Chinese legal norms converge with Western standards

BEIJING — For anyone planning a co-production, China’s legal environment is a lot more sophisticated than you might think, a leading Hollywood lawyer has told Variety, and an expanding business means exotic concepts like completion bonds may become more common.

Burgeoning growth in China means Hollywood is keen for way into the market, but investors are fearful sometimes of what looks like a murky regulatory environment and legal framework.

Robert Darwell, an attorney for Sheppard Mullin, has been involved in co-productions in China for about four years, and during that time he said he has seen an increase in activity and a high degree of sophistication.

In an interview with Variety on the fringes of the 1st Beijing International Film Festival, Darwell said his experience of working with big Chinese and Hong Kong orgs, such as Huayi Brothers and Media Asia, had been positive.

“In terms of co-production, people are turning to China. Everyone is looking for opportunities. I was surprised at how sophisticated the companies here are. The co-production agreements took a while, but not because people were unsophisticated, it had more to do with time difference and the scheduling of calls,” said Darwell.

He has worked on two co-productions in China, one of which is a 3D animation by Beijing-based film studio Stellar Megamedia Group and French giant Pathe, which is under way, while another project is in the works.

What was also noticeable, and significant, is that the partners would not always insist on Chinese law, that they would be happy to apply the law of a neutral country such as the U.K.

“These are sharp people who have been involved on global productions. It’s just like doing business throughout Europe or North America. Some may even opt to have a separate U.S. counsel. Chinese partners have wanted to have things spelt out as detailed as their U.S. counterparts,” said Darwell.

Completion guarantees are still relatively underexplored in China, and the completion guarantor companies are all watching closely to see how the market develops, both in China and more broadly in Asia.

Darwell said an increase in the amount of bank funding in the market, as well as more calls for monitoring by a greater number of financiers, means that this is an area set to grow.

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