World’s Largest Law Firm Departs China in Response to Hostile Regulations

A man types on a computer keyboard. Kacper Pempel/Reuters

One of the world’s largest global law firms is separating from its partner firm in mainland China because of the tightening regulatory environment.

Dentons announced that it will split up with its Chinese partner firm, Dacheng, which joined its business in 2015. The move marks the latest response of global firms to the tightening and restrictive data and cybersecurity controls from Beijing. Dentons bills itself as the world’s largest law firm by the number of employees, and the sixth largest by revenue.

The company explained that the changing regulatory environment in China had brought about the change.

The “new mandates and requirements relating to data privacy, cybersecurity, capital control, and governance” caused it to adjust its business, it said in a statement.

Effective this month, Dacheng will operate as a separate and independent legal entity, under a “preferred firm” relationship with Dentons, and will meet Chinese clients’ needs with its lawyers and professionals.

Dentons’ Hong Kong practice, which joined the firm in 2013 before it combined with Dacheng, will remain an integrated part of the firm.

The firm expected the most notable change to be an update to the firm’s logo and branding, which will return to its pre-2015 look that does not include the Chinese characters and will roll out in the coming weeks, said the statement.

The Regulatory Climate Turns Hostile

International firms are challenged with an even more complex business environment inside China as the regime has tightened and passed laws and regulations in data protection, cybersecurity, and anti-espionage.

On Aug. 3, China’s cyberspace regulator issued a draft regulation requiring service providers holding data on more than 1 million people to undergo at least one compliance audit a year.

Consequently, every business has been forced to weigh the costs of complying with cybersecurity and data security laws with the benefits of operating in the world’s No. 2 economy, said Tom Nunlist, a Shanghai-based associate director at Trivium China who focuses on tech policy, reported Bloomberg.

“The fact is that we will see more companies separate out their operations—maybe break partnerships—because of this,” Mr. Nunlist said, “the data security related regulations, data export security assessment stuff is extremely strict,” “It’s been an absolute nightmare for everyone to deal with.”

The closed office of the Mintz Group is seen in an office building in Beijing on March 24, 2023. Five Chinese employees at the Beijing office of US due diligence firm Mintz Group have been detained by authorities, the company said on March 24. Greg Baker / AFP

The recently expanded anti-espionage law, in addition, has further devastated the operations security of the firm inside China.

The rule gives the regime more power to punish what it deems threats to national security.

The ambiguous legislation covers any documents, data, materials, or items related to national security and interests, and it gives authorities more leeway in implementing already opaque national security legislation.

Dentons had advised its staff in Western nations against travel to China months ago, according to the Financial Times.

In recent months, Beijing has carried out a series of raids and seizures on foreign companies, including the Western advisory firms Mintz Group, Bain & Company, and Capvision.

Wu Wei contributed to this report.