Eversheds Sutherland’s international arm and King & Wood Mallesons’ (KWM’s) China business have unveiled a cooperation agreement that will see KWM close its six offices in Europe and the Middle East. This is an edited version of an interview about the deal with Eversheds’ international CEO, Lee Ranson.

It is fair to say that the cooperation agreement took the legal market by surprise. What is the thinking behind it?

The announcement might have been a surprise, but the driver behind it won’t have been a surprise given the enormous opportunity created by China both in terms of inbound and outbound work.  The IMF recently forecast that China will be the global economy’s biggest driver of growth over the next five years, doubling the contribution of the US.  So, the business case is very clear, but firms generally default to certain business models. The traditional strategy for law firms wanting to operate in China in recent years has been about opening offices: that reflected the relationship between the US and China at the time. But with the world as it is today, is that strategy going to be effective?

Given the pace at which world events move, the challenges of the geopolitical situation, and the regulatory position, it makes sense to explore ways to get business done without necessarily committing to mergers or having people on the ground. Having a cooperation agreement enables us to be externally focused by concentrating on what is most important for our clients, building on our existing strength in Hong Kong and Mainland China.   

What are the origins of the deal and how will it work in practice? 

Hong Kong’s position in the global market has been evolving and we weren’t convinced our model of having a Hong Kong office and small offices in Beijing and Shanghai dealt with the breadth of inbound work we wanted to tap into or the large Chinese outbound market. All three offices will continue to operate as they do now but, now that we have entered in to this cooperation agreement, work which we cannot undertake due to regulatory or expertise or capacity reasons will be referred to KWM (China).  

I was on a panel with [KWM’s global chief executive] Sue Kench. A conversation led to an introduction to Wang Junfeng [KWM’s global chairman] and other members of the leadership team and we started to explore the art of the possible. Over the last 12 months we have referred work to each other. There has been a good synergy between the businesses and we worked well together. 

Working with KWM is very attractive to us as it is the most internationally focused of the Chinese firms. We now have an agreement with one of the largest firms in China with offices in 15 cities, 10 of which are bigger than London. There is a structure in place: we have dedicated marketing, business development and administration teams. Executive management teams on both sides are currently meeting weekly to get the building blocks in place. There will be town halls, road shows and conferences.  

What are the prospects of the deal being extended to cover Eversheds Sutherland’s US arm? 

I suspect the geopolitical situation currently prevents any substantive announcements in relation to the US, but I am certain that there will be work opportunities.  

KWM has six offices in Europe and the Middle East that will close as part of the agreement. The joint statement with KWM says it is “expected” that partners and staff will join Eversheds. How do you see that process playing out? 

Not everybody will move across; it will be subject to conflicts and client demand. But we expect the numbers to be significant. Not only is it the right thing to do, we also want the people element to run smoothly. The backstop date for KWM (China) to cease its operations in Europe and the Middle East is October 2024, but I expect the process to happen much more quickly than that.  

This agreement is principally about the role of China in the world. How do you see it developing? 

The capital flows between China and the rest of the world are at the highest level they have ever been. China and the US conduct the most trade between any countries that don’t have a border with each other. We sit here in London where there is a certain perspective about China, but when you go to the Middle East and other regions there is a lot of willingness to look at Chinese investment opportunities. 

Take the Middle East, where KWM has one small office and Eversheds Sutherland has seven. Given the extent of the Chinese investment taking place in the region, this agreement will allow KWM to talk to their clients about the additional capability they now have. 

It is true there is a play around international companies de-risking when it comes to their engagement with China. But it is part of our role to advise clients on how to navigate a complex trading environment. There are challenges around supply chains and how to operate in China, for example around new data regulations being introduced. Our clients need to respond to this and we can now offer them even more sophisticated advice.  

How does the agreement affect Eversheds Sutherland International’s overall Asia strategy? 

We have three core markets: the US, Europe and the Middle East, and Asia. We have to provide a sophisticated offering in each of them. This co-operation agreement provides us with a medium-term strategy to create this in Asia, where we already have four offices and will continue to do so. For now, we’re going to put time and effort into making this agreement work because in three years’ time I want us to be in a position to extend it because it is working successfully.