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

Abstract

Along with the globalization of markets and cross-border business activities of multinational corporations, large US and UK firms have played an important role in exporting Anglo-American common law internationally. In this vein, an important but under researched issue is the confluence and interaction of the state power with the diffusion of law via legal professional service firms. Using a sample of 1393 cross-border transactions into and out from China dated between 2010 and 2018, this article empirically sheds light on this issue from the perspective of legal counsel choices in these transactions. It is found that in general, Anglo-American law firms take up an unmatched leading position in the international corporate transactions market; while Chinese law firms only represent a small fraction of all the legal counsel hired in the transactions. In particular, Chinese SOEs do not exhibit a very different pattern in choosing their legal counsel. The percentages of them engaging Anglo-American law firms are actually greater than those of Chinese clients as a whole. If the retaining and dealing with legal counsel is seen as the very first gateway to the entry of a foreign county, then the SOEs need to encounter and compete with the bargaining power of the counterparties when trying to pass it. In such light, host countries may not need to be over alarmed about the investments by Chinese SOEs and the potential cross-border transcendence of state power, which so far do not constitute a counter force to the globalization of Anglo-American common law.