Global Law Firm Dentons has announced its split from its China branch, Beijing Dacheng Law Offices, due to new national security regulations implemented by the Chinese government. The partnership between China’s Dacheng and U.S.-based Dentons, formed in 2015, established a formidable 6,600-lawyer mega-firm, with Dacheng contributing over 4,000 attorneys.

The collaboration operated under Dentons’ Swiss verein business structure, enabling international branches to function as distinct legal entities while sharing a common identity. Following the separation, Dacheng will become fully independent from Dentons, while maintaining a “preferred firm” relationship, as outlined in a memo to Dentons clients. Dentons will also remove Dacheng’s Chinese characters from its logo and branding.

This move is a response to “recent Chinese government mandates on Chinese law firms, including those relating to cybersecurity and data protection,” as stated in Dentons’ official statement. Dacheng is yet to provide a response to this development.

See also: Dentons Law Firm Files $1.7 Million Lawsuit Against Former Client Steel Connect

In April, Chinese lawmakers amended the Counter-Espionage Law to prohibit the transfer of any information concerning national security and to broaden the definition of espionage. Effective from July 1, the revised law grants authorities conducting anti-espionage investigations the power to access data, electronic equipment, personal property information, and even impose travel bans.

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Concerns have arisen internationally, with the United States cautioning that foreign companies operating in China could face repercussions for their routine business activities under the new legislation. Several major U.S. and international law firms have established a presence in China, although some have scaled back due to the nation’s increasingly challenging economic and political environment, exacerbated by the pandemic.

From U.S. law firm consultancy Adam Smith Esq, Bruce MacEwen remarked on the shrinking appeal of conducting business in China. The reputational risk, MacEwen pointed out, has surpassed potential economic gains, citing instances of government raids on the Chinese offices of U.S. consultancies Mintz Group and Bain & Company.

See also: Dentons Expands Hospitality Practice with Addition of Perkins Coie Lawyers

The separation from Dacheng significantly reduces Dentons’ legal workforce. In May, Dentons reported a global employee count of 21,000; however, the firm’s spokesperson confirmed that the count now exceeds 12,550. Notably, Dentons emphasized that its Hong Kong office remains integral to the firm’s structure.

Despite the split, Dentons asserts its standing as the world’s largest global law firm, boasting a presence in more locations than any of its counterparts. With nearly 6,000 lawyers, the firm underscores its extensive reach. Nevertheless, data collected by The American Lawyer highlights that Dentons’ size is surpassed by Chinese domestic law firm Yingke, which boasts over 13,000 lawyers.

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This development reflects the ongoing challenges for foreign entities navigating China’s evolving legal landscape. The impact of the new counter-espionage regulations is prompting legal firms and businesses to reevaluate their engagements within the nation, as the balance between economic prospects and potential risks shifts.

In a climate where national security measures can lead to significant business repercussions, Dentons’ separation from Beijing Dacheng Law Offices marks a notable episode in the complex interplay between international law firms and the regulatory environment in China.

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