The Professional 'Tug of War': The Regulation of Foreign Lawyers in China, Business Scope Issues and Some Suggestions for Reform

By Godwin, Andrew | Melbourne University Law Review, April 2009 | Go to article overview

The Professional 'Tug of War': The Regulation of Foreign Lawyers in China, Business Scope Issues and Some Suggestions for Reform


Godwin, Andrew, Melbourne University Law Review


[This article looks at the regulatory framework governing foreign law firms in China and the unique challenges that this poses for foreign lawyers, Chinese lawyers and the Chinese regulators. The challenges are unique because of the significant gap between, on the one hand, the strict letter of the law in terms of what foreign law firms are permitted to do and, on the other hand, the liberal interpretation and enforcement of the law in practice by the relevant regulatory authority--the Ministry of Justice. The article concludes by considering various models for reform to the regulatory framework and providing suggestions as to the appropriate choices.]

CONTENTS

I    Introduction

II   Background to the Regulation of Foreign Lawyers in China
     A The Initial Framework
     B China's WTO Commitments

III The Current Regulatory Framework
    A The Administrative Regulations and the Implementing Rules
    B The Reaction of Foreign Law Finns
    C The Legal Practice of Foreign Law Firms in China to Date

IV  The 2006 Controversy
    A The Background
    B The Perspective of the Regulators
    C The Perspective of the Local Profession
    D The Perspective of Foreign Lawyers

V   Developments in Relation to Lawyers from Hong Kong and Macao

VI  Models for Further Reform

VII Conclusion

I INTRODUCTION

In keeping with its status as the world's fastest-growing emerging market, China (1) is now host to many foreign law firms. These include law firms that have a large international presence (such as those based in the United Kingdom and the United States of America), as well as law firms that include China as part of their regional presence (such as those based in Australia). (2) The importance of transactions involving Chinese counter-parties and Chinese assets is reflected both in the revenues that foreign law firms are generating out of their China practices and also in the size of their China-based professional resources.

The context for this article is the regulatory framework governing foreign law firms in China and the unique challenges that this poses for foreign lawyers, Chinese lawyers and the Chinese regulators. The challenges are unique because of the gap between, on the one hand, the strict regulatory restrictions on the permitted scope of business of foreign law firms and, on the other hand, the liberal interpretation and enforcement of the regulations by the regulatory authority. This has provoked a 'tug of war' between Chinese lawyers and foreign lawyers--one that flares up periodically and became particularly heated and controversial in 2006.

This article is set out in seven parts. Part II sets out the background to the current regulatory framework and places it within the context of China's World Trade Organization ('WTO') commitments concerning the permitted business scope of foreign law firms. Part III analyses the current regulatory framework as it applies to business scope issues and outlines the reaction of foreign law firms to the current regulations and the practice of foreign law firms in China to date. Part IV looks at the controversy that flared up in 2006 concerning the operations of foreign law fin-ms and compares the perspectives held by the main protagonists--namely, the regulators, the local profession and foreign lawyers. Part V outlines the regulatory regime in respect of lawyers from the Hong Kong and Macao Special Administrative Regions ('SARs') for the light that it might throw on the future reform of regulations governing foreign lawyers. Part VI identifies certain models for further reform and Part VII draws some conclusions.

II BACKGROUND TO THE REGULATION OF FOREIGN LAWYERS IN CHINA (3)

A The Initial Framework

The first rules governing offices of foreign law firms in China were the Provisional Rules of the Ministry of Justice and the State Administration for Industry and Commerce on the Establishment of Offices in China by Foreign Law Firms, which were issued on 26 May 1992 ('Provisional Rules'). …

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