corporate contacts,

and thus can be internationally oriented.

2

In particular, English and

American law firms have been the precursor in helping the

internationalization process of the businesses with a built-in global

dimension.

3

Relative to their code-based civilian counterparts, these law

firms were the earlier entrants into global markets, thanks, among other

things, to the prevalent use of Anglo-American common law in international

business transactions.

4

Although there is not so much in the literature against the part played by

the Anglo-American firms in exporting the common law, especially the U.S.

law and capitalism abroad, such enthusiastic account of the diffusion of

American legal style

5

has been criticized for examining global change only

through the eyes of the exporters but not those of the importers.

6

The

reason is that any attempt at cross-border transfer of law will presumably be

subjected to a considerable degree of cultural and institutional translation

and adaptation by the importers.

7

In addition to this, another long-existing

problem with the existing research efforts on global diffusion of law is that

* Assistant Professor, Department of Private and Business Law, Tilburg University, the

Netherlands. The author is grateful to Christoph Van der Elst, John Flood, and Anne Lafarre

for their constructive comments on earlier versions of this article. All errors are my own.

1. John Flood, Lawyers as Sanctifiers: The Role of Elite Law Firms in International Business

Transactions, 14 I

ND

. J. G

LOB

. L

EGAL

S

TUD

. 35, 41 (2007).

2. Sigrid Quack, Recombining National Variety: Internationalisation Strategies of American and

European Law Firms, 5 J. S

TRATEGY

& M

GMT

. 154, 159 (2012).

3. John Flood, Institutional Bridging: How Large Law Firms Engage in Globalization, 54 B.C. L.

R

EV

. 1087, 1088 (2013).

4. Martin Shapiro, The Globalization of Law, 1 I

ND

. J. G

LOB

. S

TUD

. 37, 39 (1993); see also

Flood, Lawyers as Sanctifiers, supra note 1, at 41.

5. Shapiro, supra note 4, at 39; see also Daniel R. Kelemen & Eric C. Sibbitt, The Globalization

of American Law, 58 I

NT

’

L

O

RG

. 103, 105 (2004).

6. David Levi-Faur, The Political Economy of Legal Globalization: Juridification, Adversarial

Legalism, and Responsive Regulation. A Comment, 59 I

NT

’

L

O

RG

. 451, 457 (2005).

7. Sigrid Quack, Legal Professionals and Transnational Law-Making: A Case of Distributed

Agency, 14 O

RGANIZATION

643, 649 (2007).

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384 THE INTERNATIONAL LAWYER [VOL. 53, NO. 3

they have concentrated on the developed industrial democracies in Europe,

8

such as Germany

9

and Italy,

10

as well as Japan.

11

True, the literature has

already drawn remarkable contrast between the state-regulated professions

of continental Europe

12

and the privately regulated professions of the Anglo-

American world.

13

But not every country can be classified into such a

bipolar system. Given the rapid growth of China’s global influence as a new

superpower in recent years, political economists start to reflect on the so-

called Chinese model of capitalism, which is hard to find its place in either

the liberal market economy or the coordinated market economy camp.

14

Such difficulty is embodied in a framework of important observations.

Among other things, China witnesses a tense, and often contradictory,

coexistence of an export-oriented capitalism with the authoritarian rule of a

party-state, and of the resilient state control across key sectors of the

economy with the “liberalized foreign investments and transnational

engagements enabled by the open-door policy.”

15

As such, China should

form a triangular relationship with the varieties of capitalism dichotomy,

rather than be awkwardly forced into it.

16

This then brings up an interesting issue: the literature on transnational

lawmaking so far seems “to converge on an implicit assumption that the

development of transnational law is strongly shaped by American and British

law traditions when government is weak or absent.”

17

Such an assumption,

however, apparently does not hold true for China. In particular, while the

Chinese government assumes a key role in shaping the trajectories of

professionalization, its relationship with the legal profession involves more

8. See generally Shapiro, supra note 4; See generally Kelemen & Sibbitt, supra note 5.

9. See Glenn Morgan & Sigrid Quack, Institutional Legacies and Firm Dynamics: The Growth

and Internationalization of UK and German Law Firms, 26 O

RG

. S

TUD

. 1765 (2005); See Quack,

Recombining National Variety, supra note 2.

10. See Daniel Muzio Daniel & James R. Faulconbridge, The Global Professional Service Firm:

One Firm” Models versus Italian Distant Institutionalised Practices, 34 O

RG

. S

TUD

. 897 (2013); See

James R. Faulconbridge & Daniel Muzio, Global Professional Service Firms and the Challenge of

Institutional Complexity: ‘Field Relocation’ as a Response Strategy, 53 J. M

GMT

. S

TUD

. 8 (2016).

11. See Kelemen & Sibbitt, supra note 5, at 108.

12. See M

ICHAEL

B

URRAGE

& R

OLF

T

ORSTENDAHL

, P

ROFESSIONS IN

T

HEORY AND

H

ISTORY

: R

ETHINKING THE

S

TUDY OF THE

P

ROFESSIONS

(Sage Publications 1990); R

OLF

T

ORSTENDAHL

& M

ICHAEL

B

URRAGE

, T

HE

F

ORMATION OF

P

ROFESSIONS

: K

NOWLEDGE

,

S

TATE AND

S

TRATEGY

(Sage Publications 1990).

13. A

NDREW

A

BBOTT

,T

HE

S

YSTEM OF

P

ROFESSIONS

: A

N

E

SSAY ON THE

D

IVISION OF

E

XPERT

L

ABOR

(Chicago: University of Chicago Press 1988); R

ICHARD

L. A

BEL

, T

HE

L

EGAL

P

ROFESSION IN

E

NGLAND AND

W

ALES

(New York: Blackwell 1988).

14. P

ETER

A. H

ALL

& D

AVID

S

OSKICE

, V

ARIETIES OF

C

APITALISM

: T

HE

I

NSTITUTIONAL

F

OUNDATIONS OF

C

OMPARATIVE

A

DVANTAGE

(Oxford: Oxford University Press, 2001).

15. Jun Zhang & Jamie Peck, Variegated Capitalism, Chinese Style: Regional Models, Multi-scalar

Constructions, 50 R

EG

’

L

S

TUD

. 52, 60 (2016).

16. See Jamie Peck & Jun Zhang, A Variety of Capitalism. . . With Chinese Characteristics?, 13 J.

E

CON

. G

EOGRAPHY

357, 362 (2013); See also Zhang & Peck, Variegated Capitalism, Chinese Style,

supra note 15, at 52.

17. Quack, Legal Professionals and Transnational Law-Making, supra note 7, at 648.

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2020] GLOBALIZATION OF COMMON LAW VS. STRONG STATE 385

than a universal form of compromise. Relative to the laissez-faire history of

the legal profession in the Anglo-American world, which is organized in a

rather uniform manner, the legal profession of China shows deep political

embeddedness in the state bureaucracy, which is a result of both its unique

historical development path and institutional context.

18

As such, what will

happen when the globalization of Anglo-American common law meets with

the strong Chinese nation state? Will common law and large Anglo-

American law firms be able to repeat their victories elsewhere and

“Americanize” the Chinese commercial law practices? Alternatively, given

China’s emergence as an important “norm-maker” and “norm-shaker,” will

its behemoth State-owned Enterprises (SOEs), enforcing the nation’s neo-

mercantilist approach in their global strategies,

19

be more inclined to retain

Chinese law firms in engineering their cross-border transactions, and thus

export Chinese law?

Despite that these questions are highly relevant to the end of

understanding the dynamics in global governance of business transactions,

they are in general still very much under-researched, let alone being

examined and answered empirically. This article aims to shed light on this

issue by looking at the choices of legal counsel in cross-border business

transactions involving China. The weight of China in the global economy

not only makes this study important on a global basis, but also directly

enables a rich set of observations to start with. I use the data from Zephyr,

20

an international data provider specializing in business deals information.

The object of study is 1,393 cross-border transactions dated

21

from January

1, 2010 to December 31, 2018 where a Chinese business firm is a party, and

where at least one legal counsel (law firm) is identifiable. Overall, it is found

that large Anglo-American law firms very much still dominate the

international business law market, which is evidenced not only by the

number of representations attributable to them, but also by the variety of

countries of their clients.

22

In this light, this article offers evidence that none

of the importance of contracts and private ordering in international business

transactions, the sovereign of common law, the existing experience

advantage, and the universality of the English language is easy to shake given

the force of path dependency. In the meantime, it is also true to argue that

Chinese law firms are indeed catching up. Although they are not yet able to

compete with their powerful counterparts from the United States or United

Kingdom, the market has already started tilting to their side. This is

18. Ethan Michelson, Lawyers, Political Embeddedness, and Institutional Continuity in China’s

Transition from Socialism, 113 A

M

. J. S

OC

. 352, 365 (2007); See also Sida Liu, Lawyers, State

Officials and Significant Others: Symbiotic Exchange in the Chinese Legal Services Market, 206 C

HINA

Q. 276, 281–85 (2011).

19. See Ronald J. Gilson, & Curtis J. Milhaupt, Sovereign Wealth Funds and Corporate

Governance: A Minimalist Response to the New Mercantilism, 60 S

TAN

. L. R

EV

. 1345, 1346 (2008).

20. Zephyr

,

B

UREAU

V

AN

D

IJK

, https://www.bvdinfo.com/en-gb/our-products/data/

economic-and-ma/zephyr (last visited July 17, 2020).

21. Including date of announcement and (assumed) completion.

22. See infra Sections III.A & III.C.

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