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China: managing legal risks

China: managing legal risks

CHINESE LAWYERS have turned to the Australian in-house legal profession in an effort to learn how to manage the legal risks associated with being part of a global economy. A delegation of…

CHINESE LAWYERS have turned to the Australian in-house legal profession in an effort to learn how to manage the legal risks associated with being part of a global economy.

A delegation of Chinese lawyers this month spent two weeks in Australia, visiting BHP Billiton, Telstra and the Commonwealth Bank of Australia (CBA) to see how their legal departments were organised. The Chinese lawyers represented organisations and corporations including China National Nuclear Corporation, China Minmetals Corporation, China National Offshore Oil Corp, Petro China Company and Huaneng Power International.

Australian Corporate Lawyers Association (ACLA) chief executive officer and general counsel, Peter Turner, said the companies were all state owned enterprises of China. “As China moves towards a more western-style economy the likelihood is they will privatise or corporatise some of those departments,” he said.

“They were very interested in places like the CBA that [had been] government-owned and have been privatised.”

The Chinese were particularly concerned about the legal risks of operating in a market economy, and topics up for discussion included features of enterprise legal risks, and identifying enterprise legal risks.

Turner said the primary concern of the delegation was to ensure that its corporate governance was properly structured. “That’s an area where China has been lagging.” He said the state-owned enterprises were structured as an arm of government, which in turn was in the hands of the ruling party.

“As they move away from that model, all kinds of cracks appear,” Turner said. “They want to be sure [the cracks] don’t become chasms.”

The issue was, he said, to determine how they could put in place an entire regime of legal risk recognition, control and management, from the position they were starting from.

The Chinese lawyers also used the visit to look at the structure of ACLA. Turner said the Chinese were working towards the formation of a national in-house lawyers association. However, government authorities must approve an application for such an association before it could go ahead.

In the meantime the lawyers had received input on how to structure such an association in China through visits to the Association of Corporate Counsel in America, and Australia. Turner said the information would be used to make recommendations to the authorities as to how the in-house legal profession should be structured and what responsibilities and rights should be given to general counsel.

“If they succeed the association will be enormous,” Turner said. “In one stroke they would be the biggest in-house counsel association in the world with anywhere between 50,000 and 100,000 members.”

Turner said the Chinese had looked to Australia for advice because of the strong trading relationship between the two countries and the significant presence of Australian law firms in China.

“There is certainly logic in furthering our relationship with the legal profession,” he said.

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