Tim Steinert
General Counsel and Secretary
Alibaba Group

Fellow lawyers, friends, 哥们儿, 姐们儿. Good evening.

I’m sorry, but, I haven’t had enough time to prepare in Chinese, so please accept my apologies; I am going to speak in English.

I have been asked to speak on the topic of “Growing a World Class Law Department”, and I will say some things about that topic in a bit.

But first, I’d like to briefly review where we – company counsel and lawyers in general in China – have been over the past 35 years.

As an important part of one of the most incredible modernization stories in history, I think all of you, all of us, have a lot to be proud about.

I started college in 1978 in the United States, around the time Deng Xiaoping came to power in China. It was also the first year, I believe, that the law faculty at Beijing U. reopened – with a student named Li Keqiang in one of the first classes. On January 1, 1979, the US and the People’s Republic of China resumed normal diplomatic relations, and there was a lot of attention on China at my university, Yale, which itself had had a long and sometimes complicated relationship with China.

I got really interested in China when I took a modern Chinese history course with a famous professor named Jonathan Spence.

And when I graduated with a history degree in 1983, I decided I wanted to spend a few years in China.

One problem or maybe two: I didn’t speak Chinese… and I needed a job.

At that time, it was hard for foreigners – at least Americans – to study Chinese in Mainland China and even harder to get a job here, so I went to Taiwan, where I stayed for 3 years, teaching English and studying Chinese. I started Chinese by learning “bo po mo fo” and reading the “国语日报”.

At the time, I also visited Hong Kong and met some of the first international commercial lawyers working on China commercial matters. I met Owen Nee (who was working at Coudert Brothers and is still practicing law and teaching at NYU Shanghai), Sandy Randt (later US ambassador to China) and Michael Moser (who has retired from law firm life but is a leading international arbitrator focusing on China).

And I traveled all over China by bus and by train – to Guangdong (the Shenzhen train station was too small waiting rooms at the time), Fujian, Zhejiang, Jiangxi, Jiangsu, Henan, Hebei, Beijing, Shanxi, Shaanxi, Guangxi, Yunnan, Sichuan, Tibet… I went to many small places where few foreigners had been (at least for the past 40 years or so).

Sometimes I had to fight for a guest house room because foreigners weren’t allowed – I used my Taiwan student ID to get in the door. After all, Taiwan is part of China and I was a student in Taiwan, so they couldn’t refuse a student from part of China. I attracted small crowds at train stations and universal astonishment when I actually spoke some Chinese. I even caused a few bicycle accidents when riders stared too long at my big nose.

My memory has of course faded, but I don’t remember ever seeing any courthouses, or law firms, much less any lawyers during my travels. In fact there were almost none at the time and, as you know, very few laws.

After those 3 years based in Taiwan and traveling on the Mainland, I had decided that I wanted to try a career focused on China. I concluded that law could be a good avenue. So I went back to study at Columbia University School of Law. Because of Professor Randle Edwards, Columbia was probably the leading US law school with some focus on Chinese law. Americans interested in China and Chinese interested in the US went there.

3 years later, I had to decide where I would start my life as a lawyer – New York, Washington… or China. I really was not interested in Wall Street or the Washington political scene at the time – even if I could find a China flavor here and there, so I chose to come directly to China with Coudert Brothers.

I made that choice in late 1988 after working as a “summer associate” at Coudert. I actually graduated in June 1989. . . Nonetheless, I still came, arriving in Beijing in October 1989, almost exactly 26 years ago.

The army was still in Tiananmen Square at the time. And, well, business was a little slow.

The Coudert Office in Beijing had 2 lawyers and 2 support staff. There were only 2-3 other foreign law firms in town. In 1989, there were no private Chinese law firms that I remember, though there were a number of commercial firms sponsored by government ministries and departments: Great Wall Law Firm, Global Law Firm, etc. My guess is that in 1989, there were no more than a couple hundred practicing commercial lawyers in Beijing, if you included those in big national level SOEs.

At Coudert, I did a little of everything: joint ventures, licensing, tax, IP, disputes, customs law, etc. etc. I became a pretty good Chinese legal advisor (as we all know, foreign firms weren’t and aren’t supposed to practice Chinese law).

Three years later, private Chinese law firms had emerged from the state-sponsored firms. In 1993, Coudert and others, including Haiwen & Partners （海闻） and Commerce & Finance (通商) worked on the first overseas IPOs of Chinese companies – all state-operated (not state owned) enterprises. Later, after a wave of SOE IPOs, came private company IPOs.

Fast forward to the present day, there are now some 250,000 licensed lawyers and some 25,000 law firms in China. Many hundreds of thousands more work inhouse in companies across the country. In addition to the many general commercial firms, there are specialist IP firms, dispute resolution firms, labor law firms, etc.

The development is astounding. Like the economy as a whole, the legal profession has come a long way in 35 years.

Law at Alibaba has come a long way too. In 1999, when we were founded, one of the founders was Joe Tsai (蔡崇信). Joe grew up in Taiwan and went to high school, college and law school in the US. He graduated from Yale Law School, which is the most difficult law school to get into in the US. Actually, Joe’s father was the first Chinese person to graduate from Yale Law School …

Out of law school, Joe joined Sullivan & Cromwell, one of the leading “Wall Street” law firms, and practiced tax – probably the most intellectually challenging area of US law.

However, Joe didn’t stay in the law firm world long: he first tried out private equity and then, after a few years, he joined with Jack Ma and the other 18 founders to launch Alibaba.

Joe was Alibaba’s first lawyer, though his official role was as a financial manager. Joe had and still has a tremendous influence on the development of the legal function at Alibaba.

Joe hired another lawyer in 1999, but she left soon after. In 2000, Sara Yu (俞思瑛) joined us as a secondee and has been with us ever since. Here employee number is 138. When Alibaba found Sara, she was working in the Hangzhou City 工商局. In fact, Sara was the official responsible for reviewing our application for our first business license!

From 2000 on, Sara continued where Joe had started. For the first 5 years or so, the company was relatively small and the team was small.

In 2007, when I joined, we had about 35 people in the legal department, most in Hangzhou but some in Hong Kong. At the time, only 3 were “specialists”: a disputes lawyer, a patent lawyer, and a trademark lawyer. Everyone else was a generalist – doing anything and everything that came over our desks.

Today, if you include Ant Financial’s legal and compliance team, we have over 250 legal staff spread over about 7 or 8 offices and cities, both inside Mainland China and also in Hong Kong and the US. We have commercial lawyers who service the daily business needs of our various businesses (from ecommerce, to cloud computing, mobile operating systems, entertainment and financial products), and also lawyers in specialized areas, such as IP (including patent, trademark, domains and copyright), M&A, disputes, listed company compliance, licensing, labor law and legislative affairs. We also have a team focused on corporate affairs, such as building and maintaining our internal online legal systems, standardization of processes, establishing companies and maintaining business licenses, etc.

And, in part as an indication of the position of the legal team in Alibaba, you will note from our IPO prospectus that both Sara and I are members of the Alibaba Partnership – the 30 people who are responsible for maintaining the culture of Alibaba and ensuring that our company can continue into the future.

About 85% of the members of our legal team come from Mainland China and all but 4 of the rest come from Hong Kong. Most of our team worked at law firms or other companies before joining us, mostly domestic but also some international law firms and companies. Probably about 15-20 people have studied outside of Greater China. Including the people in Hong Kong, about 40-50 people have strong business English capabilities.

How did we get here? Well, I really can’t claim it was based on some sort of carefully thought-out “5 year or 10 year plan”. Much like the rest of our company, we grew as we needed to grow – in fact, usually much slower than we actually needed to grow. As the work load and specialization of our business teams increased, we had to run to keep up with them. Similarly, as the legal environment for our businesses continued to develop, we had to develop the expertise of our people to keep pace.

Thus, we naturally were forced by circumstances to specialize more and more. And as we got bigger, we had to create a team structure to allow adequate supervision and coordination. The need for specialization has continued to affect not just our team structure but also our training and recruitment. And more and more we are looking for new people who have experience at the top levels of international business.

But, I don’t think there was any particular magic in our development to date.

It goes without saying, of course, it has been based on a tremendous amount of hard work, dedication and energy. And we have been energized by the fact that we are working in an exciting industry and an exciting company, with a mission to help small businesses succeed.

Which takes me to a brief discussion of what I think are some of the challenges we and probably many of you face.

First, like many legal teams, large and small, we of course face the challenge of serving our aggressive and ever-moving business teams. The internet industry is tremendously competitive and it is changing at an incredible pace. New technologies, new products, new lifestyles and new business models are appearing, evolving and, in some cases, dying every year – sometimes it seems like every season! Just keeping up with change is really tough – especially for lawyers, who tend to be conservative, deliberative and risk adverse!

Second, because our industry is new and many of the products and services we deliver and the methods we deliver them are new, we frequently face an absence or insufficiency of regulation and regulatory experience. We spend a tremendous amount of time working with regulators to come up with appropriate ways to regulate our industry. Often we come up against old laws and old regulatory practices that are totally unsuitable to the internet world, and we need to help change them.

For example, true online banking should not require any offline person-to-person contact or virtually any offline form filling and signing. But traditional banking requires in-person applications, hand-execution of applications and loan contracts and in person review of IDs.

And this is what traditional regulators are used to. So, in order to make the online banking model work, we have to completely change the regulatory thinking by convincing regulators that our methods are just as secure and just as reliable as the traditional methods. And, most importantly, that we are bringing more value to our customers than traditional services.

And often there are just no laws that apply to what we do. For instance, from 2004 or so when Alipay was founded, until 2010 there was no law regulating online payment companies. From one perspective, having no law allows you to have more flexibility. From another perspective, without clarity, you can have no certainty that what you are doing can continue into the future.

Third, we still face a relatively low level of legal consciousness among our business colleagues inside the company and with our business partners outside the company. We have to spend a lot of time training and even evangelizing the law: What the legal requirements are, how products should be structured and what the procedures should be to comply, and why compliance is in the best long-term interests of the company, etc. And at every level of the company, it is still hard to teach people that involving the legal team early can only help prevent much bigger problems later on. At the same time it is also challenging to teach our young legal team members to be pro-active, to think creatively and to be effective problem solvers. And at the business decision-making level, we still need to work harder to convince people that we can be useful strategic advisors too.

Fourth: now that we are so big and are becoming more specialized, we face the challenge of providing a rewarding and long-term career path for our ambitious team members. How much cross-training should we do? How much rotation should we encourage? How much specialization should we require? How do we train leaders? And, as you can imagine, most lawyers are not used to focusing on management, organizational planning, etc.

These four challenges are probably familiar to many of you.

There are some others that are looming on the horizon for us.

First is internationalization. While our original business was Alibaba.com, which is a cross-border B2B ecommerce platform, including an English language website; until relatively recently, we have in fact not been very international – at least if you compare us to our international peers, such as Google, Facebook or Amazon. This was because, for B2B, nearly all our merchant customers were in China and for Taobao and Tmall, the sites were focused on sales to consumers in China only. Now, with AliExpress, Tmall Global, Taobao itself and more recently with Alibaba Cloud Computing, we are focusing more on more on developing customers and operations based outside of China.

For our legal, as well as business, teams this challenge is not just linguistic, of course. It means that we need more people who are familiar with the legal environment in important countries outside of China. It also means that both business and legal teams need to have some cultural affinity to foreign environments. It is in some ways the opposite of the experience that US or European companies have when they come to China.

I spoke earlier about the flexibility that the Chinese legal environment sometimes affords. As we all know, there is much less flexibility in a number of more developed foreign jurisdictions such, as the US and in Europe. Companies like Uber and AirBnB can sometimes push the envelope with some success (so far), but as a Chinese company we need to think twice and sometimes three times (especially in the face of US presidential election campaigns…) before we might do the same thing. This reality is often particularly frustrating for our business teams, and the legal department sometimes bears more than the usual brunt of this frustration. . . .

We need legal talent that can fill this role and it’s not easy to find it. [pause] You can sign up after dinner.

The second major challenge I see on the horizon for us is one I personally think everyone in this room should and probably does think about.

How can we contribute to the further development of legal consciousness and of legal institutions?

I think we can do this primarily by continuing to build legal consciousness in our organizations.

• By showing how good procedures, good contracts, and careful advance planning can improve the futures of our products and services and of our companies.
• We can act as models of moral conduct in our companies and with our business partners, with transparent and user-friendly codes of conduct.
• We can build private dispute resolution platforms that are fair and efficient (we have an online “cloud dispute resolution service” at Alibaba, by the way).
• We can join together with legislators and local courts to help solve the problems they face in getting their own jobs done.

It is not just in the interest of our company to do these things, I think it is our duty as lawyers to contribute in this way to our companies and to society.

We are probably not yet a “great global legal department”, but if we successfully meet and conquer these challenges, I think we could become one. You can too.

Thank you.