As Chinese philosopher Lao Tzu once said, "The journey of a thousand miles begins with a single step." In a way, that adage aptly encapsulates how Sidley came to be the very first law firm to offer a freestanding life sciences practice in China.
“Our biggest milestone was in taking that first step in the beginning,” explained Scott Bass, head of Sidley’s Global Life Sciences team. Nearly a decade ago, Bass, with just one lawyer and one marketing person, charted the firm’s path in China. It was at a time when there were no law firms there devoted to life sciences regulatory work.
While other firms had attempted a foray into the country with their primary focus on expansion, Bass says Sidley took a different approach.
“First, we wanted to make sure we had something to offer,” recalls Bass. “So we started with the vision of molding our global advice to pragmatically address the Chinese landscape. What cultural and legal differences would a Western company encounter in China and how could we guide them through the right pathways?”
Tom Albrecht, the firm’s Asia-Pacific managing partner (retired), who is based in the Hong Kong office, recalls how the climate at the time seemed ideal for Sidley to test the waters. “The economic expansion of the middle class that was then just starting in China reminded me of a similar consumer demand trajectory that we had already witnessed in the United States and Europe. Among other things, we anticipated increased consumer demand in China for pharmaceuticals and that is what has happened beyond our most optimistic projections.”
That promising landscape was, and still is, fraught with business challenges. Bass pointed to the government’s structural complexities, which often add a layer of confusion for companies doing business in China. He added that businesses must also understand the sophisticated regulatory and enforcement issues, including those pertaining to Chinese traditional medicine, which is a national priority. “We have really been dedicated to spending a lot of time understanding those priorities,” said Bass. “We didn’t just come in with an American legal model. Rather, we really thought about and incorporated Chinese cultural thoughts and approaches.”
Advising clients and government
Bearing in mind such intricacies of the landscape has served the team well: In the last decade, Sidley has come to represent almost every major significant Western innovator company in the life sciences in China. The goal of adding value has also extended beyond advice to clients; Sidley has partnered with the government in a variety of ways. It was the first law firm, for example, to be honored with a Memorandum of Understanding (MOU) by the Shanghai Institute for Food and Drug Safety, a public institution affiliated with the Shanghai Food and Drug Administration, in 2008. Sidley received another MOU, issued by the China Center for Pharmaceutical International Exchange, a public institution affiliated with the China Food and Drug Administration, in 2013. Under those MOUs, Sidley provides input into new drug, device, food and cosmetics laws and regulations.
Chen Yang, head of the firm’s China Life Sciences practice and a core member of the team since its inception, said that one of the key distinguishers of Sidley over the years is its substantive work in matters involving regulatory bodies around the world. A partner in the Hong Kong and Sydney offices who had been resident in the Beijing office since the inception of the practice, before relocating last year, Chen Yang who focuses on regulatory, corporate and commercial law for the life sciences industry, said “Because many of us have a background in China’s government, we are better at deciphering the legislation.”
Prior to entering private practice, Chen Yang worked as a legislative official in the Bureau of Legislative Affairs of the State Council, one of China's main legislation drafting bodies, as well as in the anti-corruption bureau of a local procuratorate in Beijing. Such experience, she said, affords the team an uncommon insider’s perspective on both regulation and enforcement.
Indeed, understanding both the law and the politics of China has been key to success for the team, some of whose members, in addition to Yang, have prior service in the Chinese government. This includes Lei Li, a partner in the firm’s Shanghai and Beijing offices who heads the China enforcement and compliance practice. Prior to joining the firm in 2007, Lei Li worked with the Ministry of Commerce of the People's Republic of China (MOFCOM) for eight years.
Lei Li, who practiced in the firm’s New York office for three years before relocating to China, says the decision to return was sparked in part by an increasing need in the country for cutting-edge industry-focused legal services. “The regulatory environment was evolving very quickly in China—as it continues to today—sparking uncertainty. Our clients had a lot of questions about how to grow their businesses in China; how to tackle the very complex regulatory, anti-bribery, compliance and enforcement systems.”
So, in 2010, when Sidley undertook several important enforcement projects for pharmaceutical and medical device clients, Lei Li said it was apparent that he could better undertake those efforts by speaking directly with local management on the ground in China and doing investigations onsite.
Such enforcement work has since grown significantly for the practice, including in the area of antitrust. Lei Li, who has worked on antitrust matters in China since the implementation of China’s Anti-monopoly Law in 2008, says those matters began to proliferate in 2013, when the Chinese government began to intensify its focus on medicine and medical device companies.
He says the greatest challenge for the firm’s life sciences clients in China is the risk of government enforcement. “It very often dictates their commercial and business plans in China, where there are many uncertainties regarding enforcement. The government has a lot of discretion, and the interplay between the government’s policy agenda and government enforcement is very complex.”
A diversified global practice
Over the years, Sidley has advised life sciences clients across a wide swath of matters, including mergers and acquisitions, healthcare enforcement, FCPA and SAIC, investigations, antitrust, private equity, licensing and technology transactions. On the transactional side, such businesses have benefited from the corporate transactional experience of Joseph Chan (alum), a partner in Shanghai, as well as the deep industry regulatory knowledge of the team. With an increasing number of Chinese life sciences companies and investors going abroad, Sidley’s team has harnessed the experience of Wendy Pan (alum) in the firm’s Shanghai and New York offices. Pan, who joined Sidley in 2014, has represented a significant number of Chinese clients in their cross-border transactions. Yuet Ming Tham, a partner who works with Li on compliance and enforcement issues, and also advises clients across South East Asia.
Chen Yang believes Sidley’s strength lies in its ability to understand the true intention of the often rather opaque regulations in China. “We understand them in ways that others cannot and are therefore able to better advise our clients and even keep them ahead of the curve in terms of how the law may evolve,” said Yang. “To not only advise on the issues our clients face but provide strategic insight for the future—I think that’s what we have done so well in the last 10 years and what we will continue to do in the future.”