China open to funding plans

A little sophistication is to be expected

BEIJING — For anyone planning a co-production in China, its legal environment is a lot more sophisticated than you might think, says Los Angeles entertainment attorney Robert Darwell, and an expanding business means exotic concepts like completion bonds may become more common.

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

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

In an interview with Variety on the fringes of the inaugural Beijing Intl. Film Festival, Darwell says his experience of working with big Chinese and Hong Kong orgs, such as Huayi Brothers and Media Asia, has been positive.

“In terms of co-production, people are turning to China,” Darwell say. “Everyone is looking for opportunities. 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.”

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

What was also noticeable, and significant, when making these deals, says Darwell, 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,” Darwell says. “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 spelled out (in as much detail) as their U.S. counterparts.”

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

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

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