On March 31st, 2019, AugmentIC co-founders Daniella and Eitan interviewed Amir Zolty, a founding partner at Eyal Khayat Zolty, Neiger & Co. Zolty specializes in technology and corporate law. Prior to the establishment of EKZN in 2001, Zolty served as a registrar of the Supreme Court of Israel and as the senior legal assistant to the president of the Supreme Court of Israel, Prof. Aharon Barak, as well as senior legal assistant to the attorney general of the state of Israel. Prior to his career in the civil service, Zolty worked as an associate for Herzog Fox Neeman. Zolty received his LLB from Tel-Aviv University and his LLM degree from Yale Law School. He sits on the board of trustees of the Buchmann Faculty of Law at Tel Aviv University. Since the establishment of EKZN, Zolty has engaged extensively in high-tech and biotech/pharmaceutical transactions, and represents a considerable number of private and public high-tech and biotech companies in Israel and abroad. Zolty has been ranked by the Legal 500 for six years (2011-2016) as one of the leading Israeli practitioners in the field of high-tech, startups and venture capital.
This interview has been edited and condensed for clarity.
AugmentIC: Could you briefly share some milestones in your career and how they contributed to your career trajectory, specifically your practice today? When did your interest in China and Sino-Israeli relations begin?
Amir Zolty: My interest initially developed when I made a pivot to the private sector and started my practice, which focuses on mergers and acquisitions (M&A) and legal transactions, specifically international transactions. Of course, this really took shape in 2013 when we started working with Yingke (a law firm in China) on inbound and outbound China-Israel deals.
Working with Chinese investors and business people was a matter of consequence and serendipity. It is known in Israel that if you study law at Hebrew University you will work in the civil practice, and if you study at Tel Aviv University you will end up in private practice. However, post Tel Aviv University, I attended Yale Law School and realized I could apply myself in both the private and public sector. Back in Israel, I received an offer to join the public service and spent an incredible seven years there.
It was an emotionally charged period for the state, and I also worked as part of the committee investigating former Prime Minister Rabin’s assassination, so a lot of the work I did was with the Shin Bet (Israel Security Agency); organically I realized that I was ready to leave the public sector. I joined the emerging tech wave two months after the tech bubble burst in 2000.
As a lawyer, I really enjoy working with startups, especially helping companies develop and implement their most creative ideas. My work with China came about quite spontaneously. My team was working on a Hungarian deal and one of the lawyers said, “China is the next big thing so let's start something with them.” And that was that.
AugmentIC: Tell us more about your work in China and with Chinese firm Yingke. What are some of the challenges you face?
Amir Zolty: EKZN facilitates deals and aligns expectations on both sides of every business transaction. Chinese law firms operate differently from Israeli firms. China only opened its private law industry in the last ten to fifteen years, so corporate law is a new industry in China. Many Chinese lawyers were trained as "regulators" or as "pencil pushers" and not as deal makers and facilitators. In many cases they tell you that you cannot do X, but they don't think that it is their job to tell you that you can do Y (or vice-versa).
One of our goals here at EKZN is to develop a smoother transaction process with our Chinese counterparts. As part of our efforts to achieve this, we are working with our counterparts to familiarize and educate Chinese firms on how to work with Israelis. This is really done with friendship in our hearts and from a place of trying to make business deals close swiftly and without hitches. On the other hand, we try to educate our Israeli clients on how to conduct business in China.
AugmentIC: What are some of the biggest challenges you face as a lawyer operating in China and what are some of your best lessons learned?
Amir Zolty: Everyone should be very humble. After five years of working with the Chinese, it would be presumptuous to say Israeli lawyers understand the Chinese legal system and the business environment and the external forces influencing it. The bottom line is we still have a lot to learn and must be ready to face the unexpected.
I can say that it took us a long time to understand how much Chinese businesses and firms need to pay heed to governmental policy. This is of course in complete contrast to Israel, where free market principles predominantly lead our capitalist economy. For instance, I remember a while back Fuson was in the advanced stages of an acquisition deal of an Israeli insurance company by Chinese company, when spontaneously the Fuson CEO disappeared for a month or so. He was completely unreachable, and as it turns out, he was being interrogated by the Chinese government. However, the significance of this anecdote lies with the response of the Israeli Ministry of Finance, Capital Markets, and Insurance and Savings Authorities. They felt they could neither rely on, nor trust Chinese investors with holding the hard earned savings and insurance of the Israeli public. So, this was an educational lesson for me and for my Israeli clients, to always prepare for the unexpected.
Another issue Israelis have encountered working in China is the difference between the utility and functionality of communities. Israel is a tight knit community; anyone and everyone is just two degrees of separation away. In China, the social system is completely different; it is exceedingly difficult to identify a vetted Chinese partner that you can rely on and partner to work with for the long term. Sometimes you succeed, sometimes you fail. However, I always believe that to thrive one must adapt. So we (Israelis), have to adapt to the Chinese cultural behavior, like guangxi (translates loosely to networking). We use guangxi to find partners but we still caution our Israeli clients to prepare for potential liabilities.
AugmentIC: How often does this uncertainty or deviation occur, and how do the Israeli companies react?
Amir Zolty: I do not have enough data to answer this question, but it happens every so often. This is not to say that closing deals between Chinese and Israeli partners is futile, but yes, the preliminary process of finding a reliable Chinese partner can prove at times frustrating. After all, once a deal goes south, there is not much to do. We are essentially obligated to forgo the deal and speculate what went wrong among the numerous external forces: Five Year Plan, Belt & Road Initiative, domestic policies, cultural offense, etc.
AugmentIC: On a separate note, tell us about the U.S. and China Trade War. How does this affect your firm or the Israeli companies you work with on the daily?
Amir Zolty: So far we do not feel a direct pressure from the U.S. regarding our deals with China. This is because mergers and acquisitions are different from foreign direct investment (FDI) and venture backed transactions. Generally, I am noticing a slight trend where Israeli companies need to make a difficult decision choosing between U.S. markets and the Chinese market. I would go so far as to say that in this regard, we are talking about a cold war of sorts and most definitely a tech cold war. Israeli startups and companies are becoming proxies and I foresee this becoming more challenging and complex to navigate in the near future.
However, like I mentioned before, mergers and acquisitions operate differently and thus far we have not been affected by the increasing U.S.-China tensions. In the last 5-7 years China has become a very reliable source of FDI for Israel and stipulates less regulations on Israeli firms than the US. We are lucky that we have not encountered any Committee on Foreign Investment in the United States (CFIUS) related issues, and this is mainly because our mergers and acquisitions do not overlap with U.S. affiliated companies. I have heard from my VC colleagues about their experiences with CFIUS. The general sentiment seems to be that CFIUS creates, under the best case scenario, time blockages for government clearances. So I feel that, if anything, the intervention of CFIUS may drive businesses away from U.S. markets and its overbearing regulations.
AugmentIC: Finally, what is the most important piece of advice you would give to Israeli and Chinese young professionals looking to enter the China-Israel space?
Amir Zolty: I don't have first hand experience positioning myself professionally for the China-Israel space. However, I know people who received their first degrees in Israel in Chinese or East-Asian studies with the goal of going into business in China. Understanding the Chinese culture is critical when spending time in China, preferably with a Chinese corporation. As for learning Chinese – this is a very demanding task and very few scholars manage to master the language. I am often told that it is better to speak in English in China then to speak in broken and rudimentary Mandarin.
What is critical to enter the Chinese business sector you might ask? Understanding the culture and mindset. For example, Yingke started 20 years ago with 30 lawyers and today they have 6,000. This is wholly inconceivable to me. So yes, if you want to work in operations in China, you may not need the language but you do need to spend substantial time on the Mainland to form an understanding of the behavior and culture there, and to develop guanxi. Ultimately, this is what will give you an edge. The operations business between China and Israel is experiencing a boom. China is the second biggest trade partner of Israel (after the U.S.) – with approximately fifty percent of Israel’s global exports (thanks to Intel microchips) delivered to China. Ultimately, if you can reach the point where you are really accustomed and attuned to Chinese culture you will have a competitive edge and an easier ease-in process.
To accentuate the importance of that extra mile, I just want to point out that in many seminars, articles, and lectures you will get a rather polite and ‘diplomatic’ version of the local culture with regards to doing business in China, and even your Chinese partners will not be very forthcoming during your initial negotiations and dealings. So by creating informal ties, you will get an insider’s glimpse into the issues China faces today. And in business this is invaluable.