Global law firm Dentons is splitting from its Chinese operations to comply with impending data regulations, one of the more significant withdrawals by a Western company as Beijing intensifies a campaign to curb outflows of valuable information.
(Bloomberg) — Global law firm Dentons is splitting from its Chinese operations to comply with impending data regulations, one of the more significant withdrawals by a Western company as Beijing intensifies a campaign to curb outflows of valuable information.
Dentons, a law firm with partners from the US to France, is separating this month from its Chinese-based arm in response to “government mandates” related to cybersecurity and data protection. It will become fully independent of Beijing Dacheng Law Offices, a local private firm it partnered with in 2015, Dentons said in a memo to clients.
The global agency becomes the latest Western firm to resort to drastic measures to comply with sweeping restrictions on the handling and transfer of data within and beyond China that will take effect later this year. Among other things, Beijing’s new data security regime gives President Xi Jinping’s administration the power to shut down or fine companies that leak or mishandle sensitive information. Penalties include fines and suspensions.
Xi’s administration has tightened control over the hoard of information produced by the nation’s companies, considered critical for steering the economy as well as future technologies such as AI. But the broad and vague nature of new regulations has spurred concerns about compliance, and the penalties for falling short. Morgan Stanley, for one, is shifting more than 200 technology developers — about a third of the tech cohort — out of mainland China after the country tightened access to troves of data stored onshore.
Morgan Stanley’s remaining staff on the mainland have started to build a standalone China system to comply with local regulations. The new infrastructure, which may cost hundreds of millions of dollars, will be incompatible with its legacy global platforms as the lender overhauls its Asia strategy of handling client records.
Read more: Morgan Stanley Moves 200 Tech Experts From China on Data Law
Dentons’s split was first reported by the Financial Times. The law firm signed a deal in 2015 to link up with Dacheng Law Offices to create what was at the time the world’s largest legal firm. Among Dacheng’s clients were some of the largest state-owned enterprises, including PetroChina Co. and China Telecom Corp.
Denton’s move was “in response to an evolving regulatory environment for Chinese law firms in China — including new mandates and requirements relating to data privacy, cybersecurity, capital control and governance,” the firm said. Dacheng “will instead operate as a separate and independent legal entity under a ‘preferred firm’ relationship with Dentons.”
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